“It’s very reliable,” says Van Kirk. “You get across the border without any difficulties,” compared to what can typically happen during a ground crossing in Laredo. “There’s also a high level of security and we don’t have a lot of tampering or break-ins with the containers. You have a shorter dray in Mexico, which means you also have less risk.”
The cross-border trade lanes are also very imbalanced, with more northbound Mexico-U.S. freight than southbound, for instance, which further enhances the opportunities for intermodal, notes Van Kirk.
Even still, Van Kirk realizes that intermodal remains a tough sell for some companies. “There are some mature intermodal shippers who have been able to convert a lot of their freight from truckload to intermodal,” he says. However, not everyone is on board. Van Kirk tells of one recent example where the customer presented a memo from 1978, which instructed staff to avoid intermodal shipping, and the customer was still complying with those instructions.
The typical objections Van Kirk encounters are related to inventory carrying costs and transit times. But, now that rail service has improved dramatically, those arguments are hard to sustain, he contends.
“When it comes to transit times, we’re within one day of a similar truckload move. And, with the current interest rates, the inventory carrying costs are actually minimal, so that objection, too, if you work through the numbers, can be eliminated rather easily.”
Concerns over damaged freight can also be addressed, says Van Kirk. “Schneider has load engineers that meet with new accounts to show them how to load freight to avoid damage and shifting en route. So, if companies are willing to listen, they’ll end up with very few damage issues.”
Although some shippers clearly aren’t ready to make a wholesale leap to intermodal today, Van Kirk expects that fuel prices will continue to rise over the coming years, which will eventually become the tipping point.
“If you really analyze the history of fuel prices, recalling where they were 5 or 10 years ago, it’s not hard to imagine that 5 or 10 years from now that diesel prices are going to be a lot higher. Furthermore, from a driver availability standpoint, I think the same argument holds true. It’s likely that driver shortages are not only going to continue, but get worse over time,” says Van Kirk.
At the end of the day, there are two compelling reasons that continue to drive shippers to intermodal, says Van Kirk, “having reliable access to capacity, and a desire to control costs.”
Converting truck to rail
The overarching desire to convert more truck freight to rail is shared by others in the transportation and logistics industry, including APL Logistics’ Dave Howland, vice president, global land transport services.
He believes the effort should include going after secondary markets. And, while rail carriers operating in the eastern U.S. have done a pretty good job thus far, the western U.S. represents a virtually untapped market, says Howland.
“For example, when you look at the golden triangle in Texas—Dallas, Houston, and San Antonio—while that may seem like a short-haul market, it’s a huge overnight truck market and not one rail carrier effectively serves it. The Union Pacific serves San Antonio from the west, both UP and BNSF serve Dallas and Houston from the west and Chicago, but there are no intermediate services between these cities or between these cities and places like Kansas City or Denver. The only place you can go is California or Chicago.”
Fortunately, the conversation concerning secondary markets has started to materialize, reports Howland. “They are beginning to realize that it’s not just about Los Angeles to Dallas and it’s not just about the metropolitan markets they serve today. It’s the secondary markets—Oklahoma City, Minneapolis-St. Paul, and even between Northern and Southern California.”
According to Howland, western rail carriers estimate that between $9 billion and $11 billion in market share is available to them, “if they can come up with some new mousetraps.”
As to when the conversation will result in concrete plans, Howland expects that starting next year “we’ll definitely start seeing some real steps in this direction.”