Intermodal

Origin Drayage

Rail Linehaul

Destination Drayage

Billing Processes

TOFC vs COFC

Complexity of Operations

Intermodal

Where Does Intermodal Work?

Intermodal Terminal

BLinehaul

If you are outside the circle, the distance to the terminal makes it cheaper to ship directly to the receiver via truck

Intermodal Terminal

A

Shipper of Origin Shipper of Destination

Intermodal

Original Intermodal terminals were known as “Circus Ramps,” and they are still frequently referred to as “Ramps”

IntermodalBNSF Intermodal Yard in Chicago

IntermodalBNSF Intermodal Yard in Chicago

Intermodal

Shipment Boxes

Chassis

Intermodal Rail Cars

Lifts, Cranes & Packers

Hostlers

Intermodal Equipment

Intermodal

Shipment Boxes

Containers Do not have attached chassisDesigned to be picked up and placed on rail cars and chassis Typically 20, 40, 45, 48, 53 ocean and domestic

Trailers Actual motor carrier trailer with built-in chassisVirtually any motor carrier trailer, 28-53 feet, including refrigerated

Intermodal Equipment

Intermodal

Intermodal EquipmentTypical Container without Chassis

Intermodal

Intermodal EquipmentTypical Intermodal Container Chassis

Intermodal28’ UPS Trailer on Typical Flat Car

Intermodal

Well Cars

Allows doublestacking of containers

Articulated version has 3 to 5 cars permanently joined to form one unit which can carry up to 12 containers

Intermodal Rail Cars

Intermodal Equipment

IntermodalIntermodal Well Cars

IntermodalIntermodal Well Cars

IntermodalDouble Stacked Containers in Well Cars

IntermodalDouble Stacked Containers in Well Cars

Intermodal

Conventional

Designed to carry containers or trailers

Can carry two trailers up to 40 feet in length.

Doublestacking not possible

Spine cars

Same capabilities as conventional cars

Less weight for better fuel economy

Intermodal Rail Cars

Intermodal Equipment

Intermodal

Intermodal Equipment

Conventional Intermodal Flat Car with Trailer

IntermodalIntermodal Spine Cars

IntermodalIntermodal Spine Car Connections

IntermodalArticulated Spine Car with Fifth

Wheel and Shared Trucks

Intermodal

Intermodal Equipment

Intermodal Spine Car with Two 20’ Containers

Intermodal

Intermodal Spine Car with 53’ Trailer

Intermodal Equipment

Intermodal

Terminal Equipment

Lifts, Cranes & Packers Designed to move containers from chassis to flat car or vice versa

or trailers from ground to flat car and vice versa

Hostlers - A truck tractor designed for managing containers and trailers within the terminal

Intermodal Equipment

IntermodalStraddle Crane

IntermodalStraddle Crane Loading Spine Cars

IntermodalStraddle Crane Loading Well Cars

IntermodalStraddle Crane?

IntermodalAlternative Mobile Lift

IntermodalAlternative Immobile Lift

Intermodal

Realizing Intermodal Potential: A Total Cost Approach

Intermodal GrowthImpediments to GrowthTotal Cost AnalysisExamplesPotential for GrowthConclusions

Intermodal

Intermodal GrowthImpediments to GrowthTotal Cost AnalysisExamplesPotential for GrowthConclusions

