Intermodal Trends: What Should We Expect in the International Supply-Chain System?
The international supply chain is evolving to meet the need for consistency, increased velocity and visibility, and the incorporation of emerging technologies.
Logistics Distribution Warehousing 2007
It is important to note that trends are part of the predictor of change in trade management. Observing trends in global logistics is the easy part; the most difficult challenge is to understand where the trends will have an impact on trade flow, and which trends will gain acceptance across all points of custody that occur on the global conveyor belt.
The logistics system is made up of many components including intermodal rail and the associated delivery challenges associated with rail-truck and truck-rail interchange. The complexities of the system reflect the imprint of each importer's (or their logistics services provider partner's) approach to managing security, visibility, cost, predictability, compliance, and numerous country-specific requirements.
The trends that will be discussed in this format are "works in progress," and only time will tell if any or all of these trends will become part of actual trade practices. Given the competing pressure for supply-chain consistency, increased velocity, decreased labor, lower costs, increased visibility, and compliance, as well as the emerging role of technologies, robotics, and security innovations, it is clear that global trade will continue to evolve - change will be the only constant.
Trade, specifically trade with China, is growing rapidly. At 7-8 percent growth per year, in 10 years, trade with China will double. The U.S. transportation system faces a massive shortfall in capacity to move and absorb these goods. To add greater unpredictability to the logistics process, shifting populations will continue to drive changes in port and destination selections. Larger ships, new port capacity, changing routes in favor of the Suez Canal, or new capacity in the Panama Canal will only continue to complicate the decision process for goods movement inland. Importers continue to weigh the costs of drayage, the costs/benefits of transloading or intact moves, the challenges of labor and truck drivers, and expanding rail capacity as intermodal market shares shift in the rail carrier's service systems.
The moving target is simple to ask: "Where do the boxes stop?" The answer is as complex and varied as each importer's strategy for distribution site requirements (where and how many import and regional distribution center (DC) sites are required and why?); location selection (which port, near port, inland port, regional DC, or import DC and why?); and choice over the carrier's role (is it door-door, door-port, port-port service, landed-delivered, consigned and why?). These selection choices come at the same time that the rail carriers have created an increase in intermodal market share. They face increasing pressure for intermodal services and increasing demand for port/near-port service and a diminishing land inventory at our ocean ports.
Furthermore, the rail carriers are looking for ways to aggregate services into inland "hubs" where they can operate more efficiently and service a greater number of clients. What is emerging from this desire for efficiencies by the rail carriers is a logistics hub, a site where the rail carrier's intermodal services intersect with logistics distribution services. There are several trends that indicate certain changes that are in varying stages of evolution:
Change Agent 1: Large ships at mega ports create huge volume spikes in cargo to be moved inland or to be moved to import/regional distribution sites near ports. Carriers are also seeking to aggregate their services to (inland or port) load centers in key markets and seek fewer ports of call where import and export volumes provide profitable operating revenue streams. The ocean carrier is driving this change purely on the basis of a desire to better utilize their container equipment. Choosing ports where they can reduce the "cycle time" of the containers between unload/load or discharge/stow can have a significant impact on the ocean carrier's profitability. Thus, ports of call that support efficient loading or unloading of containers from the ship and distribution networks that keep the containers closer to the ports are important considerations for the ocean carriers. This trend will continue to drive volumes to the most efficient ports and to ports where a higher ratio of goods can transition between the ocean carrier's containers and domestic conveyances in reduced timeframes.
Change Agent 2: Rail carriers are seeking to operate more efficiently by creating a parallel policy of aggregating demand in key markets. In fact, rail carriers now seek to change the model for delivery of goods by aggregating all rail-served goods into a single or multiple logistics parks in their markets (similar to how they concentrate intermodal delivery to a single ramp). These efforts to aggregate demand are based on their desire to increase velocity in service, to reduce local shuttle costs, and to expand their railcar service efficiencies. The rail carriers not only seek higher volumes of trade to specific locations, but once at an inland destination, they also seek a destination within that market where they can deliver all rail-served buildings within one logistics and distribution park.
Change Agent 3: Competition and collaboration between traditional U.S. East Coast and U.S. West Cost rail carriers, emerging corridors for rapid rail services, and the environmental desire to displace trucks on roads by rail short- and long-haul services are all emerging as trends for the future. All water routes to the U.S. East Coast and the promise of greater lift capacity post-Panama's expansion provide the traditional East Coast carriers with new mid-country reach on a competitive platform with U.S. West Cost and land-bridge service to mid-country markets. New corridors (Heartland and Crescent/Norfolk Southern, Triangle/CSX, and Meridian Speedway/Kansas City Southern/ Norfolk Southern) provide both north-south and east-west collaboration and track sharing in order to reduce truck traffic, provide expedited service, and reduce pollution and congestion at the ports and at inland destinations. The Union Pacific and Norfolk Southern have strengthened their collaborative efforts and the Burlington Northern Santa Fe and CSX have now done the same.
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