Intermodal Transportation and
the North Texas Region
Center for Logistics Education and Research
University of North Texas
This whitepaper was made possible through a scholarship grant provided by the
Intermodal Association of North America
Authors:
Terrance L. Pohlen, PhD, CTL
Director, Center for Logistics Education and Research
Student research assistants providing research and co-authoring this whitepaper:
Curtis Pogue
Regina Suwuh
Jesse Dolan
Mary Catherine Schoals
Laura Catalina Quinones Rios
Intermodal Transportation and the
North Texas Region
Intermodal transportation plays a key role in the economic development of the North
Texas region and for the many companies distributing goods throughout North America.
The ability to combine ocean, rail, and motor transportation has enabled the North
Texas region to become a major logistics hub with the ability to efficiently and quickly
source, transport, perform value-added services, and re-distribute goods throughout
North America and the rest of the world. The ability to move goods inland quickly and
efficiently from the West coast ports has allowed North Texas to become the single
largest port not located on a border or a major coastline. In addition, the large volume
of goods flowing through the region has contributed to many companies locating
facilities in the metroplex. Senior supply chain executives understand how the region’s
logistical capabilities can create and sustain a competitive advantage while
simultaneously contributing to bottom-line performance. The region directly benefits
from the economic effects through a resilient base of employment, less costly
transportation and goods, the attraction of additional companies and industries to the
area, and a lower cost of living.
This whitepaper explores intermodal transportation and its effect on the North Texas
region. The objectives for this paper include:
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Defining intermodal transportation and how it differs from simply combining
modes
Identifying the advantages and disadvantages of using intermodal transportation
Reviewing the factors contributing to the steady growth in intermodal movements
Examining how intermodal systems have evolved in the United States
Understanding how the development of the standardized shipping container has
facilitated intermodal shipments and globalization
Recognizing the effects of intermodal transportation on the logistics operations
and economic development within the region
Intermodal Transportation
The term intermodal transportation is sometimes confusing. Many individuals refer to
intermodal transportation as another mode within the transportation system. Others
define it simply as freight using more than one mode of transportation; however,
intermodal transport involves more than using two modes. In this whitepaper, the
definition used by the General Accountability Office will be used. Intermodal
transportation can be defined as “. . .a system that connects the separate transportation
Intermodal Transportation and the North Texas Region
3
modes and allows passenger or freight to complete a journey using more than one
mode.” 1
Systems View of Intermodal Transportation
Intermodal transportation is a system that combines two or more modes for moving
passengers or freight. A systemic approach distinguishes intermodalism from simply
combining two modes. For example, freight could be loaded onto a truck, transported to
a rail terminal, unloaded from the truck, reloaded into a railcar, and then transported to
another terminal where the freight is unloaded from the railcar and then loaded into a
trailer for final movement to the destination by a motor carrier. Although this approach
may be considered an intermodal movement, it lacks a systemic view to streamline
handling, reduce time and cost, and improve performance.
An intermodal movement would view transportation as a system combining the best
features of multiple modes while attempting to reduce handling costs. For example, an
intermodal movement (Figure 1) would have the shipper contract with a single provider
for an integrated movement combining multiple modes. A motor carrier could load the
freight into a trailer, or a container mounted on a chassis. The carrier would transport
the freight to a rail terminal where the trailer or container would be lifted onto a
specialized railcar. The rail carrier would transport the trailer or container to a terminal
near the destination. The trailer or container would be lifted off the train, placed on a
chassis if a container movement, and then transferred to a motor carrier for final
movement to the consignee’s location. Although similar to the previous example, this
approach involves less handling and paperwork but also requires a system capable of
seamlessly transferring trailers or containers while linking information flows to
synchronize the transportation modes involved in the movement.
Figure 1 Example of an Intermodal Movement
1
Siggerud, Katherine (2006), Director, Physical Infrastructure Issues, General Accounting Office,
Testimony Before the Subcommittee on Highways, Transit and Pipelines Committee on Transportation
and Infrastructure, House of Representatives, “Intermodal Transportation: Challenges to and Potential
Strategies for Developing Improved Intermodal Capabilities,” GAO-06-855T, Washington D.C., June 15,
p. 1.
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Intermodal Transportation and the North Texas Region
Intermodal transportation integrates the use of two or more modes into a single
movement. By combining modes, an intermodal shipment obtains the advantages and
disadvantages of each mode used in the movement. For example, a rail – truck
shipment would obtain the low cost of rail but would gain the accessibility of trucks. Due
to the need to move shipments from origin to the final destination, trucks are common to
most intermodal movements. Within the U.S., eighty percent of delivery locations can
only be served by motor carriers. Deregulation made intermodal movements more
prevalent by allowing carriers to offer a single “movement,” or one-stop shopping, on a
single bill of lading to their customers.
Major Intermodal Functions
Figure 2 Major Intermodal Functions
Four major functions (Figure 2) define an intermodal transport chain 2. The functions
include composition, connection, interchange, and decomposition.
Composition is the process of assembling and consolidating inbound freight. Containers
and trailers originating at different suppliers are drayed 3 to intermodal hubs where they
can be transferred to high capacity modes such as rail and maritime shipping. Trucks
tend to play a major role in this process as they provide door-to-door service. In
addition to the inbound dray, composition includes all of the logistics activities to
prepare the shipment to include warehousing, fulfillment, packaging, loading the trailer
or stuffing the container, and working with an intermodal marketing company (IMC) to
coordinate the intermodal movement.
