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.”
Robots are revolutionizing factories, warehouses, and distribution centers (DCs) around the world, thanks largely to heavy investments in the technology between 2019 and 2021. And although investment has slowed since then, the long-term outlook calls for steady growth over the next four years. According to data from research and consulting firm Interact Analysis, revenues from shipments of industrial robots are forecast to grow nearly 4% per year, on average, between 2024 and 2028 (see Exhibit 1).
EXHIBIT 1: Market forecast for industrial robots - revenuesInteract Analysis
Material handling is among the top applications for all those robots, accounting for one-third of overall robot market revenues in 2023, according to the research. That puts warehouses and DCs on the cutting edge of robotic innovation, with projects that are helping companies reduce costs, optimize labor, and improve productivity throughout their facilities. Here’s a look at two recent projects that demonstrate the kinds of gains companies have achieved by investing in robotic equipment.
FASTER, MORE ACCURATE CYCLE COUNTS
When leaders at MSI Surfaces wanted to get a better handle on their vast inventory of flooring, countertops, tile, and hardscape materials, they turned to warehouse inventory drone provider Corvus Robotics. The seven-year-old company offers a warehouse drone system, called Corvus One, that can be installed and deployed quickly—in what MSI leaders describe as a “plug and play” process. Corvus Robotics’ drones are fully autonomous—they require no external infrastructure, such as beacons or stickers for positioning and navigation, and no human operators. Essentially, all you need is the drone and a landing pad, and you’re in business.
The drones use computer vision and generative AI (artificial intelligence) to “understand” their environment, flying autonomously in both very narrow aisles—passageways as narrow as 50 inches—and in very wide aisles. The Corvus One system relies on obstacle detection to operate safely in warehouses and uses barcode scanning technology to count inventory; the advanced system can read any barcode symbol in any orientation placed anywhere on the front of a carton or pallet.
The system was the perfect answer to the inventory challenges MSI was facing. Its annual physical inventory counts required two to four dedicated warehouse associates, who would manually scan inventory to determine the amount of stock on hand. The process was both time-consuming and error-prone, and often led to inaccuracies. And it created a chain reaction of issues and problems. Fulfillment speed is one example: Lost or misplaced inventory would delay customer deliveries, resulting in dissatisfaction, returns, and unmet expectations. Productivity was also an issue: Workers were often pulled from fulfillment tasks to locate material, slowing overall operations.
MSI Surfaces began using the Corvus One system in 2021, deploying a small number of drones for daily inventory counts at its 300,000-square-foot distribution center (DC) in Orange, California. It quickly scaled up, adding more drones in Orange and expanding the system to three other DCs: in Houston; Savannah, Georgia; and Edison, New Jersey. The company plans to add more drones to the existing sites and expand the system to some of its smaller DCs as well, according to Corvus Robotics spokesperson Andrew Burer.
Those expansion plans are based on solid results: MSI’s inventory accuracy was about 80% prior to the drone implementation, but it quickly jumped to the high 90s—ultimately reaching 99%—after the company initiated the daily drone counts, according to Burer.
“We actually had an incident early on where one of the forklift drivers ran into the landing pad, rendering it inoperable for about a week while the Corvus team fixed it,” Burer recalls. “When we restarted the system, we noticed MSI’s inventory accuracy had dropped down to the 80s. But after flights resumed, accuracy quickly improved back to near perfect.” He adds that such collisions are rare as Corvus mounts landing pads high off the floor to avoid impacts but that accidents can still happen.
Overall, the system has helped speed warehouse operations in two key ways: First, the accuracy improvement means that associates no longer waste time searching for missing material in the warehouse. And second, the associates who used to conduct the physical inventory counts have been reallocated to picking and replenishment—creating a more efficient, and optimized, workforce.
A SAFER, MORE EFFICIENT WAREHOUSE
Robot maker Boston Dynamics is well-known for its Stretch and Spot industrial robots, both of which are at work in warehouses and DCs around the world. Earlier this year, Stretch made its debut in Europe, teaming up with Spot at a fulfillment center run by German retail company Otto Group. The deployment marks the first time Stretch and Spot are being used together—in a partnership designed to improve Otto Group’s warehousing operations by increasing efficiency and making warehouse work safer and more attractive to workers.
The partnership is part of a two-year project in which Boston Dynamics will deploy dozens of its warehouse robots in Otto Group’s European DCs. The first location is a fulfillment site operated by Hermes, the company’s parcel delivery subsidiary, in Haldensleben, Germany—a facility that handles as many as 40,000 cartons of goods on peak days.
At the site, Stretch—which is a mobile case-handling robot—autonomously unloads ocean containers and trailers, using its advanced perception system to pick and place boxes onto a telescoping conveyor inside the container or trailer. Spot—a quadruped robot—helps with predictive maintenance by collecting thermal data and performing acoustic and visual detection tasks throughout the facility to reduce unplanned downtime and energy costs. One of Spot’s jobs is to detect air leaks in the facility’s warehouse automation systems; future duties may include conveyor vibration detection, according to leaders at Otto Group.
