The North American intermodal market is the largest in the world. But even in this $40 Billion space there’s still room for growth. In fact, the shipping industry as a whole continues to move toward intermodal at a clip of 9 percent annual expansion. But without the right data, how do you know which lanes are a good fit?
According to Jenny Vander Zanden, Breakthrough®Fuel’s Vice President of Fuel Recovery, “Transparency into the real economics of shipping drives behavior to increase utilization of the best mode.”
Going Intermodal Increases Efficiency, Sustainability
Intermodal’s growth is no surprise, considering the advantages. Most notably, moving goods by train is about three times more efficient than by truck. Transportation comprises as much as “66 percent of a shipper’s total logistics costs” with fuel taking up 20-30% of that cost. In a world where every penny of margin counts, shrinking the costs of moving goods to market is a competitive imperative.
On top of that, with boards of directors and shareholders exerting pressure to increase sustainability efforts, it helps that trains also emit fewer greenhouse gases. Writing in Inbound Logistics, Jeff Vielhaber found that “Trucks emit approximately 19.8 pounds of carbon dioxide per 100 ton-miles. Compare this to trains, which emit 5.4 pounds of carbon dioxide per 100 ton-miles.” Of course, going green also has other benefits, including risk management improvements and even employee recruitment.
Rail = Fuel Savings
Another major advantage to rail transit is reduced costs. As of May 2017, over-the-road diesel taxes represented almost 61 cents of the total price per gallon. While some states do impose rail fuel taxes, most are exempt. Want even more insights into the costs of fuel and their impact on carriers and shippers? Sign up to receive a three-month subscription to the Breakthrough®Advisor Brief.
So, with all these advantages, why aren’t shippers taking even more advantage of intermodal?
Lack Of Data Hinders Moves to Intermodal
Traditionally, shippers have been content to pursue rail shipment only across larger distances such as cross-country moves. Taking advantage of rail for shorter distances would be a boon to shippers, but it hasn’t always been easy to identify opportunities for intermodal growth on shorter transport lanes. In addition, annual or semi-annual reviews of routes made progress slow, and lack of available data hampered decision-making.
Dependency on outdated, inaccurate cost measurements holds shippers back from making more informed and advantageous decisions. The DOE Index Program that shippers and carriers have historically relied on for fuel pricing only provides averages of the costs of fuel, updated weekly, and based on retail, not wholesale charges.
Some shippers, though, are growing intermodal rapidly, with double or even higher annual growth rates than the industry average.
Transparency Into The True Costs Of Shipping Drives Intermodal Growth
The key is achieving true visibility into the actual costs of shipping. In contrast to the status quo DOE Index, Breakthrough®Fuel’s Fuel Recovery program provides real-time market costs of fuel, specific to each individual movement of goods. Knowing the actual price of fuel creates transparency into the real-world expense for shipping goods by mode along a certain route, whether rail, truck, or marine.
Results Far Above Industry Trends
Working with Breakthrough®Fuel, one best-in-class client emphasized intermodal shipping in their strategy and partnered closely with the company to analyze their routes to take more advantage of train transit where possible. The results:
- Use of intermodal for over 50 percent of total shipping mileage
- 90 percent of long-haul shipments completed by intermodal
In all, this company grew its use of intermodal shipping an astounding 23 percent from 2012-2016. As a result of this increase in intermodal, the company saw a 52% reduction in fuel cost per shipment as compared to full truckload. Overall, Vander Zanden noted that a typical client working with the company increased its intermodal use by 18 percent over the same 2012-2016 time period, about double the industry average.
How are results like these achieved? Having accurate lane-level data for each movement along every lane can help push companies along to consider other options where needed. In addition to ensuring accurate reimbursement between shippers and carriers, Breakthrough®Fuel works with clients to proactively identify new opportunities for switching to intermodal. Many clients have experienced tremendous cost savings along intermediate-length routes of around 800 miles.
In addition to fuel pricing and lane identification, the company also provides compliance assistance in terms of insuring that intermodal awards between the shipper and carriers are followed accurately and noting where they are not using their Breakthrough®Insight platform.
What Can Your Organization Achieve?
With the pressure on shippers today to increase margins and improve sustainability, maximizing use of intermodal just makes sense. Turn logistics into a competitive advantage for your organization. To get a first look at Breakthrough®Fuel’s industry insights and services, visit our Knowledge Center, or gain access to a sample of our Breakthrough® Advisor publication by filling out the form at the bottom of this page. See how we provide up-to-date pricing trends and exclusive analysis of regional and global impacts on the costs of fuel.