Intermodal is tied up in knots. When will shippers see relief?
Record import volumes have flooded an intermodal system that moves tens of millions of containers annually. Railroads are struggling to clear the backlogs, but service disruptions continue nationwide.
Gary Frantz is a contributing editor for DC Velocity and its sister publication CSCMP's Supply Chain Quarterly, and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
Intermodal rail service providers are experiencing a banner year, thanks to unprecedented levels of imports into America’s seaports, surging demand for capacity, and an e-commerce–driven economy that just keeps on truckin’. This confluence of events is shining a spotlight on the critical interplay between rail lines and ports, truckers, drayage providers, and warehouse operators, illuminating fundamental challenges and weaknesses that are causing record delays in moving containerized cargo over the rails.
Who’s to blame? You can spread it pretty much equally across all participants in the nation’s overwhelmed supply chains.
Railroads, which cut staffing during the pandemic, have been challenged to rehire crews and bring more mile-long intermodal trains online quickly enough to meet demand. Ports have been dealing with a record number of ship calls, which has overtaxed shoreside capacity and created backlogs at sea and on land. In early September, for example, 44 container vessels were anchored in Southern California’s San Pedro Bay waiting for a berth; once unloaded, containers at the Port of Los Angeles terminals faced peak dwell times of over five days.
Truckers have been overwhelmed as well, as they contend with critical shortages of both drivers and container chassis. And warehouses, already stacked to the rafters with forward-stocked inventory, have been pushing back container deliveries, and in some cases simply parking containers on wheels in their lots, delaying the return and redeployment of the all-important chassis.
FRUSTRATED SHIPPERS
Shippers are seeing the port/rail congestion and service delays affect their operations at different points in the supply chain, particularly the “middle mile” segment, where they are moving goods out of ports and then to distribution centers around the country.
That’s exactly what Kitchen Cabinet Distributors (KCD), a Raleigh, North Carolina-based importer of ready-to-assemble cabinetry, has encountered. Although KCD’s struggles to move freight are hardly unique to the company, they are nevertheless leaving its customers frustrated, according to Glen Wegel, vice president of operations and IT. The impact has been significant enough that KCD is rethinking its mode choices. “We are in general avoiding rail when possible due to the deterioration of services across all rail carriers,” he says. Still, he recognizes that while the rail carriers are working through backlogs “as best they can, they’re up against [the same] labor and [Covid-19] struggles as the rest of us.”
The intermodal backlogs largely originate at congested seaports. That’s one reason Wegel completely avoids the Southern California ports; instead, KCD lands most of its import containers at the Port of Virginia complex and makes “pretty heavy” use of the Port of Houston as well. Wegel notes, however, that congestion in Houston, where in late August it was taking upwards of seven days to clear vessels, is starting to feel like the congestion on the West Coast.
KCD also uses the inland port system from Savannah, Georgia, to get boxes to destinations in that state and Tennessee. There’s no relief there, either. “Inland ports are where my freight continues to get held up,” Wegel says, citing delays in some cases of six weeks to get a box on the rail and headed inland. That won’t be a problem in Florida, though. KCD has built a new DC in Orlando that will be served from the ports of Tampa, Jacksonville, and Miami, which between them have containership calls from Asia seven days a week, he notes.
Wegel sums up the situation this way: “Port congestion is costing me a boatload of money. The labor issues, congestion, and lack of trucks and chassis are making it extremely difficult to predict freight arrivals.”
Domestic intermodal is also facing service challenges, but for different reasons. “This is a super-disruptive time,” observes Rob Kemp, president and chief executive officer of Lebanon, Pennsylvania-based DRT Transportation, an asset-light logistics, trucking, brokerage, and transportation management firm that, he says, does “tens of millions of dollars a year” in business with the rails. “Since this precision railroading started, [the railroads] are just not equipped to handle the volumes they are moving.” (Under precision scheduled railroading, or PSR, freight trains operate on fixed schedules, much like passenger trains, instead of being dispatched whenever a sufficient number of loaded cars are available.)
The inconsistencies in the railroads’ service make it hard to make commitments to DRT’s customers, Kemp says. Intermodal’s capacity and service challenges are pushing the company to move more of its customers’ freight over the road, to the point where he’s added more tractors and hired more drivers. “We have always been a road-to-rail conversion company,” he observes. “We are a really big channel partner. We have a large book of business, but when volume spikes and a [rail intermodal] ramp is flooded with 100 loads, [the railroads] will take it and we kind of get lost in the shuffle.” The pricing delta between rail and truck has been painful: “The losses we have incurred in our intermodal and trucking operations due to disruption caused by the railroads is significant,” he says.
Kemp does say that not all Class 1 railroads operate that way, noting that some are “trying to live up to their commitments even in this disruptive environment.” Nevertheless, in this market, it’s a constant battle to meet shippers’ needs. “We move 20 loads a day, and when [the railroads] tell us we can only move five, what do I tell the other customers? They get delayed until I can get it on the train, or I have to move it over the road—if I can find a driver.”
He’s not optimistic about peak season and the outlook for service and capacity. “I think they are working desperately to get ready for the fourth quarter,” Kemp says. “[But] I have not seen anything that makes me [confident] that it will not turn into another disruptive event.”
