The far-flung intermodal operations of the nation’s Class 1 railroads continue to deal with a host of challenges as shippers look to get peak season cargoes moved without delay and available in stores for the annual holiday sales push.
Those challenges reflect persistent issues that rail service providers, drayage firms, shippers both import and export, and warehouse operators have been dealing with since the onset of Covid. Containers are piling up at seaports and inland port intermodal (IPI) facilities (off port or inland rail depots where containers are staged and loaded on stack trains). Intermodal rail capacity remains stubbornly problematic. Train departures are delayed or canceled as the rail lines continue to recover from staffing shortages, a residual effect of Covid-driven furloughs and layoffs. On-time arrival of dispatched trains is mired in the mid-70% range.
Then there is the impact of warehouses already filled to the rafters with aging inventory that still needs to be moved to stores. That landside capacity crunch means fresh inbound goods have no place to go. As a result, incoming containers are left on rail ramps for extended periods of time, exacerbating congestion issues at the ramps. Those that do move off ramps often are being parked at warehouses, unable to immediately be unloaded. That creates yet another capacity issue, as chassis are then delayed being returned to ports and inland rail ramps.
All this foreshadows a challenging run to the end of the year for intermodal rail providers, drayage truckers, and shippers.
TURNING THE FAUCET OFF, THEN ON
Larry Gross, who has followed the industry for several decades and publishes the monthly "Intermodal in Depth" report, points to a couple of factors that have influenced—and continue to influence—intermodal service and capacity. “Ocean carriers late last year and early this year basically turned off the IPI faucet, because they wanted to corral their [containers] close to the port and shoot them back to Asia as fast as possible,” he said. “They were short of equipment in Asia, and rates were insane coming east. They didn’t want containers spending a lot of time running around the U.S. when [containers] could be back in Shanghai getting another high-profit load,” he noted.
Then they opened the spigots, sending a surge of freight into inland intermodal systems, “which just cannot deal with the speed and magnitude of the changes,” he explained. “Volume went up like an escalator. There are chassis shortages in many lanes, the surge has eaten up all the chassis [capacity], and warehouses are [already] full with the wrong inventory.” All of which led to what seem to be intractable bottlenecks.
While capacity remains tight, Gross believes demand is beginning to slacken, which may provide some relief through the end of the year.
At the same time, the rails are making progress reducing congestion, adding crews, and improving on-time dispatches. But Gross isn’t convinced the pain is behind us. “My expectation for peak season is very muted,” he notes. “We’re already running as fast as we can.” The ability of rails to “flex up” is very limited, particularly as many shippers have advanced or “up-streamed” orders early in an effort to get goods into stores in time for seasonal sales. As a result, for intermodal networks, “when everyone is doing the same thing, it creates a big problem.”
DISJOINTED SUPPLY CHAINS DISRUPTING—AGAIN
“Everyone is acutely aware of supply chain challenges; our service has been impacted as well,” notes Pat Linden, assistant vice president, intermodal marketing for the Union Pacific railroad. “We have taken some actions in terms of metering [restricting] inbound freight as a few inbound ramps are congested with stacked containers.” He emphasizes that “fluidity” and throughput at intermodal ramps depends as well on how promptly shippers pick up their containers. He points out that shippers control “the first or last mile, so we need improvement from our customers to process those loads and get them off the inbound ramps.”
Nevertheless, Linden says that “we at the UP are accountable to our customers for our service, [which] certainly has not been where we want it to be. We need to increase velocity and deliver better performance, and that’s on us.”
Balance is critical to an intermodal network, which Linden says the railroad works constantly to manage, taking steps operationally and commercially to adjust and improve. Crew availability has been an issue—“and we have been very public about the challenges we have faced with crews,” Linden says—but he emphasizes that progress is being made. “Crew availability [in September] is the best it has been since the end of the first quarter.” The UP has graduated nearly 600 train, engine, and yard service employees through July and has another 100-plus member class soon to graduate. “We are on pace to meet our hiring target of 1,400 crew members by the end of the year.”
