Tight Squeeze (page 3)

-- Logistics Management, 1/1/2005

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Intermodal Changes

Even if the Panama Canal is able to keep up with constantly increasing traffic, that may not solve all of shippers' problems. According to Schneider's Brian Bowers, shippers and carriers need to pay more attention to the impact port diversions are having on the domestic truck and intermodal network. In his opinion, all-water diversion to the East Coast is changing intermodal's operating model.

"If you look at the dynamics of where that freight is now going—Seattle, Oakland, Houston, Savannah, Charleston, Norfolk—every one of those ports is getting hammered. So they're going to start pulling capacity to them and creating an ever-growing [equipment] imbalance," he says. "Folks who live in the 'wrong' spots are going to get hit with increases, all based on the availability and movement of empty equipment, until something is done to achieve better balance."

Pat Casey, director of planning and forecasting for railcar pool manager TTX, agrees with Bowers' call to action. To alleviate the growing equipment imbalance, shippers need to think differently about how intermodal fits into their plans, he suggests. "In the past, it was a fall-back plan, a way to grab some surge capacity. Today, it needs to be a permanent commitment, especially with predicted import growth."

But until that kind of thinking is commonplace, savvy shippers need to establish strong relationships with ocean and rail carriers—sooner rather than later—to "stake out" needed capacity to and from their chosen ports, contends Rob Steere, director of operations and global logistics for energy- drink manufacturer Red Bull.

"If you're going to make a change, now's the time to do it before you really need the service," Steere says. "It may be worthwhile to pay a small price premium to have that relationship functioning, instead of trying to beg for that capacity when you need it later."

Shipper Takes Congestion Bull by the Horns

Rob Steere, director of operations and global logistics for energy-drink manufacturer Red Bull in Santa Monica, Calif., says he was simply "fed up." When one of his ocean carriers stopped calling at the ports of Los Angeles and Long Beach (LA/LB) because of congestion and delays, Red Bull didn't receive a vital replenishment shipment. That's when he decided to take 50 percent of his LA/LB volume and get it to Southern California through other means, he says.

Steere's first step was to establish a warehouse in Seattle that could serve Southern California. "What I found was interesting," he says. "The slightly higher ocean costs to the Pacific Northwest were actually offset by less-expensive truckload transportation coming out of Seattle. It was a risk-mitigating measure that didn't cost much."

Red Bull is also experimenting with moving containers through the Panama Canal to the Port of Houston, then by rail to L.A.

In his third step, Steere is working with third-party logistics company Ozburn-Hessey Logistics (OHL) to launch a new route to Los Angeles from the Port of Oakland. "OHL has a customer in Los Angeles who needs to move freight from L.A. to Sacramento," Steere says. "I will move my cans into Oakland and then OHL will use the trucks from Sacramento to pick up my loads and take them back into L.A." In this new arrangement, the motor carrier can utilize its equipment on a round-trip basis. Steere, meanwhile, can bypass LA/LB and move freight to Red Bull's Carson, Calif., warehouse for not much more than the cost of a local move.

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