Connection involves the transportation of the shipment by an intermodal freight train or
containership. The transportation occurs between at least two terminals. In some
instances, the transfer may cross international borders, such as shipments departing
China bound for the United States. The connection derives its efficiencies through the
2
Rodrigue, J-P et al. (2009) The Geography of Transport Systems, Hofstra University, Department of
Global Studies & Geography, http://people.hofstra.edu/geotrans
3 See drayage section later in this paper for definition
Intermodal Transportation and the North Texas Region
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mode’s ability to achieve economies of scale such as through the use of intermodal unit
trains or large container ships. Practices such as double stacking containers or the use
of large post-Panamax containerships have further reduced the unit cost of moving a
container or trailer.
Interchange occurs at terminals such as maritime ports or inland intermodal hubs. To
make intermodal transportation operate effectively, the terminals must provide the
capability to efficiently transfer the containers or trailers from one mode to another. The
use of standardized equipment, procedures and containers greatly facilitates this
transfer. Information exchange across the supply chain plays a critical role to ensure
the efficient scheduling of outbound transportation from the terminal and onward
movement from being delayed.
Decomposition occurs when the trailer or container is delivered to an intermodal hub
near the final destination. The freight is drayed to a local or regional center. From this
point, distribution to the final end user, typically a retailer or industrial consumer.
Advantages and Disadvantages of Intermodal Transport
The development of intermodal transportation has produced substantial advantages that
have greatly facilitated global trade; however, intermodal transportation does pose
several disadvantages which greatly affect shipper acceptance and growth. Due to its
multi-modal nature, intermodal transportation incurs both the advantages and
disadvantages of not only containerized freight but also those associated with each
mode involved in the freight movement.
Advantages
The advantages of intermodal transportation include: standardized handling, flexibility,
reduced travel time, lower cost, an alternative option for transporting goods, avoidance
of chokepoints, reduces congestion, sustainability, security, and warehousing-in-transit.
Standardized Handling
Standardization of containers has permitted equipment to be designed anywhere in the
world to support intermodal transportation. For example, shippers in remote locations
such as Vietnam can load containers knowing equipment will be available throughout
the intermodal supply chain to handle and transport the shipment. The containerized
freight can be moved intact to customers virtually anywhere in the globe where
containerships, container ports, and inland transportation capable of handling
containers exist. Standardization makes possible reduced handling, cost, and transit
time.
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Intermodal Transportation and the North Texas Region
Flexibility
Containers provide a flexible unit load device for transporting cargo and carry a wide
range of items and commodities. Imported containers from China may contain apparel,
consumer goods, machinery, automobile parts, furniture, and other finished goods.
Exported containers may contain commodities such as cotton, scrap paper and
cardboard, coal, lumber, and agricultural goods. Tanks can be inserted within a 40 by 8
by 8 foot frame to move liquids. Some containers are refrigerated (reefer containers)
and move food and medicines.
Reduced Travel Time
Shippers obtain reduced travel times by combining modes. For example, a Pacific
Ocean carrier, APL, used mini-land bridge shipments to compete with ocean carriers
that offered all-water service from Asia to East coast ports through either the Panama or
Suez Canals. The combination of ocean and rail enabled APL to offer reduced transit
times from Asia to destinations located near East coast ports. The use of rail, although
more expensive than water, across North America provides a shorter transit time than
the all-water route through the Panama Canal.
Lower Cost
Intermodal service may provide a lower cost transportation alternative. The
combination of rail and truck for distances over 700 miles will typically produce a 15
percent cost reduction in freight spend when compared to over-the-road trucking. The
savings increase as the rail distance increases and the motor carrier portion of the
move decreases. Elimination of the dray for either the pick-up or delivery enables
intermodal to offer lower costs over shorter distances. For example, Norfolk Southern
has been able to competitively price intermodal between Savannah and Atlanta, a
distance under 300 miles. They are able to do so by loading containers from ships
directly onto rail cars and eliminate the cost of the dray between the port and the
railroad.
Alternative Transportation Option
Intermodal provides more transportation options to shippers. Single modes may be too
slow or too expensive for the shipper; however, the combination of modes provides
more options. For example, a Dallas-based shipper may have previously relied on
over-the-road (OTR) trucking to move freight to New York. Intermodal can provide the
additional options of truck-ocean-truck through the Ports of Houston and New York –
New Jersey or truck-rail-truck from Dallas through an intermodal rail hub near the final
destination.
Intermodal Transportation and the North Texas Region
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Avoiding Chokepoints
Intermodal shipments can by-pass or eliminate chokepoints in the transportation
system. Containers loaded on to trains at ocean ports can bypass highway chokepoints
by moving inland before clearing customs or being transferred to motor carriers. The
Port of Los Angeles constructed the Alameda Corridor to enable intermodal trains to bypass congestion near the port as well as reduce highway congestion created by
drayage trucks. With the reduction of trucks, The Port of Los Angeles has been able to
reduce emissions as well.
