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Thursday, April 08 2010

A National Intermodal Shift

William B. Cassidy and John D. Boyd | Apr 5, 2010 4:00AM GMT

The Journal of Commerce Magazine - News Story (sign-in required)

This cover article speaks of the DOT's plan to move truck traffic to ocean and rail methods.  Deputy Secretary Porcari told Congress “We want to keep goods movement on water as long as possible, and then on rail as long as possible and truck it for the last miles.” That is, let’s transform the trucking industry into drayage carriers for the railroads – just what Norfolk Southern CEO Moorman called for a couple of years ago.  Secretary LaHood spoke recently of how well he has been able to work with railroads, which have received a great deal of DOT funding.


Moving truck traffic to the rail would slow the delivery time.  Rails, while gaining in competition, are still not able to handle time sensitive freight.  Today's inventories are leaned and set to work on JIT delivery schedules.  Rail and ocean cannot accommodate this type of system.  In essence, the government is telling big business to change their method of operation.  Companies are leaning inventory and stock to save money, space and general overhead charges.  They have invested much in the last 10 years to achieve this new structure.  I do not see them changing back to the old ways willingly.

JB and Schneider embraced the intermodal methods and changed their business methods accordingly.  Driver miles were cut almost in half as long haul freight disappeared to the rails.  This also meant a change in client base for these carriers.  Swift, who happily grabbed up the Wal-Mart account, split their transport method between rail and ground freight (truck) for JIT customers.  Automotive clients always required JIT service.

While a move to rail claims to be more environmentally friendly and can save up to 30% in transportation costs, time will always be the issue.  Rail is limited in its area of service and ocean is even a slower option.  Claims processing through these channels are a nightmare and one of the main reasons many companies avoid these options totally. 

The government explains that this would help relieve the congestion on our highways, promote safety highways and reduce the cost of infrastructure.  Highways that no longer have to support the weight of heavy truck traffic are cheaper to build.  It is implied that in doing so, fuel cost can be lowered due to the reduced highway funds needed.  I find this hard to believe since the government is already ear marking those funds for railway improvements.

If these were to happen, inventory costs would raise along with replenishment times.  This would mean consumer costs would rise to compensate for the increase.  Large cities may feel a slight relief in traffic but for Main Street America, I doubt much change on the highway will be noticed.


More info -

Posted by: Andrea Sitler PhD AT 01:05 pm   |  Permalink   |  Email

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