Like most companies, ConAgra Foods, Inc., is always on the lookout for ways to reduce costs and boost its bottom line. A few years ago, the Omaha, Neb.-based manufacturer of consumer brands such as Armour, Banquet, Chef Boyardee, and Egg Beaters did just that when it began using intermodal transportation to ship canned goods from the West Coast to Midwest and East Coast markets.

ConAgra, with $14.5 billion in annual sales, has steadily expanded its use of intermodal transportation since then, concentrating on service lanes where intermodal demonstrates a significant cost/benefit advantage over truckload transportation. "It provides a truck-like service at a much more effective cost. That's the key attraction," says Paul Newbourne, ConAgra's vice president of logistics planning.

Newbourne uses intermodal primarily to replenish warehouse inventory. He uses it less frequently for plant-to-customer deliveries, and relies on intermodal as a backup during busy periods. "It can also provide a degree of surge capacity during our peak shipping seasons, which helps us maintain inventory levels and better service to our customers during those periods," he explains.

ConAgra is hardly unique among shippers these days. More and more companies are turning to intermodal shipping to save transportation dollars.

Historically known more for its affordability than its reliability, intermodal transportation clearly is gaining in popularity. The Intermodal Association of America (IANA) in Greenville, Md., reports that U.S. and Canadian intermodal shipment volume has been on the upswing for the last six quarters.

Thanks to the economic downturn, slumping technology sector, and persistent manufacturing recession, intermodal growth was flat during 2000 and 2001, IANA says. But the numbers began to pick up during the second quarter of 2002, and they haven't shown any signs of slowing down yet. Tom Malloy, the group's vice president of member services and business development, attributes the last six quarters of growth to an increase in international trade driven by offshore manufacturing and sourcing of consumer goods.

In the third quarter of 2003 (the most recent period for which statistics are available), railroads reported an average 3-percent increase compared to the same period in 2002. Domestic containers were the biggest winners, posting a 4.5-percent rise, followed by international boxes, which increased by 2.5 percent.

Geographically speaking, all seven of the busiest intermodal corridors carried more business in 2003. As a group, those lanes delivered average increases of 4.4 percent. According to IANA, the Trans-Canada lane saw the strongest growth, with a 6.7-percent gain, followed by South Central—Southwest, which posted a 5.4-percent increase. The Southwest—Southeast and Southeast—Midwest corridors, meanwhile, achieved minimal gains of 1.4 percent and 1.8 percent, respectively.

Stable pricing, which typically hovers below truckload rates but above traditional boxcar rates, has played a key role in the growth of intermodal, says Malloy. Recent signs of improvement in the domestic economy and major improvements in intermodal infrastructure also are helping to attract more users, he adds. Rather than using converted freight yards, for example, carriers now have access to dedicated terminals that were specifically designed for intermodal shipments. Today, whether intermodal cargo is being transferred between ship, truck, rail, or all of the above, terminals are better equipped to handle it in an efficient manner, he notes.

"The capital investment in port and rail infrastructure has been significant over the last few years," says Malloy. He cites the industry's ongoing commitment of capital resources to system improvements like global positioning systems, positive train control, bar coding, and radio frequency identification (RFID) tag readers to identify, locate, and track intermodal shipments.

Like any mode of transportation, intermodal has its pluses and minuses. On the plus side, says Peter Stone of Reebie Associates, a transportation consulting firm in Stamford, Conn., intermodal has come a long way in the last decade, thanks to improvements in on-time delivery and the cost savings it offers over truckload transportation. Still, his company's research revealed a 30.6-percent decrease in rail/highway intermodal tonnage between 1998 and 2002. Stone expects those numbers to climb back up as the U.S. economy improves.

"The costs continue to be held down, making [intermodal] very attractive for the shipper compared to over-the-road," says Stone. In his view, intermodal transportation is especially attractive to manufacturers that mainly move freight in cartons, cases, or on pallets, as well as to importers and exporters that ship bulk materials like minerals and scrap.

Consultant Brooks A. Bentz, an associate partner with Accenture in Boston, agrees that price remains the main attraction for shippers. He says shippers can move 200 containers by doublestack train more affordably than they could using 200 trucks. He also expects that increasing traffic congestion in urban areas—which leads to more shipment delays—also makes intermodal a good choice for some shippers.

But intermodal also has it drawbacks. For one thing, the cost advantage shifts to trucks at distances below 500 to 700 miles, he says. Intermodal train schedules, moreover, are less flexible and departures are less frequent than they are for trucks. That could leave shippers waiting several hours or even a day or more for a shipment to move, he adds.

"That's definitely a complicating factor," says Bentz. "It's why intermodal is still viewed as second-tier service to trucking, which is a one-at-a-time, custom service." Intermodal, therefore, works well for a company that's replenishing warehouses, but poses challenges for shippers that need to deliver directly to stores, for example. "If you're a company with very high service demands, then you'll probably be better off using trucks," he observes.

ConAgra's Newbourne agrees with that assessment. In his experience, intermodal has been most economical in the 700-plus mileage band, but that fluctuates depending on the level of truckload competition on those lanes. As for reliability, if intermodal could sustain a 98-percent or better on-time record, he says, ConAgra would more routinely offer intermodal as an alternative for customer-direct shipments. Because intermodal has yet to achieve that mark, though, he has to add extra days to order lead times on certain lanes, which has proved to be another deterrent to using that service.

Newbourne believes that, with some improvements, there can be a greater role for intermodal transportation in shippers' supply chains. His "wish list": "We'd like to see the railroads and intermodal marketing companies increase the competitiveness of shorter-haul market offerings, and we'd also like to see on-time service reliability continue to improve," he says. "The industry should continue to grow intermodal capacity in existing lanes, add new service offerings in short-haul lanes, fine-tune service performance to 'look like a truck,' and work to inform potential users of the benefits of intermodal transportation."

Newbourne isn't the only one who sees a better future for intermodalism. "Every forecaster with a crystal ball says intermodal will continue to grow, based on the terminal improvements, increased predictability, better service levels, and standardized pricing," says IANA's Malloy. "Adding to intermodal's credibility is the fact that shippers that were reluctant to use it or that have had unfavorable experiences with it in the past are now revisiting it and finding a viable addition to their transportation mix."

Bridget McCrae is a freelance journalist who frequently writes on logistics technology and distribution practices.