Intermodal transportation isn't necessarily right for every shipper, nor is it right for every situation. But when there is a good match, it can be a powerful transportation option that can cut costs and improve productivity—especially when intermodal activity is executed quickly and efficiently.

That's the situation at Sweetheart Cup, North America's largest manufacturer of single-use disposable products for the food and beverage service industry. Sweetheart, based in Owings Mills, Md., has found that intermodal transportation is the most cost-effective and efficient option for certain types of traffic—principally, regularly scheduled replenishment product moving long distances from its manufacturing plants to distribution centers.

To get the most that intermodal has to offer, Sweetheart works closely with one intermodal marketing company (IMC). Hub Group Inc. of Lombard, Ill., handles all of Sweetheart's intermodal traffic; in fact, the two companies have just celebrated the tenth anniversary of their single-sourcing arrangement. Sweetheart credits that long-term relationship with assuring that it gets the right equipment at the right time—and at the right price. And that, in turn, keeps customers happy while lowering Sweetheart's transportation costs.

Sweetheart's intermodal traffic moves under three-party contracts that include both the rail carriers and Hub Group. Under these agreements, which the shipper has signed with most of the major rail carriers in North America, the railroads and Hub Group guarantee equipment, while Sweetheart guarantees minimum shipment volumes.

Coming up with enough shipments to meet that commitment isn't hard: Sweetheart has had such success with intermodal that it currently moves 25 percent of its total freight volumes that way.

Some shippers say that intermodal transportation is not as reliable as trucking, but that hasn't been Sweetheart's experience. True, intermodal transit times are slightly longer than those for truckload (TL) moves, but the shipper simply takes that fact into account in its planning. "The intermodal service is so consistent that the time in transit is not an issue," says Kathy Chasis, Sweatheart's director of transportation. "We work our inventory plan around the intermodal transit times."

In addition to being reliable, intermodal shipping also has proved to be cost-effective for some types of traffic. Warehouse replenishment shipments from Sweetheart's nine plants to its five distribution centers (DCs) located throughout the United States and Canada are especially suited for intermodal, says Chasis. One reason is that those moves, which represent about 40 percent of the company's annual shipment volume, can be quite lengthy. For example, the Ontario, Calif., DC is served by all nine plants, most of which are east of Dallas, Texas.

Sweetheart's shipments from east to west also fill the railroads' needs. "The rail carriers are always looking for empty equipment out on the West Coast to move Asian imports back east," says Chasis. "We are giving them the equipment they need, so we receive very attractive rates."

In addition, Sweetheart gets favorable rates for those shipments because its business pattern is counter-cyclical to those of most intermodal shippers, says Philip C. Bayle, president of Hub Group Mid-Atlantic, which manages the Sweetheart account. The manufacturer's inventories begin building in January and February and drop off in September, exactly the opposite of most consumer-goods traffic. "That inventory cycle puts them in a very good negotiating position," he says.

The single-source arrangement with Hub provides several benefits for Sweetheart. By working with one provider, for example, transportation decisions become very simple for managers at the plants and warehouses, which operate and ship 24 hours a day, seven days a week. Hub Group routes shipments and provides tracking and tracing information through its proprietary computer system. The intermodal marketing company also is responsible for anticipating problems and taking preventive action as needed. Good communication is critical: If there is a significant exception, such as a derailment or a major rerouting, the IMC is responsible for alerting the right people at Sweetheart's facilities. "To the degree possible, it is our job to avoid problems to the point they are invisible to Sweetheart," says Bayle.

Hub assumes responsibility for equipment supply, including minimizing per diem and detention charges. That's no easy task, though. Sweetheart prefers to use 48- and 53-foot equipment because shipments cube out long before they weigh out, says Chasis. That need was a key factor in the shipper's decision to work with a single provider. As the largest IMC in North America, Hub has been able to provide Sweetheart with all the 53- and 48-foot trailers and domestic containers it needs.

