Ever since the advent of trailer-on-flatcar shipping and the later development of intermodal containers, shippers have had a lower-cost alternative to highway shipping.

But domestic intermodal shipping had two drawbacks when it came to competing with trucks: It was slower and transit times were less predictable. As a result, shippers tended to turn to intermodal only when service was secondary to obtaining the lowest possible price.

No wonder then that just-in-time (JIT) was sometimes jokingly referred to as "just-in-truck." Who could imagine a railroad playing a role in a strategy where on-time delivery mattered? That was especially true in the mid-1990s, when rail service suffered as the industry struggled to digest several large mergers and acquisitions.

Yet today, intermodal appears to be back on track. Consider the following:

• Railroads like BNSF and the Union Pacific are so confident of their ability to provide on-time deliveries that they are offering money-back guarantees for premium service.
• Intermodal marketing companies, or IMCs, now offer seamless tracking, tracing and billing services across the intermodal network, regardless of handoffs from one mode to another, or even from one railroad to another.
• Carriers are reporting quantum jumps in service levels. "Five years ago, we ran at only 80 percent reliability," says Clarence Gooden, CSX Intermodal's president and CEO, "but today our service levels run at the 90th percentile if you measure on-time to within a minute. If you measure on-time to within four hours, we're in the high 90s."
• Improved equipment, like double-stack trains, and capital investments in intermodal rail yards provide for more economical shipments.

Plus the savings are there. Shippers typically expect to save 5 percent above the cost of shipping by truck, including any incremental costs associated with managing an intermodal network. Those savings can translate into significant dollars on long hauls, says Jeff Brashares, president of Pacer Global Logistics, an IMC in Dublin, Ohio. "If we can't save the shipper $100 by going to intermodal," he says, "we don't have the conversation."

Who's using intermodal today? "I don't know of an industry that has not considered—or will not consider—using intermodal as part of its transportation planning," says Mike Hickey, an associate partner with the consulting firm Accenture's Dallas office.

Even more surprising, intermodal logistics is carving out a role in just-in-time supply chains.

Take UPS Autogistics, a two-year-old alliance between UPS Logistics and Ford. The Autogistics team worked with the automaker, railroads and truckers to re-engineer Ford's transportation network for the delivery of finished vehicles throughout the United States, Canada and Mexico.

"We applied the approach to intermodal developed by UPS Logistics Group to moving vehicles using a scheduled railroad network and multi-level stack trains," says Denny Barts, vice president of Autogistics. "Coordination across the rail lines means connections and arrivals are more precise."

The transition wasn't always easy. The railroads were forced to think more about their role in an overall transportation network. For example, one of the criteria established by UPS was a definition of on-time performance that was different from what the railroads were accustomed to using. "The railroads used to assume that if they arrived early, that was on time and successful," says Barts. "From our perspective, they have to work in synch with the entire network, not just their isolated leg."

The effort has paid off. Last February, Ford announced that the intermodal project had sliced vehicle transport time by four days, or 26 percent. Ford realized a $1 billion reduction in vehicle inventory and more than $125 million savings in inventory carrying costs on an annualized basis.

Why use intermodal? Advocates point to three benefits for shippers.

The first is predictability. Today's railroads, airfreight carriers and shipping lines run their operations based on predictable and published departure and delivery schedules, just like an airline. "Intermodal is now a time-sensitive product," says Dan Bingeman, assistant vice president of supply chain logistics at Canadian National Railway in Mississauga, Ontario. "We're having to position our product to meet the needs of our customers, including just-in-time customers like the automakers."

The second is ease of service. With intermodal, you can have a shipment as fast—or as slow—as you want it, which allows you to manage your costs better. Last year, for instance, one of Pacer Global Logistics' customers implemented an intermodal strategy to control costs on its $1 billion annual transportation bill. "We went from 9,000 to 20,000 intermodal moves a year," says Jeff Brashares. "On some lanes, intermodal is saving shippers up to 25 percent, with no reduction in service."

Most domestic shippers who choose intermodal work with an intermodal marketing company rather than deal directly with individual railroads. The IMCs aggregate shipments, coordinate the various modes and track shipments to provide one face to the customer as part of their service. "As an IMC, we move freight, we move information and we move the money to settle accounts," says Bill Uberti, vice president of intermodal and rail services at Exel Transportation Services of Memphis, Tenn.