Both Stretch and Spot will help the Haldensleben facility run more efficiently, especially during fall peak season when volume increases and work intensifies. The addition of Stretch addresses safety and comfort issues as well: Trailer unloading—a process that entails repeatedly lifting and moving heavy boxes inside a trailer, which can be dark, dirty, cold, and/or hot, depending on the weather—tends to be unappealing to workers. Along with reducing the amount of labor required, automating these tasks will have the added benefit for European facilities of helping them comply with EU (European Union) regulations limiting the amount of time workers can spend in those conditions.
Essentially, the robots are making life easier on the warehouse floor and for the company at large.
“Stretch is going to have a ton of benefits for customers here in the EU,” Andrew Brueckner, of Boston Dynamics, said in a recent case study on the project.
The trucking industry faces a range of challenges these days, particularly when it comes to load planning—a resource-intensive task that often results in suboptimal decisions, unnecessary empty miles, late deliveries, and inefficient asset utilization. What’s more, delays in decision-making due to a lack of real-time insights can hinder operational efficiency, making cost management a constant struggle.
Truckload carrier Paper Transport Inc. (PTI) experienced this firsthand when the company sought to expand its over the-road (OTR), intermodal, and brokerage offerings to include dedicated fleet services for high-volume shippers—adding a layer of complexity to the business. The additional personnel required for such a move would be extremely costly, leading PTI to investigate technology solutions that could help close the gap.
Enter Freight Science and its intelligent decision-recommendation and automation platform.
PTI implemented Freight Science’s artificial intelligence (AI)-driven load planning optimization solution earlier this year, giving the carrier a high-tech advantage as it launched the new service.
“As PTI tried to diversify … we found that we needed a technological solution that would allow us to process [information] faster,” explains Jared Stedl, chief commercial officer for PTI, emphasizing the high volume of outbound shipments and unique freight characteristics of its targeted dedicated-fleet customers.
The Freight Science platform allowed PTI to apply its signature high-quality service to those needs, all while handling the daily challenges of managing drivers and navigating route disruptions.
STREAMLINING PROCESSES
Dedicated fleets face challenges that evolve from day to day and minute to minute, including truck breakdowns, drivers calling in sick, and rescheduled appointment times. PTI needed a tool that allowed for a real-time view of the fleet, ultimately enabling its team to adjust truck and driver allocation to meet those challenges.
The Freight Science solution filled the bill. The platform uses advanced analytics and algorithms to give carriers better visibility into operations while automating the decision-making process. By combining streaming data, a carrier’s transportation management system (TMS), machine learning, and decision science, the solution allows carriers to deploy their fleets more efficiently while accurately forecasting future needs, according to Freight Science.
In PTI’s case, Freight Science’s software integrates with the carrier’s TMS, real-time electronic logging device (ELD) data, and other external data, feeding an AI model that generates an optimized load plan for the planner.
“We’re an integrated data analytics company for trucking companies,” explains Matt Foster, Freight Science’s president and CEO. “We’re talking about AI.”
The benefits of the real-time data are difficult to overstate.
“We’ve been able to execute in the toughest of situations because we’ve got real, live data on how long each event is actually going to take and a system to aid and even automate the decision-making process,” says Chad Borley, PTI’s operations manager. “From what traffic patterns we are battling in the morning and evening with rush hour and things like that, to the impact of additional miles to a route, or even location-specific dwell times, it’s been a huge differentiator for us.”
REALIZING RESULTS
A case in point: the collapse of Baltimore’s Francis Scott Key Bridge in March. PTI was scheduled to go live with a new dedicated account in the area just days after the collapse, which would mean rerouting and the potential for longer transit times. Instead of recalculating based on assumptions or latent data, PTI was able to reroute freight based on real-time information and analytics to give the customer timely updates.
“With the bridge going out, that changed our ability to make as many turns a day as the customer would expect,” Stedl explains. “But one of the things Freight Science could do [was to] quickly [assess] how much of an impact that traffic would have [and] what the turns [would] be based on what’s happening on the ground.
“So we were able to go back to the customer and readjust expectations in a real way that made sense, using data. Now expectations can be reset¾we’re not asking for forgiveness when there’s no reason for it.”
The system’s advanced algorithms make load planning more cost-effective and scalable as well. The platform allows PTI to monitor trucks, trailers, and driver hours in real time, recommending additional loads with remaining driver hours that would otherwise be wasted.
And they’re doing it all with much less. Stedl says tasks that used to require five people and hours of work can now be accomplished by one person in mere minutes, improving productivity and profitability while reducing labor and operational costs.
Terms of the deal were not disclosed, but Aptean said the move will add new capabilities to its warehouse management and supply chain management offerings for manufacturers, wholesalers, distributors, retailers, and 3PLs. Aptean currently provides enterprise resource planning (ERP), transportation management systems (TMS), and product lifecycle management (PLM) platforms.
Founded in 1980 and headquartered in Durham, U.K., Indigo Software provides software designed for mid-market organizations, giving users real-time visibility and management from the initial receipt of stock all the way through to final dispatch of the finished product. That enables organizations to optimize an array of warehouse operations including receiving, storage, picking, packing, and shipping, the firm says.
Specific sectors served by Indigo Software include the food and beverage, fashion and apparel, fast moving consumer goods, automotive, manufacturing, 3PL, chemicals, and wholesale / distribution verticals.
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”