Realizing Intermodal Potential: A Total Cost Approach

Intermodal

Intermodal Growth

Fastest growing segment of the railroad industry

3 million trailers and containers in 1980 vs 8.1 million in 1996

More than 17% of rail revenues, 2nd only to coal at 22%

Containers account for more than 60% of intermodal volume vs 40% ten years ago

Still, enormous untapped potential

Intermodal

Percentage GrowthYear Total Trailers Containers Difference Total Trailers Containers1990 6,206,782 3,451,953 2,754,829 697,124 3.66 -1.27 10.591991 6,246,134 3,201,560 3,044,574 156,986 0.63 -7.25 10.521992 6,627,841 3,264,597 3,363,244 -98,647 6.11 1.97 10.471993 7,150,457 3,458,406 3,692,051 -233,645 7.89 5.94 9.781994 8,128,228 3,752,502 4,375,726 -623,224 13.67 8.50 18.521995 7,936,172 3,492,463 4,443,709 -951,246 -2.36 -6.93 1.551996 8,143,258 3,302,128 4,841,130 -1,539,002 2.61 -5.45 8.941997 8,695,860 3,453,081 5,242,779 -1,789,698 6.79 4.57 8.301998 8,772,663 3,353,032 5,419,631 -2,066,599 0.88 -2.90 3.371999 9,041,771 3,298,024 5,743,747 -2,445,723 3.07 -1.64 5.982000 9,554,184 3,219,183 6,335,001 -3,115,818 5.67 -2.39 10.292001 10,265,761 2,413,933 7,851,828 -5,437,895 -0.71 -8.65 2.022002 11,191,142 2,344,130 8,847,012 -6,502,882 9.01 -2.89 12.672003 11,903,121 2,400,558 9,502,563 -7,102,005 6.36 2.41 7.412004 12,923,036 2,639,545 10,283,491 -7,643,946 8.57 9.96 8.22 2005 13,641,872 2,584,262 11,057,610 -8,473,348 5.56 -2.09 7.53 2006 14,234,074 2,432,928 11,801,146 -9,368,218 4.34 -5.86 6.72 2007 14,078,952 2,145,466 11,933,486 -9,788,020 -1.09 -11.82 1.12 2008 13,659,495 2,060,399 11,599,096 -9,538,697 -2.98 -3.96 -2.80

Growth in Domestic Intermodal Traffic: 1988-2003

Intermodal

U.S. Domestic Intermodal Traffic Growth 1988-2008

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

Intermodal

Realizing Intermodal Potential: A Total Cost Approach

Intermodal GrowthImpediments to GrowthTotal Cost AnalysisExamplesPotential for GrowthConclusions

Intermodal

Impediments to Intermodal Growth

Lack of availability of IRT service Use by mainly larger shippers Shippers concern for service Lack of knowledge about IRT by potential users Poor perceptions in the minds of many usersTransit-time disadvantage of IRT vis-a-vis MC options Complexity, coordination, and image due to

the multi-party nature of IRT

Source: Harper and Evers, Transportation Journal, (Spring, 1993), pp. 31-45.

Intermodal

9

2

8

1011

8

8

4

6

5

9

11

7

3

3

Intermodal Ramp Closings by Region:1990-1997

Intermodal

Type Number Percent Amount PercentA = Airport related 14 27.45 134.0 30.67F = Freeway related 18 35.29 124.0 28.38FT= Highway access to transit 4 7.84 37.9 8.67G = Grade separation 8 15.69 86.1 19.71IM= Intermodal freight related 5 9.80 39.0 8.93N = Needs/corridor studies 2 3.92 15.9 3.64

Total 51 100.00 436.9 100.00

Priority Intermodal Projects In ISTEA

“The purpose of this section is to provide for the construction of innovative intermodal projects”

Intermodal

Shippers Perceptions

Survey of Manufacturers, Wholesalers, and Retailers in Arkansas, Missouri, and OklahomaSample size = 277

Importance of transit time reliability (TTR) 4.3*Measurement of transit time reliability 57.3%Use of TTR to aid in selecting carriers 13.1%Use of TTR to compute inventory costs 0.0%

* Scale of 1 to 5, 5 = Very Important

Shippers perceive IM service to be poor, but few actuallymeasure it and/or compare total cost of IM to other options

Intermodal

Realizing Intermodal Potential: A Total Cost Approach

Intermodal GrowthImpediments to GrowthTotal Cost AnalysisExamples Potential for GrowthConclusions

Intermodal

Total Cost = OC + CC

OC = Order Placement Cost = A(R/Q)CC = Inventory Carrying Cost = 1/2(QVW)

Where:Q = Optimal Order Quantity (EOQ)A = Cost of placing an orderR = Annual Rate of useV = Value per unitW = Carrying cost as a percentage of average value of inventory

Determining EOQ

Q* = 2ARVWEOQ =

Source: Coyle, John J., Edward J. Bardi, and C. John Langley, Jr., The Management of Business Logistics, 6th edition (St. Paul, MN: West Publishing, 1996).

Intermodal

Total Cost = OC + CC + Tr + PC + It + SS + Other

Where:OC = Order Placement CostCC = Inventory Carrying CostTr = Transportation CostPC = Product CostIt = Inventory in Transit CostSS = Safety Stock Cost

Total Cost Analysis

Intermodal

Total Cost = OC + CC + Tr + PC + It + SS + Other

OC = A(R/Q)CC = 1/2(QVW)Tr = rRwt/100PC = VRIt = iVRt/365SS = BVWWhere:

Q, R, A, V, W = As previously definedr = Transportation rate per 100 pounds (CWT)wt = Weight per uniti = Interest rate or cost of capitalt = Lead time in daysB = Buffer of inventory to prevent stockouts

