Intermodal at global watershed point
By Sarah Stone -- Purchasing, 5/20/1999
One of the main reasons for the strong growth of intermodal transport relative to other modes is the concurrent expansion of globalization among companies in North America. As more and more goods are purchased and shipped overseas, from raw materials to finished products, shippers must find ways to move goods via a series of different transportation modes.A common situation is for goods or materials to be moved via rail from the interior of an exporting nation, to a seaport, where they are loaded onto a ship. Upon arrival at its destination, the cargo is moved to a truck, which moves through a hub system to arrive at the buyer's loading dock. Obviously this scenario brings with it a whole set of problems that are further exacerbated by differences in language, shifts in the market, and differences in equipment and technology.
With unstable markets in certain areas of the world--most notably Asia, South America, and now Eastern Europe--making the intermodal connection has been getting more and more complicated. One of the countries experiencing--and creating--the worst difficulties is Brazil. Recently the Brazilian railroad system has been undergoing privatization, and is having trouble keeping up with the demand for containerized cargo, an integral piece of the intermodal puzzle.
But Ferrovia Sul Atlantico, the railroad serving the southern areas, is not about to put much attention into the needs of intermodal shipping. The company's president, V.L. de Souza, has made it clear that the focus will continue to be on bulk shipping for the foreseeable future. Also, at present, the two main container terminals in Brazil, Rio de Janeiro and Santos, were recently privatized and are not very well connected to other parts of the country. Brazil is considering opening the port of Suape up as a container terminal to serve the northeastern areas, but that is still in the planning stage.
This kind of situation is, alas, not unusual when it comes to shipping overseas. Yet as more and more business is conducted on a global basis, the need for efficient intermodal routes and carriers is growing.
Global intermodal beset by problems
The difficulties of intermodal transport as an international shipping means are not easy to resolve. The European Union has been attempting to reform intermodal there in hopes of making it a more attractive option for shippers from the U.S. and other countries, but has been running into roadblocks thrown up by member states. For example, there were proposals made that taxes on intermodal be lowered, that the truck weight limit be raised, and that weekend truck bans be lifted. But Italy and France don't want the weekend bans lifted, the British Isles are afraid of being hit with an onslaught of heavy trucks, and Britain, Ireland, and Portugal are all opposed to lowering taxes.
In Asia, besides the problems all transportation is having as a result of economic woes and the trade imbalance, the intermodal niche is harder hit than most by labyrinthine red tape imposed by the Chinese government. Also, even though China has expressed an interest in developing intermodal linkages between the interior and the port cities, it has done little to actually follow up. Given the size of the country, the best that can be hoped for is a city-by-city growth pattern, according to a spokesman for the Orient Overseas Container Line, the biggest Hong Kong container carrier.
There are new linkages in place in the provinces of Sichuan, Yunnan, Guizhou, Guangxi Zhuang, and the city of Chongqing. These linkages open up the southern part of China to considerably more container shipping. The new network has attracted overseas ventures to the tune of $4 billion, now that the very attractive combination of cheap labor and fairly convenient shipping are in place in this part of China. But much work still remains to be done before the entire country could be considered truly linked.
Intermodal transport from parts of Asia to the U.S. is also further complicated by the requirement of pest inspections of wooden containers and pallets. Lately the usda has increased its inspections in New York and Chicago for the Asian longhorned beetle after serious outbreaks in those two areas. Approximately 50% of containers arriving from China and Hong Kong contain the hardwoods that harbor the pests. The inspections and corrective treatments are adding days to shipments coming through those ports, inserting dead-time and its associated costs between the stages of an intermodal journey in many cases.
Not all news of intermodal shipping internationally is bad, however. Taiwan has announced it will connect the port of Kaohsiung, its main port, which is located in the South, to the major business and manufacturing areas of the North by rail in a new infrastructure sponsored by Taiwan Intermodal Rail Co.
