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Plotting Next Steps for Optimizing Intermodal Shipping

Each year, nearly 25 million containers and trailers are moved in the United States using intermodal transportation, according to the Intermodal Association of North America. Intermodal transportation initiatives have resulted in a multi-billion dollar US intermodal industry where shippers now routinely look for the most efficient combination of truck, rail, ocean, and air to get goods to market.

But if shippers are to optimize intermodal shipping further, new steps must be taken to ensure that goods arrive safely, in great condition, and when customers want them. Shippers looking at these four key areas can take their intermodal logistics strategies to the next level:

#1 Understand that just going intermodal is not enough
Almost every cross-country third-party logistics (3PL) provider now offers intermodal shipping. To support the intermodal shift that has occurred over the past decade, railroads have invested billions of dollars into North American railroad infrastructures, with the Burlington Northern Santa Fe, the Union Pacific, and others adding new locomotives to fleets, building new tracks, and developing more capacity. This was done in part to quell shipper complaints that railroad shipping options and capacity were so limited that they were not up to the task of handling shipping needs.

The railroad buildout was welcome news to shippers, which were also seeing the trucking industry getting hit with driver shortages. They were fascinated with Burlington Northern statements that trains can move 2,000 pounds 500 miles on one gallon of diesel, which is three-and-a-half times more fuel efficient than moving freight by truck. Because of this, many shipping managers considered their transportation optimization strategies “complete” with the switch to intermodal. The reality is, there is more work to be done.

#2 Shipping should be an integral part of customer fulfillment strategies
For most companies, customer fulfillment is an exercise that balances supply against demand, with a focus on manufacturing production and the maintenance of inventory levels that enable customer orders to be fulfilled. Shippers continue to use age-old methods of expediting orders via air when customers are willing to pay for it, but an overall strategy that carefully matches intermodal shipping options to customer order fulfillment expectations is often missing.

“It's important to provide service that mixes different modes of transportation, and then integrates all of these logistics with the end customer and how you provide service,” said Fred Schardt, President and CEO of FedEx Trade Network. Schardt said that from a cost management standpoint, companies should correctly match the velocity of shipping with their customers' expectations for delivery of goods in an intermodal strategy.

“You can actually over-supply service, if you are shipping goods to a consumer in two days when he would be perfectly happy with delivery in four days,” he said. “If you don't have to expedite goods by using air service, you can save money on transportation by shipping by ocean freight, and then tie these ocean shipments into other land-based modes of transportation as you need them… All of this is a balance of cost, value, and time to market that each company must determine for its business. What matters is that you have the logistics infrastructure at your disposal to fulfill a diversity of customer needs.”

#3  Shipping should be visible
Best-of-class intermodal logistics providers have online systems that give shippers granular visibility of every point along the logistics path through which goods travel. These automated tracking systems use sensors placed into individual containers to ensure that seals are not broken and that environmentals are maintained. The sensors auto-issue alerts when environmental failures or broken seals are detected. Companies are even extending some of this visibility to their end customers.

“We see this every day,” said Alan Amling, vice president of global logistics and distribution marketing for UPS. “The connected consumer is the next big thing for global logistics companies. Whether a purchase is made at a business, at home, or in a store, the consumer now has access to the greatest source of power since the dawn of time — information. This is causing companies around the world to rethink who they are selling to and how they can differentiate themselves in a world where their competitor is just a click away.”

#4 Use scorecarding with your intermodal logistics providers
The next frontier of intermodal transportation for shippers should include diligent scorecarding of their logistics providers' performance against key metrics such as on-time delivery, the quality of goods upon arrival (i.e., no damage claims), the overall cost of transport, and contributions to shipping companies' own environmental sustainability goals.

Sustainability is often missed by many shipping companies, but it is a golden opportunity. Energy-efficient transportation not only saves on transportation spend, but also can deliver bottom line impact to corporate sustainability report cards that the government and industry regulators look at.

Let us know how you'd score your organization in managing these key areas of intermodal shipping. What's the next frontier in your strategy?