Reduce Congestion
By converting OTR trucking to rail, intermodal can reduce highway congestion. A single
intermodal train can replace 200 trucks on the highway using one-fourth the fuel. For
example, in the North Texas region six to eight trains arrive every day at the BNSF
Alliance facility and another six to eight arrive every day at the Union Pacific facility in
south Dallas. These trains take between two to three thousand trucks off local and
surrounding highways. The ability of intermodal to reduce congestion is especially
important near maritime ports. As container vessels increase in size, the number of
trucks required to dray the containers dramatically increases. Maersk’s McKinney
Moller would require a line of trucks 97 miles to haul its capacity of 18,000 TEUs. 4 The
Alameda Corridor enables intermodal rail to reduce congestion around the port by using
rail to transport containers away from the port. The below-grade corridor also
eliminated over 200 railroad crossings which greatly improved the traffic flow in the
surrounding area.
Sustainability
Shippers have found intermodal to be an effective means to increase the sustainability
of their supply chains. Rail and water use considerably less fuel than OTR trucking or
air to transport goods. In addition, both rail and water carriers are examining the
potential use of natural gas which would further reduce carbon emissions. Since
drayage firms move containers out and back short distances from intermodal hubs, they
represent ideal candidates for converting their truck fleets to natural gas as well. As
sustainable supply chains increase in importance, more shippers will be attracted to this
“added” benefit of intermodal transportation.
Intermodal transportation has received strong political support due to the fuel
efficiencies associated with moving freight by water and rail. US freight railroads can
move one ton of freight an average of 484 miles per gallon of fuel. This ton/gallon figure
is up from 235 miles in 1980 reflecting the increased productivity and efficiency of the
US rail systems since it was deregulated. Rail is approximately four times more fuel
efficient than trucks. If 10% of the truck volume was converted to intermodal rail, the US
would save approximately $1 billion of diesel fuel each year.
4
A twenty foot equivalent unit (TEU) is a common form of measuring container volumes. A 40 foot
container would be equal to two TEUs.
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Intermodal Transportation and the North Texas Region
Security
Containerization enabled intermodal freight to move more securely. The contents and
owner [shipper] are not readily visible. The container greatly reduced access to the
freight and resulting theft especially when compared to break-bulk shipments. The use
of standardized equipment reduced damage due to fewer handlings, and articulated
drop-center rail cars have produced a smoother ride and less damage during rail
transport. Shippers sometimes request their containers be placed in the lower position
on double-stack intermodal trains. These containers cannot be opened while in-transit
offering greater security and precluding tampering with the contents. Containers can be
further secured using smart-seal technology which can detect tampering with the
container doors. Some shippers also employ GPS-tracking to maintain visibility of highvalue cargo throughout the entire intermodal movement.
Warehousing In-Transit
Intermodal containers provide temporary storage for goods. Many companies use
containers to temporarily store goods when confronting warehouse capacity issues,
matching multiple shipments together for additional processing, or staging goods for
holiday seasons. Although containers provide the capability for temporary storage, the
container owners may seek to have these containers returned as rapidly as possible to
be made available for revenue-generating movement. Ocean carriers have been
attempting to keep their containers from moving inland. They can exert less control
over the inland movement, and the containers may take more time to be returned. As a
result, many arriving international containers are unloaded at maritime ports and
reloaded into domestic containers for the inland movement.
Disadvantages
Intermodal movements possess the disadvantages that are incurred with the use of
containers and those associated with each of the modes used. The disadvantages
include: reliability, cost, travel time, infrequent service, site constraints, infrastructure
costs, losses, empty backhauls, and illicit trade.
Reliability
Intermodal continues to battle shipper perceptions of being an unreliable transportation
option. Despite being a lower cost alternative to OTR trucking, many shippers will not
use intermodal due to the perceived risk of their freight not arriving on time. Often,
these perceptions are based on a previous experience with intermodal occurring several
years ago.
Intermodal providers argue service has greatly improved during the past several years.
The railroads have invested tens of billions of dollars to upgrade their infrastructure to
support intermodal movements as well as to open, or re-open, intermodal hubs. For
Intermodal Transportation and the North Texas Region
9
example, intermodal rail can deliver a container faster from the West coast than on OTR
carrier unless the shipper is willing to pay a premium for team drivers.
Although reliability has improved, the on-time rates do not match the performance of
OTR trucking. Intermodal confronts the challenges of transfers between modes as well
as port congestion. Labor strikes or slowdowns by longshoreman can have a major
effect on service, and some companies have adopted a multiple port strategy to mitigate
the potential risk of a strike. Port congestion can result in containers being stacked,
handled multiple times, and delayed for outbound shipment. As the first quarter of 2014
demonstrated, adverse weather can have a significant effect on intermodal trains with
delays reaching several days. Increased volumes of crude oil and agricultural products
have also adversely affected intermodal service levels.
Cost
Cost represents both an advantage, as previously discussed, and a disadvantage. This
paradox stems from the use of multiple modes. The combination of water-rail-truck for
movements from West Coast to an inland location represents a higher transportation
cost than an all water route, such as moving from China through the Panama Canal to
ports along the Gulf or Atlantic coasts.
Logistics managers should perform a total cost analysis when assessing an intermodal
option. In addition to the change in transportation cost, they should consider the effect
on other logistics costs such as warehousing, cycle stock, and safety stock. For
example, a micro-bridge movement from the West coast to North Texas may be more
expensive than an all-water movement through the Panama Canal to Houston.
However, the intermodal movement from the West coast is seven to ten days faster.
These faster, more frequent shipments can result in a significant reduction in
warehousing and inventory carrying costs. These cost reductions may more than offset
the higher cost of transportation. As a result, the shipper employing intermodal may
obtain an overall lower cost despite paying more for transportation. The decision
regarding whether to use intermodal should be based on total cost rather focusing only
on transportation.
