The Role and Impact of Rail-Truck Intermodalism on Efficient and Effective Transportation
The second of a two-part series
The reality check
Shippers can utilize a number of modes and methods to move freight from point to point. Truckload has been the predominate mode and method for freight movement for some time. As shown in Table 4, TL accounts for the largest share of the total transportation budget in 2006 (25.3 percent). In fact, a vast proportion of the shipper transportation budget is spent on motor carriage (86.0 percent in 2006 for TL, private fleet, national LTL, regional LTL, surface package, small package express and dedicated truck). Intermodal freight moves represented only 2.4 percent of the transportation budget - a decline of 57.1 percent from 2005.
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The percentage of the transportation budget spent on intermodal transportation doesn't totally capture the importance of this modal option, however. Railroads, including the intermodal portion, carried about 47 percent of intercity freight as measured by ton miles.15 Approximately 32 percent of all freight is moved distances greater than 750 miles (Figure 1). The impact and role of railroads - and particularly intermodal - in moving this freight is critically important in attaining lower freight costs, mitigating truckload capacity constraints and moving imports from ports to inland distribution facilities in an efficient manner. Figure 1 suggests that there is potential opportunity to shift even more freight from congested highways to intermodal moves in the 501-750 mile category. To do this efficiently and effectively, however, the railroads must be able to combine cost and service in a way that delivers value for intermodal shippers. Transit times for intermodal are often longer than truck transportation. Increasing demand for intermodal service has sometimes made it difficult for railroads to meet transit time requirements due to lack of sufficient capacity.16
Future Outlook
There is no doubt that intermodal plays an important role in moving freight to and from the nation's ports and for long distance intercity freight moves. While many look at intermodalism as a solution to congestion, transportation pollution and many other problems, moving freight to other modes does not provide a magical panacea. Concern has been expressed about the ability of railroads to keep pace with increasing demand for intermodal service. Demand that cannot be met by the railroads is likely to be handled by motor carriers, adding to the issues this mode is already facing. The answer appears to be ensuring that sufficient intermodal rail capacity is added to accommodate the rising demand. What hasn't been determined yet is who will provide the needed investment dollars. Government funding (or other investment tax incentives) and private capital is an ideal solution. Unfortunately, this arrangement often does not seem to work as one or both parties feel that the other has not met their investment commitment.
Discussion about the role and responsibility of government in developing a comprehensive, integrated transportation system has been ongoing for more than twenty years. While many believed that the passage of the first intermodal transportation act in 1991 would be the beginning of an integrated transportation network, they were soon disillusioned when available funding was used for things other than freight-oriented projects. Even with the passage of subsequent acts little progress has been made at the federal level in establishing a national transportation plan that blends the strengths of all the modes and methods. Given the growing role and importance of intermodalism to the overall efficiency and effectiveness of the total transportation system, this lack of federal leadership has reached a level of grave concern for shippers as they face more and more issues in managing freight movements. On the carrier side, railroads are concerned about the level of investment that must be made to add the needed capacity. Without federal incentives or assistance many will be hesitant to commit the entire financial resources needed to expand intermodal capability.
To make intermodal service economical, volumes must be sufficient to pay for facility and capacity investments while making service frequent and available at various service and price levels. This means that ports and rail-highway intermodal facilities must be large and operate 24 hours per day. For example, in 2005, more than a dozen rail intermodal facilities experienced more than one-half million lifts, or more than 1,200 a day or approximately 1 truck a minute.17
Within the next five years, U.S. consumption of durable and non-durable goods is expected to increase more than $1 trillion, from $8 trillion to just over $9 trillion.18 Much of the increase in consumption will be met by imports originating in China. Trade growth is only one of several factors that is stimulating intermodal growth. Increased intermodal demand is also used by the domestic truckload industry to help offset their escalating operating expenses due to volatile fuel prices, hours of service operating impact and driver shortages.
While federal legislation has emphasized the goal of establishing a system-wide, intermodal approach to create a seamless end-to-end transportation system, the reality is that the federal (and other governmental units) funding structure is more oriented to passengers than freight.19 Federal transportation funding programs are overseen by different modal offices within the Department of Transportation (DOT) such as the Federal Aviation Administration, Federal Transit Administration, Federal Railroad Administration, and the Federal Highway Administration. Congress and the DOT remain uncertain how to establish a coherent transportation policy for the twenty-first century.
With a vastly growing global economy that depends on supply chains that can operate efficiently and effectively, we can wait no longer for aggressive government action. A weak or broken link in the transportation network can translate to costly delays that ultimately will impact domestic productivity. It is incumbent upon the railroads to move forward with adding capacity that will keep intermodal freight moving across the distribution network. Waiting for Capitol Hill to recognize the need for a strong, well-financed, nationally integrated intermodal transportation program will ultimately lead to a derailment of the current system.
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It is time for shippers and carriers to develop solutions that do not depend on the government's involvement. This will require the establishment of deeper and more collaborative relationships than has been the norm. Just as J.B. Hunt had the "vision" to move trucks off the highway onto the railroads, so will today's trucking and railroad executives need to develop the way forward for intermodal growth. An old adage is appropriate: "How do you eat an elephant?" - Answer: "One bite at a time."A good starting place is the CREATE project that was discussed earlier. Government entities have allocated only a small portion of what is needed to complete this project. The railroads have not been willing to cover this shortfall in addition to their own investment. Given that more than 40 percent of all domestic intermodal shipments connect through this gateway, why hasn't the CREATE partnership expanded to include the top trucking firms that primarily use this network? If we're lucky, there may be visionaries such as J.B. Hunt and Michael Haverty (former President of the Atchison, Topeka & Santa Fe Railroad) that will take a leading role in developing a model that can be expanded to create efficient and effective intermodal transportation for the future - without the government's involvement. Otherwise, twenty years from now we will still be discussing the need for the government to develop a comprehensive intermodal freight plan.