19 comments on “Plotting Next Steps for Optimizing Intermodal Shipping

  1. Hailey Lynne McKeefry
    February 13, 2014

    There will be a lot more to say and learn about this topic, certainly. I read with interest a white paper published in January 2014 by the Intermodal Association of North America that says we are in early days yet. For those interested, it's got some interesting reading and charts: http://www.intermodal.org/information/research/assets/tenyrsafter.pdf

  2. Hailey Lynne McKeefry
    February 13, 2014

    @Mary, i'd be interested to understand more about the current state of scorecarding for Intermodal shipping vendors (in regard to your final point). Are they being measured at all? If so by what measure?

  3. ahdand
    February 13, 2014

    @Hailey: Yes indeed a good question. Even I too do not mind knowing the answer for it. I feel they're not being measured at all. Its just a gut feeling that I have but I may be wrong. 

  4. Williamson
    February 13, 2014

    Interesting take on managing intermodal shipping. Constant Innovation and new strategies will help logistics companies improve their shipping and delivery systems. This will directly reflect in their productivity . I work for McGladrey and there's a very informative whitepaper on our website that readers of this article will be interested in. @ Count, manage and move: Warehouse inventory control strategies.    bit.ly/1kgYXWo

  5. Hailey Lynne McKeefry
    February 13, 2014

    @Williamson, thanks for the link. I know this white paper (registration required) is intended for an audience of fashion and home furnishing companies rather than electronics but the list of potential benefits is still very familiar:

    • Improve margins
    • Minimize working capital needs
    • Turn supply chains into a competitive differentiator
    • Mitigate risk and costs attributed to key supplier issues
    • Mitigate customer facing issues, such as back orders or missed shipments
    • Increase customer service metrics

    I'm sure our various industries can learn from each other.

  6. Ariella
    February 13, 2014

    Logistics are always an issue to contend with when one has to work out getting somethign from point A to point B. Certainly, the people that pay for shipping services want to have full information about the available options. 

  7. Susan Fourtané
    February 13, 2014

    Hailey, 

    I suppose logistics can be shared by all the industries, like the benefits you mentioned. 

    -Susan

  8. Hailey Lynne McKeefry
    February 14, 2014

    I think that's true, and also true that collaboration across industries in terms of best practices, technologies and the like can often be useful.

  9. Mary E. Shacklett
    February 18, 2014

    Hi Hailey,

     

    Some common scorecard metrics include ontime record, cost, quality  of goods (damage).

  10. Mary E. Shacklett
    February 18, 2014

    Many companies are not scorecarding as they should be.

  11. Mary E. Shacklett
    February 18, 2014

    I'll look forward to looking at the paper! 

  12. ahdand
    February 18, 2014

    @Mary: Very true and that is the turning point. I feel the wrong predictions and bad decisions are caused mainly due to that reason. 

  13. Mary E. Shacklett
    February 19, 2014

    All  too often, supply chain and logistics managers must fight to get the right amount of the attention from the executive suite, too.'This doesn't help a  scorecard effort.

  14. Hailey Lynne McKeefry
    February 19, 2014

    @Mary, these elements measured over time can be very useful. Both in figuring out which vendors are performing well and also how tweaking logistics can impact the whole.

  15. Hailey Lynne McKeefry
    February 19, 2014

    @ Mary, the corner office conundrum is one that is a problem for just about every project–they are pulled in so many directions and have to balance so many things. In talking with those who are successful, it often works to pair these efforts with a pet project or effort that is being launched or to clearly define potential ROI or how the effort solves a business problem. In teh case of intermodal shipping, I would guess that improved customer service, reduced costs, etc. if measurable would be good starting discussion points.

  16. Mary E. Shacklett
    February 20, 2014

    These trends are also useful for meeting with your logistics providers  on a quarterly basis to review performance.

  17. Mary E. Shacklett
    February 20, 2014

    Another important metric to add to these is the amount of  goods damaged in shipments.

  18. ahdand
    February 20, 2014

    @Mary: Yes and I think it would be great if we can drill down into various categories since that will help to identify where the most damage happens. That will be very useful for the management to take action and address the solution for the betterment of the customers as well as for the company.      

  19. Hailey Lynne McKeefry
    February 21, 2014

    @Mary, this reminds me of something that I learned at a recent counterfeit components conference: counterefeit containers (boxes and such) are a leading factor in damaged goods. It seems that counterfeiters use ligher weight containers that look real but are easily crushed and that don't properly protect the products inside. 

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