Travel time
Similar to the effect on cost, transit time can be both an advantage as well as a
disadvantage. The combination of modes can result in longer travel times; for example,
shifting freight from motor to rail will reduce the transportation cost but will increase
transit times and average inventory levels. Depending on the combination of modes,
transportation times may increase. Again, logistics managers must assess whether the
trade-offs between cost and service yield a better solution.
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Intermodal Transportation and the North Texas Region
Infrequent service
Delivery frequency will be directly affect by the level of service provided by the least
frequent mode. If an ocean carrier provides twice a week service, then the intermodal
network cannot provide greater frequency—unless, large shipments are transported,
staged at an intermediate location, and then delivered in more frequent but smaller
shipments. Third party logistics providers often perform this service. Since intermodal
is not designed for small frequent shipments, just-in-time deliveries on a multiple
delivery per day schedule may not be well suited for intermodal. However, logistics
managers can overcome this situation by staging inventory at an intermediate point in
the supply chain.
Site constraints
Maritime ports and inland hubs may confront space constraints which will limit
intermodal volumes. Ports such as Los Angeles are surrounded by expensive
development, and expansion would most likely be cost prohibitive. Space represents a
key challenge since container storage requires a large amount of real estate, and even
more space is required to stage containers when loading or unloading a large
containership. The situation is becoming more challenging as ocean carriers deploy
larger and larger containerships. Space constraints can also occur at inland hubs. In
areas such as Chicago, development has sprung up around intermodal hubs. To
expand their capacity, the railroads have opened additional hubs in areas away from
Chicago. These hubs are close enough to move freight into Chicago and can also
serve the surrounding area.
Infrastructure cost
Upgrades or changes to existing infrastructure to improve intermodal operations can be
extremely expensive. Port, rail and highway modifications are very costly. These costs
are compounded in magnitude since these modifications often take place in densely
populated areas or in remote, rugged locations such as when tunnel clearances are
increased. One example of an urban area is Tower 51 in Fort Worth where the BNSF
and Union Pacific railroads cross at grade. Multiple trains may have to wait several
hours to pass through this crossing. Cost projections to eliminate this bottleneck are
estimated to cost over $1 billion.
Losses
Another misperception is intermodal will result in greater loss and damage of goods.
This misperception stems from the damage that resulted prior to the use of articulated
deep well rail cars. Losses represent a small proportion of intermodal shipments, but
they do sometimes occur. Over 500 containers fall overboard each year when
containerships encounter rough seas.
Intermodal Transportation and the North Texas Region
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Empty Backhauls
The imbalance in international trade has resulted in many traffic lanes experiencing a
large volume of empty backhauls. Some estimates project that as many as one out of
five containers moved by ocean carriers are empty. These empty containers must be
re-positioned to where demand exists for freight movement. One example of this
situation is the container trade between China and the United States. Due to the high
demand for goods manufactured in China, containers arrive full on the West coast.
However, much lower demand exists for goods on the return trip. Rates reflect this
situation. Container rates from China to the United States are approximately $1,300 per
container. Rates for the return trip can be half this amount. The lower backhaul rate
does allow low cost commodities such as cotton or scrap cardboard to be shipped in
containers to China.
Illicit Trade
Illicit trade in drugs, human trafficking, or smuggling of other items has taken advantage
of the containers used in intermodal transportation. Containers were originally designed
to keep unauthorized individuals from knowing or accessing the contents. As a result,
they also provide an effective means to transport smuggled goods past US Customs
and Border Patrol (CBP). Inspection of a container can take three agents upwards of
ten hours. Over 26,000 containers enter the US through over 400 ports every day. One
hundred percent inspection is infeasible due to the lack of resources and the higher cost
and transit time incurred by supply chains. Shippers have worked with US CBP by
securing their supply chains and working to reduce or eliminate opportunities for the
tampering of containers. They employ GPS and telematics to track the location and
condition of the container throughout the entire movement. CBP has deployed
scanning technology capable of viewing the contents of containers using gamma
radiation technology at several major maritime ports.
Forms of Intermodal Transportation
Intermodal movements can be classified in a variety of different ways. These forms of
intermodal traffic are used to track different types of movement. The most common
ways to classify intermodal movements are domestic versus international and container
on flat car versus trailer on flat car.
International versus Domestic Intermodal
We typically associate intermodal transportation with international transportation (Figure
3). Goods are sourced overseas, stuffed into a container for movement, and then
transported to a maritime port for movement by an ocean going vessel to an importing
country. Standardized systems enable containers to be transported across the globe by
multiple modes from origin to final destination without unpacking and repacking of the
cargo while in-transit. The integrated system reduces time, cost, and damage.
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Intermodal Transportation and the North Texas Region
Figure 3 International Intermodal Movement
International intermodal can also be defined as the transportation of goods in
international 20, 40, or 45 foot shipping containers between the United States and
another country. International intermodal uses smaller containers due to standardized
equipment at ports and on ships. In addition, many international locations cannot
accommodate the transport of longer containers due to the inability to make sharp turns
in narrow streets or roads, especially in Europe. International volumes consist of both
imported and exported container traffic passing through the nation’s ocean
containership ports.