The shipper will, however, take advantage of other types of equipment providing both the price and the shipment configuration are right. On the West Coast, it sometimes uses ocean containers for shipments within the region. However, these containers generally are not suitable for use on other lanes. For example, although the rates for empty ocean containers moving from east to west are very low, the smaller size of these units would require Sweetheart to reconfigure its typical westbound loads. The manufacturer also avoids containers on some runs because any unplanned change of equipment would slow the loading process and add an unacceptable risk of missing rail connections. "It doesn't matter how low the rate is," says Bayle. "You can't easily shift back and forth from 53-foot domestic equipment to 40-foot ocean containers."

One of the keys to ensuring a supply of intermodal equipment is controlling the local drayage. In fact, Chasis says, when intermodal service quality meets or beats truckload, it is usually a matter of the quality of drayage on each end.

To save time and money, Sweetheart can sometimes use its dedicated fleet to serve DCs in markets where equipment is plentiful. But in areas like Chicago, where equipment availability is always tight, the shipper relies on its IMC to make sure it has what it needs. "In Chicago, equipment comes right off the street," says Bayle. "We manage the drayage because you need a player in the Chicago market to acquire equipment. You just can't call a rail carrier."

Getting the highest possible equipment utilization is also a consideration. In the east, where trailers predominate and the shipper's core lanes make up a triangle linking Atlanta, Chicago, and Baltimore, Sweetheart and Hub try to create closed-loop runs. "When the Chicago plant ships to the Baltimore DC, the Baltimore plant can reload the same equipment to replenish the Chicago DC," Bayle notes.

Despite its reliance on intermodal transportation for restocking DCs, the paper-goods maker usually uses truckload carriers for shorter-haul customer deliveries from its five distribution centers. There are some cases, such as customer deliveries from Chicago to the Northwest, that are suitable for intermodal transportation, Chasis says. But she will only use intermodal if those lanes offer good service that also meets customer requirements.

The customer deliveries are more complex than the DC replenishment moves because they require appointments and must arrive at a specified hour. At the same time, trailers or containers can't arrive at the railroad's intermodal yard so early that they must be held and end up incurring detention charges.

"Hub manages these tricky lead times very accurately," says Chasis, who adds that some longhaul shipments still move by truck because the intermodal service is not competitive. "Our modal decisions are made lane by lane. We look at length of haul, size of shipment, proven service levels, and costs."

Working with a single, trusted provider over a long period has paid off in several ways for Sweetheart Cup. For one thing, it has guaranteed equipment availability even in tough times. When a labor dispute shut down West Coast ports last year, 40-foot ocean containers were hard to come by. Demand quickly soared for domestic equipment, and many shippers ended up paying a $300 premium for each piece, recalls Bayle. Thanks to advance planning and a strong partnership with Hub, Sweetheart had an adequate supply of domestic equipment without having to pay any premiums. "The real test of a good relationship is how well you work together when a crisis hits," says Chasis.

The IMC's ability to identify cost savings, of course, is another important benefit. In fact, cost is the main reason why Sweetheart uses intermodal transportation as much as it does. "Shipping intermodally across the country produces huge savings," says Chasis. On lanes where rail carriers need the equipment, intermodal prices can be 60 percent less than truckload rates for the same moves, she notes.

Reliability is the third leg of this decade-long relationship. Each quarter, Sweetheart measures the performance of its truckload, less-than-truckload, and intermodal shipments and service providers. Those measures are applied to both replenishment shipments and customer delivery freight, and each carrier gets a report card. "On many high-volume lanes, the intermodal service actually beats truckload," Chasis says.

Hub also measures its own performance and provides Sweetheart with its own report card that shows such metrics as dwell time at origin, rail transit times, dwell time at destination rail yards, and drayage performance. "We want to improve efficiency as much as Sweetheart does," says Bayle. "It is constant fine-tuning and honing the service that makes our relationship work."