Linden says the UP has the resources necessary to support the demand it has currently. He notes as well that the railroad is spending some $600 million over the next several years on capacity and commercial facilities, including expansions at existing facilities to increase parking and lift capacity, fund technology initiatives, and “deliver a best-in-class driver experience.” The market is at about the halfway point through the traditional peak season, Linden said in early September. How big of a peak the industry will see remains up for debate, as a cooling economy and rising interest rates and inflation begin to put a damper on consumer spending and industrial output.
Regardless of the market, the UP is plowing ahead with initiatives to improve network fluidity, reduce congestion, and improve overall service performance. “We know that intermodal is a service-sensitive product,” Linden says. “When we don’t perform, that impedes our opportunity to fully capture what is available to us. Our bias is for growth, and we are going to make sure we have the resources and train plans in place to be competitive in the market.”
LOOKING FOR CAPACITY WHEREVER IT EXISTS
Tom Williams, group vice president for consumer products at the Burlington Northern Santa Fe Railway, says the BNSF has been experiencing capacity issues at both East and West Coast gateways and all inland terminals, driven by “crowded warehouses and labor shortages across the supply chain.” The West Coast, which provides the most direct route into the U.S. from Asia, is processing a record number of containers. With congestion apparent across all gateways, “BCOs [beneficial cargo owners] are looking for capacity wherever it exists,” he says.
The BNSF in September instituted metering for international intermodal traffic at its Logistics Park Alliance and Logistics Park Chicago depots to help reduce the high number of ground-stacked containers. Williams says that street turn times for chassis are again spiking, which is “depleting the assets that are needed to unload trains at our facilities.” Those longer chassis turn times are a big factor behind the metering of containers at ports awaiting a train.
Williams stresses that the railroad has been actively managing its network to increase fluidity and reduce congestion. “Managing the active car inventory is an impactful action in the short term to improve fluidity and restore service consistency,” he notes. Those actions include “selective metering of inbound volumes to address high container dwell and chassis unavailability.”
In one effort to alleviate the situation, the BNSF has been working with ship lines and customers to shuttle containers away from ports and IPI yards, stacking them at offsite container yards, which, Williams says, “allows us to move longer-dwelling units away from the production area and off much-needed chassis, ultimately increasing unloading potential and container availability for customers.”
The BNSF also has established a weekend dray-off program (to move containers from rail ramps to offsite yards) using new stacked container yards at its Logistics Park Chicago facility; added new stacking cranes at its Logistics Park Alliance site, which enables faster movement of stacked containers at the 3,000-unit capacity site; and implemented a long-dwelling unit dray-off program in Kansas City.
All the initiatives are part of what Williams calls the BNSF’s “aggressive service recovery plan.” He says the plan has since early July reduced by 50% the number of trains being held or delayed at origin, decreased traffic backlogs, and improved overall network fluidity and velocity.
Williams also cited several BNSF initiatives to unlock more capacity. One is the development of a new rail hub at Washington’s Port of Tacoma in collaboration with the Northwest Seaport Alliance. The new Tacoma South facility will accommodate more than 50,000 annual container lifts. That complements the BNSF’s current facility at Tukwila serving the Seattle harbor. Another is an initiative with freight transportation giant J.B. Hunt, which earlier this year announced plans to grow its intermodal fleet by as many as 150,000 containers. In support of that, the BNSF is investing to increase capability at major intermodal hubs in Southern California, Chicago, Tacoma, and other key terminals to increase efficiency.
The railroad also has been making progress overcoming hiring and retention challenges. To date through early September, the BNSF had achieved 60% of its hiring plan for 2022, which calls for hiring 1,800 train, yard, and engine personnel as well as some 1,200 workers in its engineering, mechanical, and dispatch groups.
At the end of the day, all these activities still come back to one overriding issue, Williams notes. “First and foremost, we need to restore our service to a level our customers expect from us,” he says. “We are confident in our recovery plan, and as service returns, so will volume.”
Gartner, Inc.