Because intermodal is essentially a combination of different types of transportation, it is affected by any changes in the larger transport world, as well as within its own universe. For example: the May 1 changeover to the new ocean shipping rules is already having a strong impact. Ocean carriers have the power, under the new rules, to join forces with rail and truck companies when negotiating contracts with shippers, a development that gives carriers a good deal of clout. And some ship lines are showing signs of trying to recoup possible profits lost as a result of U.S. shippers being able to enter into confidential contracts by adding surcharges to containers that will be transferred to other modes instead of being unloaded at the port.
Inevitably, the changes in ocean shipping will change the landscape in terms of what carriers focus their energies on: Naturally, the most profitable lanes and ports will receive the most attention, and intermodal will have to fit itself around those exigencies. In fact, some of the large ship lines are changing their routes or even closing their doors as a result of the new regulations. For example, Sea-Land is removing itself from the Northern Europe-Latin America lane.
U.S. intermodal also at watershed
Even within the United States the intermodal industry is at the mercy of whatever winds of change are buffeting the various transportation modes. For example, a growing controversy exists concerning an increase in regulatory involvement in the rail industry. After a period of poor performance, in particular by Union Pacific as a result of its merger with the Southern Pacific Railroad, many shippers are interested in seeing specific reforms take place that would increase competition and speed up rate dispute arbitration and adjudication. Such reforms would of necessity affect the intermodal sector as well.
Another controversy that will have an increasing effect is the burgeoning disagreement between the rail companies and the truckers over the size of trucks allowed on the road. Truckers want larger trucks, so they can carry more cargo per run and increase their market share. The rail carriers, not surprisingly, are willing to spend considerable money and energy trying to keep the size of trucks where it is now, for fear they will lose even more business. (Q1 of 1999 was not profitable for the rail carriers, for the most part.) On the other hand, the truckers see nothing wrong with the Surface Transportation Board stepping in and creating the possibility of more competition between the rail lines.
Intermodal shipping, because it uses both modes, will be caught more and more in the middle of the seesawing fortunes of trucking and rail. It could be to intermodal's benefit, however. As rail carriers and truck companies vie for dominance, one of the sectors they are focussing their attention on is the business they will gain or lose by changes in the other's operations--in other words, the intermodal segment. It is true that intermodal is continuing to show steady growth despite the vicissitudes of other modes.
Technology creating growth?
Perhaps one reason for this growth is that changes in technology are encouraging more and more shippers to use intermodal. One of intermodal's biggest drawbacks has been that it is so complicated compared to other modes. For companies that are interested in keeping track of exactly where a shipment is at any given moment, shipping intermodally could be a nightmare. But as the availability of such innovations as online tracking and tracing, radio-frequency tagging, and satellite communication have become widespread, many of those problems have either disappeared altogether or at least lessened. Shippers are showing an inclination to use more and more carriers as well as more modes of transport.
The growth of third-party logistics also is a key part of intermodal's slow-but-steady renaissance. In fact, sometimes the line between intermodal and third-party logistics (3PL) becomes blurred. There are many companies that combine the services of the two into one package that is very attractive to smaller shippers. Since much of the task of a 3PL service provider is arranging the many stages and layers of transport for its clients, it is a natural step for it to also arrange different modes for a single shipment, if necessary and economical. In fact, it is getting harder and harder to point to a given task or service and say, "This is intermodal," "This is consulting," "This is freight forwarding," etc. More and more companies are springing up that take over the transportation, warehousing, and in some cases, the assembly of goods.
The blurring of lines between modes and the overlap of core competencies is changing the face of intermodal to a point that may even make the word redundant: Soon, all transport of freight and goods may be intermodal, with only the exceptions remarkable. Will we, one day soon, be talking about the problems of unimodal transportation? It is not too extreme to imagine the lines of demarcation between functions such as shipping, warehousing, and docking becoming irrevocably blurred as the focus moves away from modes and onto containers. mWhat is intermodal?
Technically, "intermodal" means merely that more than one mode of transport is used for the same cargo. But over the years it has come to encompass its own set of meanings, with the common denominator usually being that the cargo stays in the same container from one mode to the next--for example, ship to rail to truck. For a long time it has been one of the smallest sectors of the transportation world. But it is steadily growing; in fact, in terms of percentage growth, Standard and Poor's DRI considers intermodal the fastest growing transportation mode.
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