Intermodal service issues are starting to get ironed out, say industry experts

At various times over the last year, the topic of intermodal service conditions has been a hot topic but not necessarily in a good way.

And while railroad and intermodal service providers have long been known for meeting and often exceeding shipper expectations, things took a turn in the other direction during the winter of 2013-2014, which severely impacted freight transportation operations on multiple fronts such as slower train velocity, drayage, increasing volumes, and long dwell times, among other factors.

Compounding things for multiple modes, especially early into 2015 was the recently-resolved West Coast port labor dispute between the Pacific Maritime Association and the International Longshore & Warehouse Union, which stretched nine months, with the parties reaching a tentative five-year agreement on February 20.

That situation had lingering aftereffects on nearly all facets of supply chain and logistics operations, with ocean vessels waiting for berths to unload cargo for several days at a time. And when cargo finally was unloaded, finding both truckload and intermodal capacity required to move cargo inland was tight, creating increased congestion and late shipments.

But not everything was negatively impacted by the situation out West. In fact, FTR Senior Analyst Larry Gross told LM that since shortly after Thanksgiving, railroad service quality has taken a significant turn upward.

“Poor service conditions reached their nadir last fall but then really began to improve the week after Thanksgiving,” he said. “There has been a significant improvement to the point where year-over-year comparisons are turning positive but that is a little bit misleading because we are now starting to lap the Polar vortex. You really need to look back two years for more accurate comparisons instead of year over year. We still have significant distance to go and I would say that the Western railroads have seen a little bit more of the gains than the Eastern ones but when you look at the weather situation that stands to reason.”

As for things that railroads and intermodal service providers have done since late November to augment service, Gross explained that typically operations tend to slow down during the holiday period, with railroads running fewer trains and employees taking time off. But that did not happen this year, with operations running hard right through the holiday period, which enabled them to get a leg up on things, he said.

What’s more, Gross said that they threw additional resources into it, too, with more locomotives and more crews.

“The crews take some time to train, and we are now starting to see some of the benefit of that….and in bad winter weather not much track work is being done, which an also involves disruptions,” he said. “They were just able to turn the corner and get ahead of things. And once network velocity starts to tick up then it self generates more resources because locomotive productivity and crew productivity both improve so success breeds success and there are now more crews moving faster and they can do more work.”

Jason Kuehn, vice president in the Oliver Wyman Surface Transportation Practice, agreed with FTR’s Gross in that service levels in in general for all train types were typically a little better than last winter, but nowhere near the level yet from two years ago during the winter of 2012-2013.

“Traffic volumes, especially intermodal have flattened out somewhat. We believe the port issues are the primary driver behind the year over year flat comparisons, but working off the vessel backlog should drive the numbers back up,” he noted. “But it may take awhile to work off the backlog.”

Kuehn added that intermodal volumes are also starting to see the benefits of an improving economy, as well as the ongoing driver shortage situation, which has resulted in tight capacity environment that also favors intermodal conversion by shippers.

Tony Hatch, principal of New York-based ABH Consulting, said that intermodal service is likely to slowly recover in the coming months.

“Intermodal was up more than 5 percent last year while rail velocity declined,” he said. “Part of that is because intermodal shippers are becoming more sophisticated in locking in more capacity and they know service will get better. Rails are ahead of where they thought they would be right now in terms of service recovery, if this continues through the spring they will be able to put it fully behind them and back on track.”