Total Cost Analysis

IntermodalComputing Safety Stocks

Where:SDt = Units of Safety Stock required to satisfy

68 percent of sales levels during lead timet = Average delivery timeSt = Standard Deviation of delivery timeD2 = Average DemandSD = Standard Deviation of Demand

SDt = (t)(SD)2 + (D)2 (St)2

Intermodal

Realizing Intermodal Potential: A Total Cost Approach

Intermodal GrowthImpediments to GrowthTotal Cost AnalysisExamples Potential for GrowthConclusions

Intermodal

Annual Use = 100,000 unitsCost to place orders = $30.00 Carrying cost = 20 %Interest expense = 10 %Service Level = 97.5 % Variation in Daily Sales = +/- 10 %Distance = 1000 miles

Impact of Transit Time on Intermodal ShippersExamples

Basic Assumptions:

Rate/Mile Transit Time MC = $1.20 3 days +/- 1 dayIM = 1.00 5 days +/- 2 days

Intermodal

800 3,750 120,000 150,000 123,288 166,831563,869

800 3,750 120,000 125,000 205,479 330,816785,045

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersExtreme Value Goods

Computers

Specific Assumptions:

Weight per unit = 50 lbsValue per unit = $1500.00Value per pound = $30.00Economic Order Quantity = 141Shipments per year @ EOQ= 707

Intermodal

800 3,750 28,000 150,000 28,767 38,927249,444

800 3,750 28,000 125,000 47,945 77,190281,885

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersHigh Value Goods

Televisions

Specific Assumptions:

Weight per unit = 50 lbsValue per unit = $350.00Value per pound = $7.00Economic Order Quantity = 293Shipments per year @ EOQ= 342

Intermodal

1,333 2,250 20,000 90,000 12,329 16,683141,262

1,333 2,250 20,000 75,000 20,548 33,082150,879

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersHigh Value GoodsMicrowave Ovens

Specific Assumptions:

Weight per unit = 30 lbsValue per unit = $150.00Value per pound = $5.00Economic Order Quantity = 447Shipments per year @ EOQ= 224

Intermodal

400 7,500 10,000 300,000 20,548 27,805365,853

400 7,500 10,000 250,000 34,247 55,136356,882

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersMedium Value Goods

Mattress and Box Springs

Specific Assumptions:

Weight per unit = 100 lbsValue per unit = $250.00Value per pound = $2.50Economic Order Quantity = 346Shipments per year @ EOQ= 289

Intermodal

4,000 750 8,000 30,000 1,644 2,22442,6184,000 750 8,000 25,000 2,740 4,411

40,901

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersMedium Value Goods

Lamps

Specific Assumptions:

Weight per unit = 10 lbsValue per unit = $20.00Value per pound = $2.00Economic Order Quantity = 1225Shipments per year @ EOQ= 82

Intermodal

1,600 1,875 6,400 75,000 3,288 4,44991,0121,600 1,875 6,400 62,500 5,479 8,822

85,076

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersMedium Value Goods

Insect Spray

Specific Assumptions:

Weight per unit = 25 lbsValue per unit = $40.00Value per pound = $1.60Economic Order Quantity = 866Shipments per year @ EOQ= 115

Intermodal

160 18,750 8,000 750,000 41,096 55,610873,456

160 18,750 8,000 625,000 68,493 110,272830,515

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersMedium Value GoodsKitchen Appliances

Specific Assumptions:

Weight per unit = 250 lbsValue per unit = $500.00Value per pound = $2.00Economic Order Quantity = 245Shipments per year @ EOQ= 408

Intermodal

4,000 750 2,000 30,000 411 55633,7174,000 750 2,000 25,000 685 1,103

29,538

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersLow Value Goods

Empty Cases of Glass Containers

Specific Assumptions:

Weight per unit = 10 lbsValue per unit = $5.00Value per pound = $.50Economic Order Quantity = 2450Shipments per year @ EOQ= 41

Intermodal

800 3,750 2,000 150,000 2,055 2,781160,585

800 3,750 2,000 125,000 3,425 5,514139,688

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersLow Value Goods

Xerox Paper

Specific Assumptions:

Weight per unit = 50 lbsValue per unit = $25.00Value per pound = $.50Economic Order Quantity = 1095Shipments per year @ EOQ= 91

Intermodal

800 3,750 2,000 150,000 2,055 2,781160,585

800 3,750 2,000 125,000 3,425 5,514139,688

Order Order Carrying Transport Inventory Safety TotalMode Quantity Cost Cost Cost In Transit Stock Cost

MCIM

Impact of Transit Time on Intermodal ShippersLow Value Goods

Xerox Paper

Specific Assumptions:

Weight per unit = 50 lbsValue per unit = $25.00Value per pound = $.50Economic Order Quantity = 1095Shipments per year @ EOQ= 91

Intermodal

Realizing Intermodal Potential: A Total Cost Approach

Intermodal GrowthImpediments to GrowthTotal Cost AnalysisExamples Potential for GrowthConclusions

Intermodal

SCTG Description Value % RR % MC % IM % Othr

0 All commodities 0.31 38.4 38.5 2.1 21.038 Precision instruments 26.87 0.0 60.2 0.0 39.837 Transportation equipment 11.79 31.1 52.5 2.0 14.421 Pharmaceutical products 11.34 0.0 76.7 0.4 22.935 Electronic and electrical equip 10.98 2.2 80.2 2.7 14.9 9 Tobacco products 6.83 0.0 92.1 0.0 7.934 Machinery 4.18 3.9 80.5 5.9 9.730 Textiles, leather, and articles 4.13 2.2 83.1 0.0 14.736 Motorized vehicles (incl. parts) 2.91 25.3 55.5 10.0 9.239 Furniture, mattresses, lighting 2.44 1.8 88.4 2.7 7.140 Misc. manufactured products 1.87 4.4 75.3 1.4 18.929 Printed products 1.67 0.7 76.3 1.6 21.4 5 Meat, fish, seafood, preparations 1.16 2.8 92.3 0.3 4.623 Chemical products etc. 1.14 15.3 72.4 7.6 4.724 Plastics and rubber 1.07 32.0 59.6 4.2 4.233 Articles of base metal 1.07 11.6 72.7 0.9 14.843 Mixed freight 1.04 0.0 92.6 1.5 5.9

Intermodal PotentialTon-Mile Market Shares by SCTG and Value

Intermodal

SCTG Description Value % RR % MC % IM % Othr

28 Paper or paperboard articles 0.67 5.8 84.3 2.8 7.1 8 Alcoholic beverages 0.54 39.6 49.6 8.2 2.6 6 Milled grain and bakery products 0.53 33.5 59.6 3.0 3.9 1 Live animals and live fish 0.52 0.0 94.6 0.0 5.4 7 Prepared foodstuffs, fats and oils 0.44 27.0 63.5 3.9 5.632 Base metal, primary/semifinished 0.43 30.9 57.5 1.2 10.427 Pulp, newsprint, paper,etc. 0.35 42.3 52.3 3.0 2.420 Basic chemicals 0.27 50.8 24.7 1.3 23.2 3 Other agricultural products 0.25 18.7 41.0 1.8 38.526 Wood products 0.19 36.7 53.9 3.3 6.1 4 Animal feed and animal products 0.15 28.9 57.1 4.2 9.818 Fuel oils0.10 9.1 25.8 0.0 65.141 Waste and scrap 0.09 32.5 49.1 2.1 16.310 Monumental or building stone 0.09 4.4 87.1 0.0 8.519 Coal and petroleum products 0.08 35.6 28.5 0.0 35.9

Intermodal PotentialTon-Mile Market Shares by SCTG and Value

Intermodal

SCTG Description Value % RR % MC % IM % Othr

19 Coal and petroleum products 0.08 35.6 28.5 0.0 35.922 Fertilizers 0.08 55.4 23.4 0.0 21.214 Metallic ores and concentrates 0.07 33.6 4.6 0.4 61.4 2 Cereal grains 0.06 58.0 9.1 0.4 32.531 Nonmetallic mineral products 0.06 15.4 69.7 1.8 13.113 Nonmetallic minerals 0.02 39.3 31.2 0.0 29.525 Logs and other wood in the rough 0.02 0.0 75.3 1.9 22.815 Coal 0.01 81.0 1.7 0.0 17.317 Gasoline and aviation turbine fuel 0.01 2.1 21.5 0.0 76.411 Natural sands 0.00 18.9 67.2 0.0 13.912 Gravel and crushed stone 0.00 11.8 62.8 0.8 24.6

Intermodal PotentialTon-Mile Market Shares by SCTG and Value

IntermodalRealizing Intermodal Potential:

A Total Cost Approach

Intermodal GrowthImpediments to GrowthTotal Cost AnalysisExamples Potential for GrowthConclusions

Intermodal

Conclusions

Intermodal Rail-Truck (IRT) has been growing rapidlyHowever, it is barely 2% of the ton-mile market shareIRT offers many advantagesMany impediments to realizing growth potentialOne major problem is shipper perceptions of IRT serviceRelated is that shippers do not actually measure cost of serviceRate advantage may more than offset costs of poor service Shippers should use total costs to select shipment mode