RAILROADS TAKE ACTION
The Class 1 railroads say they are working hard to keep intermodal traffic moving, but they’re hampered by capacity constraints. “A railroad is a linear network, so we can only move as much into an area as we can move out of it,” commented Jeff Heller, vice president of intermodal and automotive for Norfolk, Virginia-based Norfolk Southern. He says the amount of time a container stays at a terminal has gone up because warehouses are full, and “there is no place for [it] to go.”
That also has increased the time it takes to “turn” a container and its chassis, with the longer cycle time creating additional delay. All of this causes containers to stack up at port terminals and rail yards, contributing to congestion. “The chain has slowed,” Heller says.
He provides another interesting observation: that peak season, which this year never seemed to end, has evolved into three distinct phases. “International—moving import containers—starts in August and runs through November. Domestic starts in September and runs through Thanksgiving. Then the e-commerce–driven parcel peak [for which rails provide the middle-mile service] starts at Thanksgiving and runs through the end of the year,” he explains.
“We're running pretty hard right now," Heller says. “While business will continue to move, the ability of the North American supply chain to handle it is pretty limited to the run rate we’re [at] today.”
Heller describes the challenges of the last year, and likely the remainder of this year, as “a generational event.” “I’ve never seen anything like this,” he says, adding that the Norfolk Southern, as the second-largest intermodal service provider in North America, continues to step up to the plate and “invest in our network to accommodate the throughput and support customer demand.”
Seana Fairchild, assistant vice president, marketing and sales, premium for Omaha, Nebraska-based Union Pacific Railroad (UP), agrees that lack of warehouse space, labor, and drayage capacity have all contributed to increased terminal and street dwell time and delays, particularly in Chicago. She says UP is working closely with stakeholders and has taken several actions to increase fluidity and reduce congestion.
First, in July, the railroad “hit pause on West Coast import traffic for a week,” she reports. “We temporarily reopened our Global III facility in Rochelle, Illinois, to store international containers,” which helped to alleviate port congestion and provided ocean carriers with a more efficient inland storage solution. Second, the railroad added more locomotives and railcar assets, which supported an incremental increase of approximately 150 to 200 containers per day from the Long Beach and Los Angeles marine terminals. And third, the UP marshaled the resources of its Loup Logistics subsidiary to help shippers overcome a scarcity of drayage capacity for final-mile delivery.
Those moves helped drive improvements in Chicago operations, Fairchild says, and “while things are more fluid now, candidly, we expect the entire supply chain to be stressed for the remainder of this year and into 2022.”
Similarly, the Burlington Northern Santa Fe Railway (BNSF) has made operational changes to alleviate congestion. “We recognize that strong demand is still in front of us and have taken several actions to push more volume through our network,” says Tom Williams, group vice president, consumer products. Systemwide, the BNSF has hired more staff and increased lift at all of its facilities by 20%. It has also reopened its Harvard facility in Marion, Arkansas, for intermodal service and has taken two track segments at its Logistics Park Chicago out of service and converted them to a stacked-container area, which, Williams says, helps the BNSF improve its ability to de-ramp trains and immediately stage units.
A PERFECT INTERMODAL STORM
The strains on the supply chain imposed by Covid-19 and a surging economy have presented a perfect storm of challenges, says Scott Taylor, chairman and chief executive officer of Oakland, California-based GSC Logistics. “The record import volumes have stressed every single mode,” Taylor observes. “We don’t see it ending anytime soon.”
GSC’s core competencies, according to Taylor, are transloading, deconsolidation, and local and regional trucking. The company is also one of the largest providers of local drayage services at the ports of Oakland, Seattle, and Tacoma, making GSC a fundamental link connecting ports, rails, and shippers.
One of Taylor’s biggest concerns is that increased dwell times at warehouses and unusual cargo routings have placed severe stress on the availability of container chassis. In response, GSC over the past year expanded its chassis fleet by nearly 40%, to 1,000 units. Even with that expansion, he says, “we are 95%-plus every day on chassis utilization.”
Like other port-oriented logistics service providers, GSC has seen its mix of truck versus rail loadings shift as a result of the intermodal rail capacity squeeze. “Where it used to be 60% intermodal and 40% truck, it’s flipped,” Taylor observes; now over-the-road truck makes up 60% of moves and intermodal rail accounts for 40%. The top request Taylor is getting from customers: Find me capacity, at almost any price.
WHAT LIES AHEAD
As for when the situation might ease, it’s anybody’s guess. As the fall peak season accelerates, supply chain managers remain under the gun, facing tremendous pressure to get goods out of ports, on the rails, and ultimately delivered to retail shelves (and e-commerce fulfillment warehouses) and made available to consumers. Ports again are packed with ships, containers are sitting in congested yards, and warehouses are full. Equipment to move containers from port to rail, and on rail across the country, remains capacity-constrained, with most industry executives expecting no letup until after Chinese New Year in 2022.
“There is such displacement going on in the market right now,” says GSC’s Taylor. Yet for all the turmoil, he still holds out hope that the situation can be resolved. Service providers, working together and understanding how each segment impacts the overall chain, can find workable solutions, he says. “It’s a matter of how you handle these challenges at the grassroots level. It all comes down to communication, integrity, and delivering certainty.”
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.