Intermodal transportation also occurs in domestic transportation (Figure 4) where the
origin and destination of the shipment is within the United States. Multiple modes and
standardized unit load devices, such as trailers or containers, are used to transport the
shipment. Most domestic movements involve the combination of truck and rail between
origin and the final destination.
Figure 4 Example of Domestic Intermodal Movement
Intermodal Transportation and the North Texas Region
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Domestic intermodal refers primarily to the shipments of 48 and 53 foot domestic
containers or trailers with both the origin and destination within the United States.
Domestic intermodal uses larger containers to reduce the number of truck movements
and cost. Domestic volumes include container and trailer traffic picked up and delivered
within North America for intermodal marketing companies and truckload carriers. LTL
and small package carriers are also significant intermodal users. For example, UPS is
the single largest customer of the North American railroads and makes extensive use of
domestic intermodal.
The volume of intermodal movements in the United States is almost evenly split
between international and domestic (Figure 5). The domestic volumes include
container and trailer movements. The proportion of international movements has
recently decreased. An executive with a Class 1 railroad indicated that approximately
one-third of the arriving international containers on the West coast ports are transloaded
into domestic containers for inland transport by rail to intermodal hubs. The freight
arriving at many US maritime ports is transloaded from 20 or 40 foot international
containers to domestic 53 foot containers. Shippers and carriers practice transloading
to reduce the number of inland container moves and their transportation cost. The
conversion, or transloading, from international to domestic containers has caused what
were previously international moves to be reclassified as domestic.
.
Trailers,
1,666,350 ,
10%
ISO containers
Total,
8,166,010 ,
50%
Domestic
containers,
6,444,532 ,
40%
2014 Total: 16,276,892 units
Figure 5 Comparison of 2014 Domestic versus International Intermodal Movements in the United States 5
5
Compiled from the Intermodal Association of North America, Intermodal Market Trends and Statistics,
used with permission of IANA.
14
Intermodal Transportation and the North Texas Region
Container on Flat Car (COFC) and Trailer on Flat Car (TOFC)
Figure 6 Forms of Intermodal Moves
Intermodal transportation takes three general forms (Figure 6). The first two, known as
piggyback, consist of trailer on flat car (TOFC) or container on flat car (COFC) service.
To achieve greater economies of scale, the railroads developed specialized rail cars
capable of transporting standard containers stacked two high, or double container on
flat car. These specialized rail cars have deep wells that permit the bottom container to
sit between the rail car wheels rather than on top of a rail car bed. The lower position
enables double stack service on routes with low tunnel clearances. Five of these
specialized cars form a single unit.
Intermodal Equipment
Intermodal transportation relies on standardized equipment (Figure 7). Many early
efforts to establish intermodal transportation failed due to the inability to transport
containers or trailers on other carriers’ equipment or other countries’ ports. The US
Navy is credited with initially standardizing container dimensions. The Navy subsidized
ship construction to ensure the readiness of a cargo fleet in time of war. To ensure
military containerized cargo could be moved on any ship, the Navy insisted the ships be
built to dimensions supporting standard container dimensions. These dimensions for
international containers were set at 8 feet wide by 20 feet long for a twenty foot
equivalent (TEU) container and 8 feet wide by 40 feet long for a forty foot equivalent
(FEU) container (note a 40 foot container is equivalent to 2 TEUs). The height may
vary, but most international containers are 8.5 feet high or 9.5 feet high if high cube.
Adoption of these standards ensures pallets, containers, cranes, ships, railcars, truck
chassis, etc. will be compatible, and containers can be moved anywhere in the world
where supporting intermodal equipment exists. Standardization has resulted in faster
handling with much fewer losses and at far lower costs than previous shipping
practices. Marc Levinson, author of The Box credits the standardized intermodal
shipping container as the principle driver for reducing international shipping costs and
facilitating the expansion of global trade.
Intermodal Transportation and the North Texas Region
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Figure 7 Examples of Standardized Intermodal Equipment
Intermodal container
At the “heart” of the intermodal system is the standard shipping container (Figure 8).
Most containers are 8 feet wide by 8.5 feet tall and either 20 or 40 feet in length. Some
45 foot containers are used in international traffic. Longer 48 and 53 foot containers are
used in domestic shipping within North America, US territories, and some other
countries.
Figure 8 Intermodal Shipping Container (45 foot)
Standardized containers have provided several benefits. The containers make freight
easier and faster to handle while reducing damage and loss. Containers provide
portable warehouses and temporary storage while eliminating the need for port
warehousing and additional protection while in-transit. Multiple modes can be used to
transport containers due to standardized design and lock and pin devices located at
each corner of the container. Reduced transit times are obtained through less handling
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Intermodal Transportation and the North Texas Region
and streamlining transhipment from one mode to another. Containers provide a wide
range of configurations providing flexible capabilities for shippers.
Figure 9 Standardized Corner Castings on Containers
Each of the eight corners of an international container have a standard corner casting
(Figure 9). These castings permit compatible container cranes to use a frame with twist
locks to quickly engage and move the container. In addition, devices can be inserted
into these castings to lock several containers together when doubled stacked on a
container crane or when stacked several high on an oceangoing containership.
Container Cranes
A common sight at major intermodal facilities is the container crane. Large maritime
container ports may have several adjacent container cranes dockside along a wharf
(Figure 10). Several container cranes may be operated at the same time to service a
Intermodal Transportation and the North Texas Region
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vessel. Large container cranes at maritime ports often load and unload a ship at the
same time. A large containership may be unloaded in several hours. Previous use of
breakbulk ships would require several weeks to load and unload far less cargo at a
much greater cost and with considerably more damage. These container cranes cost
several million dollars to acquire, and West coast crane operators earn upwards of
$100,000 per year.
