You hear it almost everywhere you go in the transportation industry today. Shippers are becoming less concerned with mode or cost of mode and more concerned with reliability of service. This comes at an opportune moment as (or some say because) the intermodal industry is seeing its service levels and reliability increase while rates become more attractive compared to increasing rates in the trucking industry.

Intermodal transportation weathered the storm of 2001 fairly well, according to the Intermodal Association of North America (IANA), which says intermodal traffic that includes rail was down only 1% in 2001 compared to 2000. Tom Malloy, vice president of business development at IANA, calls this a moral victory considering the beating some other transportation markets took in 2001. He says the service improvements in intermodal are contributing to shippers thinking less about mode and more about reliability.

"The year 2000 was good economically with strong numbers, so to be down 1% from that [in 2001] is very good," Malloy says. "Overall, we're seeing a more positive trend. Service has never been better in the past 20 years."

A recent survey of intermodal shippers by the IANA says service outweighs cost by a margin of nearly three-to-one in evaluating and selecting intermodal carriers. According to the report, "The organizers report a greater emphasis on tracking capabilities and on-time delivery than in previous benchmarking exercises."

Philip Evers, assistant professor of logistics management at the University of Maryland, says the trend of shippers thinking beyond mode and price in selecting carriers goes farther back than 2000. A 1999 Maryland survey showed price was the lowest of five priorities to intermodal shippers. Top on the list was communications between shipper and carrier. Next were customer service, then transit times, and consistent delivery.

Malloy says other signs that intermodal service is improving include increasing average rail speeds and more guaranteed service lanes being offered by intermodal companies and railroads. "Obviously, they are only going to offer these guarantees if they are able to provide the service," says Malloy.

Michael Erenberg, vice president of operations at CSX Intermodal in Jacksonville, Fla., says intermodal service has finally recovered from the merger mania that occurred in the late part of the 1990s. "Intermodal service is much more reliable right now than in the past," he says, adding that customers are very positive about service levels and once you get the prerequisite of having reliable service, then cost is the deciding factor, which is good news for intermodal.

But Evers feels that rates are the prerequisite to get a provider in the door and service is the deciding factor. "Railroads have been trying to implement technology to improve their information sharing. They have the financial strength to do that where a lot of trucking companies do not."

Malloy says he has not seen any official figures, but suspects that trucking volumes were down by double-digit percentages compared to intermodal's 1% slip in 2001. "I think that speaks to the service levels. We struggled through the digestion of rail mergers in the mid-to-late 1990s and the slowdowns associated with those. The systems integration issues caused a minor black eye to the entire rail system and there was a ripple effect. That continued from 1993-1999 when the latest round of mergers took place. That made it a challenge for intermodal to perform up to the standards that it could."

Erenberg says intermodal becomes a more attractive option to shippers when fuel prices climb and trucking gets more expensive. "We have found the intermodal business to be picking up momentum as the year goes on and fuel prices are creeping back up," he says.

Malloy uses the analogy that one double-stacked train can handle 300 units and use only half the fuel as 300 trucks. One issue that may give more credibility to that argument is the mandatory fuel surcharge that Congress is considering. According to the Motor Carrier Fuel Cost Equity Act of 2002, legislation would automatically impose fuel surcharges when diesel prices hit $1.15 per gallon based on the Energy Department's fuel index. The surcharges would compensate whoever is paying for the fuel.

Surcharges in general are becoming more common in intermodal as they are across the transportation industry. With rising insurance and security costs, transportation providers are looking to recoup where they can. Erenberg says CSX implements a surcharge during its peak shipping season in the fall, basically because its capacity will be strained.

Steve Sashihara, president and CEO of New Jersey-based consulting firm Princeton Consultants, says shippers should become proactive in making the move to intermodal before fuel prices skyrocket. He says shippers should be researching what lanes and providers are most attractive for a move to intermodal shipping and what lanes and shipments need to stay on trucks. Sashihara feels that intermodal has the potential to pass truckload in its effectiveness if it focuses on some key service areas and not cost.

"Shippers are discovering intermodal is inexpensive and they are becoming smarter about shopping lane-to-lane rather than just broad-brushed intermodal," says Sashihara. "Some shippers have had bad experiences with intermodal, but you have to look at it in a lane-by-lane basis, just like any other mode. Intermodal is not really an alternative to truckload, but rather a hybrid that uses trucks at both ends."

Evers says most rail providers will post their lanes on Web sites, allowing shippers to sketch out a backup plan if fuel prices skyrocket.

Intermodal's improving reputation is bringing some new industries to intermodal. Erenberg says it's not just paper producers any more, but all consumables as well as electronics firms and clothing manufacturers as steamship companies import more from Asian markets.

The intermodal market may see some instability in the coming years, however. Market watchers expect some consolidation among third-party providers and lingering effects of rail consolidation. Evers says his research has shown there to be very little loyalty to intermodal providers. Shippers simply do not feel tied into intermodal providers like they do to major trucking firms. "That suggests that intermodal companies can get business while they're doing a good job, but as soon as their service slips, the shipper will move to trucks," Evers says. "Intermodal has not been as well marketed as truckload, so I think there are some intermodal bargains in the right lanes."

Andy Heck, manager of business development at International Paper's Printing Communications business in Stamford, Conn., agrees that intermodal has not done an adequate job of marketing itself and its advantages over trucking. But that may be because many third-party intermodal service providers are also trucking brokers and want to sell both.