The third is flexibility. In addition to choosing the most cost-effective mode to meet customer requirements, intermodal allows a shipper to divert or segment a shipment in midstream or put it in a holding pattern if necessary.

The railroads, in particular, have created a variety of new intermodal products. The Norfolk Southern and Union Pacific, for example, recently teamed up to offer the Blue Streak Intermodal Service from Los Angeles to Atlanta; Charlotte, N.C.; and Jacksonville and Miami, Fla. The service, which boasts 95 percent or higher on-time reliability, guarantees priority allocation of equipment to customers willing to pay a surcharge for premium service.

CSX Intermodal, for its part, has begun targeting hauls as short as 500 miles from the Midwest into congested urban areas in the Northeast. "Truckers don't like to make runs into New York because of the tolls and delays," says Clarence Gooden. "We can offer a reliable, overnight service from a city like Cleveland into New York or New England for less than the truckers can." This is a significant development: Previously, hauls under 700 miles were considered too short to be economical.

Reliability is the key to making intermodal an attractive shipping option today. For the carriers, that may mean buying reliable equipment. All of the railroads have made significant investments in stacktrains and in new intermodal terminals.

It also means running the trains on time, which is something of a turnabout for the railroads. "The meltdown in '95 and '98 was a wake-up call to the industry," says Joni Casey, president of the Intermodal Association of North America (IANA), an industry trade association in Greenbelt, Md. "The railroads, in particular, realized that they had to improve service and work on innovative information technology to maintain growth."

By all accounts, the various modes responded by working much more closely together to improve their service.

The steamship lines, for instance, account for 50 percent of the intermodal traffic on the railroads. In the past, one hand rarely knew—or cared—what the other was doing. That's no longer the case. "We used to think of a shipment as port to port," says Patrick Valentine, director of intermodal equipment for Maersk Sealand of Madison, N.J. "Now, it's a seamless service from the point of shipment to final delivery."

Though there are still improvements to be had, the railroads have made strides. "For a certain, growing band of products, … intermodal [service is] attractive because the railroads can now provide a service that's almost as good as truck service at a lower price," says William Rennicke, a vice president in the transportation practice at Mercer Management Consulting of Lexington, Mass. "In many corridors, customers don't know whether their box came via air freight, over the highway or via intermodal. In fact, it might come one way on one day, and another on the next."

The blurring of modes is another important development. Shippers are not buying a specific mode but are balancing price and service levels more assiduously. What makes that possible is the high level of service reliability offered by intermodal providers—not necessarily speed, but delivering on the promise.

"People used to think intermodal was slow and unreliable, so they trucked everything," notes Ron Sorrow, president and CEO of RoadLink USA, a Jacksonville, Fla., trucking company that provides intermodal services to steamship lines and the railroads. "Now, they look at their transportation department like a mutual fund. They need some high-cost solutions like air and motor carrier. But they're also looking at the savings available from slower modes of transportation, as long as they're reliable."

Railroads, IMCs and shipping lines have also invested heavily in the development of tracking, tracing and billing information systems. IT, for instance, has been the single biggest expense after employees for Pacer Global Logistics over the last 10 years.

"Transportation and equipment aren't enough any longer," reports Bingeman of Canadian National. "It's transportation combined with data flow. Information is becoming the differentiator." To achieve this, Canadian National has added onboard GPS technology to provide visibility into the contents of an intermodal container and to capture proof of delivery. The railroad is also receiving real-time information on expected future shipments from its customers that can be used to improve planning.

The flow of information is now seamless across the network on even longer hauls, where a container may move from the control of a steamship line to one or more railroads, to a trucker at the other end. In some instances, shipping information is gathered by the IMC. Then there are industry initiatives that provide visibility across a network, like Railinc, owned by the railroads' trade association, and INTTRA, an online information hub for the steamship lines that enables shippers, freight forwarders, brokers and third-party logistics providers to track and trace as well as book cargo across multiple shipping lines.

Going forward, necessity may become the real engine of growth for intermodal. "The Department of Transportation forecasts that the amount of freight being shipped will double in the next 10 years," says Joni Casey of IANA. "We're fast approaching gridlock in a lot of areas. Intermodal is a way to combat some of the capacity issues."