Figure 10 Intermodal Container Cranes at a Maritime Port
Inland intermodal hubs also rely on container cranes. These cranes are considerably
smaller than those at a maritime port. They often operate on wheeled units and can
simultaneously straddle a double-stacked rail car and a truck trailer to facilitate transfer
between modes (Figure 11).
Other cranes may operate in the yard if containers are stacked to save space.
Containers may be stacked several high in an intermodal yard or port. Unless a
container is immediately loaded on an outbound truck or rail car, maritime ports
generally need to stack containers due to a lack of space. Maritime ports generally
confront significant space limitations. However, container stacking increases handling,
time and cost within the port. In contrast, inland intermodal hubs tend to have more
space and store containers on trailer chassis. This practice reduces handling and
decreases time but requires considerably more space.
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Intermodal Transportation and the North Texas Region
Figure 11 Container Crane Operating at Inland Intermodal Hub
Spreaders are used to connect the crane with the container. A spreader is a frame
connected to the cables used by the crane to lift or lower containers. The frame can
spread to adjust for different container sizes. The spreader has twisting locks that fit
into the corner castings on the container. The locking devices are inserted into the
corner castings and then twisted to lock into place. The container is then securely
connected and can be lifted into place. After placement, the crane operator can reverse
the process, release the container, and then move to the next container. Spreaders
typically lift a single container at a time; however some spreaders can lift two 20 foot
containers as a single unit. Large container cranes at maritime ports have the ability to
simultaneously operate two spreaders—one for loading while the other is being used to
unload a ship.
Container ships
Malcolm McLean is credited with the first use of ships outfitted to transport containers.
He used cranes to stack containers on the deck of the Ideal-X, a converted tanker, to
transport his early containers. As other carriers recognized the benefits, other ships
were converted to container service.
Intermodal Transportation and the North Texas Region
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Later, ships were specifically designed to transport
containers and greatly increased the TEU capacity.
These ships can stack containers in racks below deck
(Figure 12). Containers are also stacked above deck
and secured with locking devices at each corner.
Containerships continue to increase in size with ships
exceeding 22,000 TEU already planned to enter
service. Ships exceeding 4,000 TEUs could no longer
pass through the Panama Canal and are referred to as
post-Panamax ships. The expansion of the Panama
Canal will permit 12,000 TEU ships to pass through the
locks. However, the ocean carriers are deploying larger
and larger containerships due to the tremendous
economies of scale. Larger ships employ more fuel
efficient technologies and do not consume much more
fuel than their predecessors. In addition, the crew size
is approximately the same. The use of these larger
ships results in a lower cost per container.
Figure 12 Racks for Stacking
Containers Below Deck
Ocean-going carriers have sought larger containerships to obtain increased economies
of scale. Larger ships can carry a much larger number of containers with the same
crew size and with slightly more fuel. However, potential drawbacks may include the
time required to load and unload these ships. Few ports are also deep enough to
accommodate these vessels, and these ports are already experiencing problems with
congestion. Until ocean carriers remove many of their smaller ships from service, the
industry faces a situation of over-capacity and depressed shipping rates.
Many ocean carriers have been ordering and deploying larger and larger container
vessels. Some of the largest containerships in operation have the capacity to carry over
18,000 TEUs with 22 containers across. These larger ships require ports with container
cranes with sufficient reach and capacity. In addition, these ships can create
considerable congestion at the wharf, in the container yard, and on surrounding
highway and rail infrastructure.
Larger container ships pose many logistical challenges. Ports must be sufficiently deep
to accommodate these ships, have the capacity to off-load these vessels, and possess
sufficient space to stage or store containers awaiting shipment. In addition, the
surrounding area may experience traffic congestion due to the large number of trucks,
or trains, required to move the containers to and from the port.
An example of these larger ships is the McKinney Moller, an 18,000 TEU ship which
entered service in 2013 and is owned by Maersk, a Danish carrier. The McKinney
Moller is officially listed as having the capacity to carry 18,000 twenty foot equivalent
unit containers, or TEUs. Moving from smaller container ships in the 4,000 TEU range to
20
Intermodal Transportation and the North Texas Region
18,000 TEU ships reduces operating costs per container by 20 to 30 percent. Figure 13
provides a comparison of the ship’s size and also a description of its carrying capacity.
Figure 13 Description of the McKinney Moller
The calculation in the lower portion of Figure 14 illustrates the number of trucks required
to off-load the equivalent of 18,000 TEUs from the Maersk McKinney Moller. If the ship
was to completely off-load 18,000 TEUs, then a 97 mile line of trucks, parked nose to
tail, would be required to move the off-loaded containers. As a result, several ports
have implemented infrastructure projects to facilitate on-dock rail service to alleviate
some of the highway congestion in the surrounding area.
Figure 14 McKinney Moller would require 97.16 miles of trucks to unload
Intermodal Transportation and the North Texas Region
21
Containership size will soon be defined relative to the Suez Canal and the Straits of
Malacca (see Figure 15). As larger container ships enter service, the Suez Canal may
also be too shallow to handle the largest containerships, or post-Suezmax vessels.
