Schneider eyes shorter-haul, Mexican freight for intermodal shift

Schneider National, the nation’s second-largest truckload carrier which traditionally has been a major player in long-haul intermodal traffic, is increasingly marketing shorter-haul freight options in a major shift that is sure to impact shippers’ choices and rates.

Steve Van Kirk, Schneider National’s senior vice president of intermodal commercial management, told LM that service improvements by the rails plus issues affecting driver availability are making shorter-haul intermodal moves more attractive to many customers. Privately held Schneider moves about one-third of its total freight loads by intermodal, according to trucking industry sources.

“Overall driver availability is an issue,” Van Kirk said. “Demographics, the impacts of CSA 2010, you can debate how many drivers might not be drivers going forward. I’ve seen estimates as high as 250,000. But even if its only a shortage of 100,000, so what? You still have rising freight demand and less people entering our industry to become drivers. These macro trends are affecting driver availability. That helps intermodal, especially in shorter lengths of haul.”

The average length of haul for an intermodal move is 1,575 miles, according to Larry Gross, an intermodal expert who is a consultant with FTR Associates and principal of Gross Transportation Consulting. But increasingly, traditional truckload carriers such as Schneider and J.B. Hunt are targeting lengths of haul under 1,000 miles as rail services improve, fuel costs increase and driver availability becomes tougher and wages increase.

Traditionally, intermodal has always been strong in the 2,000-mile Chicago-to-Los Angeles and Chicago-to-Portland runs. Chicago-to-Dallas is another strong intermodal market historically.

But now truckers are eying shorter-haul runs—700 miles from Columbus, Ohio to Kansas City, for example—as potential markets to increase intermodal use. This has helped drive intermodal freight volumes up 10 percent from year-ago volumes—11 percent on international moves, 9 percent domestic. That is roughly twice the rate of growth of all North American rail traffic, and three times the growth in the U.S. trucking industry.

“ What you’re seeing is the really long lengths of haul will not grow at previous levels,” Van Kirk explained. “There will be more growth at intermediate lengths of haul—1,000 miles or less. That’s what’s driving the growth.”

Truck driver hours of service limits a driver to no more than 600 miles in a day, tops. So anything over that amount is ripe to be used for intermodal, Van Kirk says, as long as rail service is reliable.

“That’s where intermodal can deliver a lot of value for capacity at a very competitive price point,” Van Kirk says.

Besides shorter hauls, Schneider wants to increase intermodal usage in and out of the Northeast, where backhauls can be problematic for TL moves.

“We like to ship into the Northeast on intermodal. It helps with our load balance. Demand is great going into the Northeast. But because of the imbalance coming back, intermodal is a great option. You can catch backhaul freight or empty at a lower cost point. The economics of rail transport helps you do that.”

Van Kirk’s advice to shippers is easy. “If I were a shipper, I would start with anything moving more than 500 miles and look at intermodal.”

Another area of intermodal growth for Schneider is crossborder moves in and out of Mexico. Up until a couple of years ago, Schneider basically trucked goods to the border, transloaded there and used Mexican power units for final delivery south of the border. It was costly, and cargo security was an issue, he said.

With the help of the Kansas City Southern—the “NAFTA Railroad”—Schneider has redesigned its Mexican freight network in the past two years.

It has created a pure intermodal train across the border with three stops in Mexico—Monterrey, San Luis Portosi, and Toluca outside Mexico City. From those three locales, it uses Mexican trucks for short drayage runs to final destinations.

“Mexico still has challenges, but we’re very satisfied with this framework,” Van Kirk says. “We know how to get boxes across the border. We have solution that will continue to gain traction in the market place. It’s a more secure way to move freight through Mexico.”

Consultant Gross said that Schneider’s moves are typical of what’s going on elsewhere in the trucking-intermodal market place. “There is a focus on trying to bring the length of haul at which intermodal is competitive down,” he said. “There is a focus on more shorter lengths of haul, especially in the East.”

The key to making that work is efficient interchange points, coordination among drayage partners and sufficient density to make it profitable, Gross said. Because intermodal has inherent cost advantages over truck at certain lengths of haul, increasingly better rail service is making intermodal a more attractive option at some shorter lengths of haul.

“There is a big opportunity there, if they can solve those issues,” he said. “It then becomes an argument of pure economics.”