Market conditions suggest now is a great time to consider rail as an alternative to truck load for your freight transportation.
By Greg Harrison and Peter Masterson
When was the last time you quoted an intermodal solution for your freight? Chances are you will be surprised how competitive rates are compared to truck load. It’s no secret that capacity limitations, driver shortages and other factors have caused load to truck ratios to skyrocket in recent months. Consequently, freight rates keep pushing higher with no end in sight. While many shippers are adjusting to the market by increasing estimated freight expenditures for 2021, there is a growing number of companies transitioning to intermodal to reduce cost.
Intermodal is the term used to describe the movement of shipping containers (or truck trailers) utilizing railroads, combined with truck trips at either or both ends of the journey. These truck trips are commonly called drayage moves. An intermodal strategy allows for shippers to take advantage of various modes of transportation, including railroad, ocean carriers and trucking to build the most cost-effective freight management strategy. Intermodal pricing often yields significant savings for shippers. Rail transport is generally more fuel efficient than over the road, contributing to lower costs and its reputation as the most environmentally friendly choice for shipping.
We have found that its not uncommon for rail to get overlooked as a slow and confusing option. When capacity is not an issue, shippers and agents naturally rely on trucks for convenience and speed of delivery. Often though, when capacity is tight, rail begins to look a lot more attractive, and we are seeing that play out now in the market with fantastic results.
Let us take a closer look at a recent shipment we handled as an example of how rail compares to truck cost. Our customer, who has traditionally used trucks to haul freight from Dallas, TX to Riverside, CA requested that we compare intermodal for the same trip. Just by adding a little flexibility, the shipper reduced their cost from $2,000 to $1,500, saving 25% on rate. The difference in delivery time increased slightly from 2-3 days to 3-4 days of transit time.
You might be asking, if rail intermodal is so great, why aren’t more shippers using it? Fair question, rail doesn’t work for all types of shipments. If your cargo is time or temperature sensitive or traveling less than 500 miles – it’s likely trucks are a better option. As a rule of thumb, if your shipment can be containerized, is traveling greater than 500 miles and you have some flexibility in schedule, intermodal is definitely worth considering.
Intermodal imperatives for success
- Shippers need to be flexible. Patience is a virtue for intermodal shippers, with potential huge gains as their reward.
- Plan on having more open windows/time frames for pick-up and deliveries.
- Expect quick-turn arounds – which means its important to assist transportation partners with loading and unloading when needed.
- Blocking and bracing your freight is critical – there are lots of resources available.
Using a combination of trucks and railroads to move your freight can seem overwhelming. At AGX, we work with all the major rail lines and coordinate shipments from door to door with one invoice to help simplify the process. Our customers benefit by taking advantage of rail as a solution to help reduce their costs and avoid the challenges created in the market by capacity limitations. If you haven’t compared shipping via rail versus truck recently, we encourage you to investigate to see if it makes sense for your business. If you need any assistance, let us know, we would welcome the opportunity to get a quote started for you.