Post Malacca-max ships are currently being designed. These ships will have their
bottom keel 65 feet below the surface, be a quarter mile long and 190 feet wide. The
Straits of Malacca does not have sufficient depth to handle these ships, and the ocean
shipping companies will need to deploy the ships on strings [routes] where sufficient
depths exist and where the origin and termination ports can accommodate such large
vessels. These Post Malacca-max ships will carry over 18,000 TEUs with the
transported merchandise valued in excess of $1B in merchandise.
Figure 15 Strait of Malacca
Intermodal Rail Cars
The railroads have developed specialized rail cars to support intermodal transport. A
container placed on a traditional flatcar has been replaced with the double stacking of
containers in a drop center car. The drop center cars allow containers to ride much
lower than atop a flat car and facilitate double-stack intermodal trains (Figure 16).
Without the ability to lower the containers, trains would often be unable to pass through
many tunnels. In many instances, the railroads had to increase tunnel clearances to
accommodate double stack trains.
22
Intermodal Transportation and the North Texas Region
Figure 16 Doublestack Intermodal Train Source: Canadian Pacific
Double stack intermodal service has provided some unique benefits for shippers. Some
shippers request their containers be placed in the deep well car with another container
stacked on top. This configuration provides the benefit of increased security. The lower
container cannot be opened until lifted out of the deep well car. Shippers using
refrigerated containers, or reefers, also request the lower position. The container
stacked on top provides shade and helps keep the refrigerated container cooler.
Figure 17 Example of Specialized TOFC Railcar Source: BNSF.com
Although some trailers may still be transported on a flat car, the railroads and rail car
leading firms have designed cars for transporting trailers (Figure 17). These cars
consist of little more than a frame with pads for the trailer wheels and the fifth wheel of
the trailer. They may also operate as an articulated unit to reduce damage and weight.
These rail cars eliminate unnecessary weight and permit more efficient trains. Cranes
or forklifts are used to load or unload trailers from these railcars.
Intermodal Transportation and the North Texas Region
23
Intermodal Truck Chassis
Containers are placed on a trailer chassis for transport to and from an intermodal facility.
A chassis consists of a trailer frame capable of transporting a container and being
hauled by a Class 8 tractor (Figure 18). The container is mounted on the chassis by
using the corner castings on the container. Chassis are manufactured in multiple
lengths to correspond with different size containers. US law requires that the length of
the chassis match or exceed the length of the container being transported.
Figure 18 Intermodal Chassis
Chassis management has become a major challenge in intermodal transportation.
Historically, the ocean carriers have provided chassis support. They had to have a
stockpile of chassis equipment stockpiled at major intermodal hubs to support their
customers. The empty chassis require parking space and posed a space issue at
maritime ports. Stacking of chassis became a practice to overcome the space issue,
but the chassis were often damaged. Ocean carriers did not share their chassis
equipment resulting in low utilization. In addition, customers did not quickly turn-around
the container and chassis further reducing utilization. Many ocean carriers are currently
selling off their chassis equipment to chassis pool companies. The chassis pool
companies are charging for their service as well as for any delays in returning the
chassis. As a result, many intermodal users may experience higher costs but will
experience greater availability of chassis for their use.
24
Intermodal Transportation and the North Texas Region
Evolution of Intermodal Transportation
Figure 19 Malcolm McLean and the First Container Being Loaded on the Ideal-X
The evolution of the modern intermodal transportation system actually began with a
trucker. Malcolm McLean, a trucking executive, recognized the potential savings that
could be achieved by shipping entire trailers rather than using breakbulk shipping
(Figure 19). As he developed the concept, McLean separated the chassis from the
shipping container to permit stacking. However, this practice required an integrated
system to permit the seamless transfer of containers from one mode to another.
McLean later purchased the Pan Atlantic Steamship Corporation and set about
developing plans to offer containerized service along the Atlantic seaboard. He
converted the main deck of a tanker ship to handle containers that could be carried on
trucks and developed the cranes needed for loading and offloading the ships.
His first containership, the Ideal X, sailed from Port Newark, NJ to Houston, TX on April
27, 1956 with 58 fully loaded containers. The Journal of Commerce quotes James K.
McLean as stating: “We are convinced that we have found a way to combine the
economy of water transportation with the speed and flexibility of overland shipment.”
The key factor that set Malcom McLean apart from previous efforts to use intermodal
transportation was his vision and ability to create an integrated system. Intermodal
transportation is more than simply using two modes of transportation. An integrated and
standardized system is required to seamlessly transfer freight from one mode to
another. For example, McLean formed Sea-Land which provided intermodal service
using ships and trucks capable of handling standardized containers. The company
developed specialized cranes and “spreaders” for handling the containers. They
eventually developed land-based container cranes as volumes increased.
Vietnam War and Increased Acceptance of Containers
McLean’s intermodal concept did not gain widespread acceptance until the Vietnam
War. The US Army is responsible for military port operations. During the war, they
encountered numerous logistical problems with unloading freight, understanding what
Intermodal Transportation and the North Texas Region
25
freight they had, and quickly moving the freight to the correct military unit. McLean
assisted the Army in using containers to resolve their problems.
The Vietnam War quickly demonstrated the efficiency of containers, and many
competitors began offering container service. However, each company used containers
of different dimensions based on compatibility with their existing equipment or their
customers’ needs.
