M ost supply chain executives probably aren’t eager to relive the 2021 freight cycle any time soon. Between pandemic-induced disruptions, equipment and labor shortages, and an e-commerce boom, it was not an easy time to obtain transportation capacity. Now that the market has cooled, shippers have the chance to prepare for the next upcycle. This involves selecting domestic transportation modes.
over-the-road,” says Luke Simendinger, vice president of intermodal services at Chicago-based 3PL and freight brokerage, Coyote Logistics. “Instead of one truck moving across North America, you might get 200 loads on a train. There’s signi cant savings, not only in transportation costs, but in accessorials, such as fuel surcharges.” The spread between over-the-road and intermodal costs shrank as the trucking market cooled in 2022. Trucking spot rates fell by 31.8% in the third quarter, according to Coyote Logistics’ Q4 Truckload Market Forecast for 2022 . And national van rates averaged $2.39 per mile in mid-November, seven cents below the October average, according to DAT’s Trendlines Report . Declining rates could convert some freight from intermodal to over-the- road transportation. “Over-the-road costs are so low now that shippers might be able to get a higher service level at a price that’s nearly competitive with intermodal,” notes Christopher Thornycroft, executive vice president of procurement at 3PL Redwood Logistics. 2. SHIPMENT VOLUME. With its high capacity and standardized transit schedules, rail transportation is best for shippers who move consistent large quantities of freight. “The decision tree a shipper uses differs for a rateable high-volume lane that moves every day of the year versus a single shipment or single pallet quantity,” says Andrew Lynch, group vice president of domestic marketing and sales at Norfolk Southern, a Class 1 railroad based in Atlanta. “Those are two drastically different freight decisions.” One consideration is economic order quantity. Every organization has an optimal order size. This allows them to meet demand without paying to hold excess inventory. Rail is suited to move large quantities of freight, but that doesn’t mean customers are prepared to handle those volumes. “You’ve got to consider your customer’s behavior,” notes Ken
There are several factors to consider when choosing between over-the-road and intermodal. Does the rise in online shopping mean that companies should fortify their trucking strategy? Or would intermodal help offset increasing last- mile expenditures? How do fuel prices gure into transportation decisions? What about balancing costs and service levels? The answer depends on a variety of criteria that differs from one scenario to the next. Shippers must evaluate their individual needs and priorities to determine an optimal strategy. Here are ve factors to weigh when deciding between over-the-road and intermodal. 1. COST vs. LEAD TIME. Typically, intermodal is the go-to option for cost savings, while over-the-road trucking tends to prevail when there’s
a time constraint. Products moved on a truck often spend less time at rest and have fewer handling points, which translates into shorter lead times. “Our shippers typically select over- the-road transportation based on transit time and consistency,” says Frank Hurst, president of Roadrunner, an LTL carrier headquartered in Downers Grove, Illinois. “They need to know how long it will take to get from point A to point B so they can plan their operations accordingly.” When delivery speed is less of a concern, intermodal offers robust capacity with a smaller price tag. Over-the-road pricing is calculated, in part, based on length of haul, while rail utilizes at rates. Freight that’s traveling at least 700 miles is a good candidate to convert to intermodal. “Typically, intermodal will be $300 to $500 cheaper door-to-door than
Flexibility is important when choosing between transportation modes. When bad weather hits, for instance, trucks can take alternate routes; rail doesn't oer that option.
186 Inbound Logistics • January 2023
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