Standardization of Containers
The US Navy is credited with forcing the standardization of intermodal shipping
containers. At that time, the Navy subsidized US shipbuilding to ensure sufficient sealift
capability in time of war. The Navy wanted to ensure that any containers being
transported on these ships could be easily transported. The results of their research
resulted in the 20 and 40 standardized lengths still used in international intermodal
transportation today.
Land Bridges and Intermodal Development
Figure 20 Types of Land bridges
Intermodal transportation made possible the “land bridge” concept (Figure 20). Robert
Neuschel, formerly with McKinnsey and Company and with the Transportation Center at
Northwestern University, developed the concept of using rail carriers to transport goods
between the Atlantic and Pacific oceans. Shippers moving goods between Asia and
Europe benefit from the sea-rail-sea movement by reducing transit times and expensive
passage through the Panama Canal.
26
Intermodal Transportation and the North Texas Region
Two other variations of the landbridge concept are frequently used. The “mini-bridge”
combines sea and rail modes to move goods from one exterior port to another. A
“micro-bridge” moves goods inland from an exterior port location.
The use of landbridges fundamentally altered the flow of containers in the United
States. Prior to the 1980s, trade from Asia moved through the Panama Canal and then
along the Atlantic seaboard to reach major population areas. In 1984, APL used the
landbridge concept to effectively compete with the all-water route through the Panama
Canal. APL ships called on West coast ports, containers were transferred to rail
carriers, and the railroads transported the containers to destinations along the East
coast. The cost of the rail portion was reduced through the innovative practice of
double stacking containers. The railroads were able to double their capacity without
incurring a doubling of fuel or labor costs. Although the rail intermodal move was still
more expensive than water, the reduction of ten or more days of transit time produced a
significant reduction in inventory carrying cost and improvements in customer service.
Implementation of the mini-land bridge concept resulted in a major shift of container
volumes from the East to West coast ports. The Ports of Los Angeles and Long Beach
continue to be the largest ports in the US and among the largest in the world.
Phases of Intermodal Development
Intermodal transportation appears to have passed through three stages. 6 During the
first stage (1960s), containerized freight was introduced to maritime shipping with inland
service being performed largely by trucking. The second stage began in the mid-1980s
and concentrated on the containerization of inland transport systems. The use of
double stack trains to inland destinations or transcontinental movements characterized
this phase. The third phase has focused on improving the overall efficiency of
intermodal operations. These efficiencies have occurred through the increased velocity
of container movements and handling and by reducing the number of container
handlings.
Deregulation and the Effect on Intermodal Transportation
The deregulation of the US transportation system in 1980 probably provided the biggest
boost to the expansion of the intermodal concept. Deregulation opened the opportunity
for transportation companies to offer integrated services. For example, deregulation
opened the opportunity for transportation companies to own multiple transportation
modes to include brokers and forwarders. Deregulation allowed shippers to contract
with one provider and have one bill of lading, or contract, for their intermodal movement.
6
Rodrigue, J-P et al. (2009) The Geography of Transport Systems, Hofstra University, Department of
Global Studies & Geography, http://people.hofstra.edu/geotrans
Intermodal Transportation and the North Texas Region
27
Government Promotion of Intermodal Transportation
Despite the importance and need for a transportation policy, no single unified statement
of US national transportation policy exists. Instead, policy has evolved over time
through statements contained in legislative acts or through funding and policies applied
by federal and state agencies. These statements occur in the form of court decisions,
laws, legislative appropriations, and rulings by the independent regulatory commissions.
The lack of a clear statement of national transportation policy has produced a situation
where there is not an integrated, systematic approach to managing transportation.
Currently, each mode is promoted and managed separately. Although policy
statements recognize the growing importance of intermodal transportation, funding has
not been provided to promote its development or streamline intermodal operations.
In a review of intermodal transportation, the US General Accountability Office (GAO)
found: “Historically, federal transportation policy has generally focused on individual
modes rather than intermodal connections between different modes. Federal
transportation funding programs are overseen by different modal offices within the
Department of Transportation—the Federal Aviation Administration, Federal Transit
Administration, Federal Railroad Administration, and Federal Highway Administration.
No specific federal funding programs have been established that target intermodal
projects for either passengers or freight although a few federal programs offer
flexibilities that would allow these types of projects.”
“Significant challenges to the development of intermodal capabilities are the lack of
specific national goals and funding programs. Federal funding is often tied to a single
transportation mode; as a result it may be difficult to finance projects, such as
intermodal projects, that do not have a source of dedicated funding. Federal legislation
and federal planning guidance all emphasize the goal of establishing a system-wide,
intermodal approach to addressing transportation needs. However, the reality of the
federal funding structure—which directs most surface spending to highways and transit
and is more oriented to passengers than freight—plays an important role in shaping
local transportation investment choices.” 7
Public-private partnerships (PPPs) have emerged as a means to promote intermodal
transportation. A combination of private and public funding has been used on several
projects to address infrastructure projects which otherwise would have gone unfunded.
The investment of public capital in private projects, such as rail intermodal
infrastructure, is justified based on reduction of truck traffic on highways, reduction of
emissions, and economic development.
7
Source: Siggerud, Katherine (2006), Director, Physical Infrastructure Issues, General Accounting
Office, Testimony Before the Subcommittee on Highways, Transit and Pipelines Committee on
Transportation and Infrastructure, House of Representatives, “Intermodal Transportation: Challenges to
and Potential Strategies for Developing Improved Intermodal Capabilities,” GAO-06-855T, Washington
D.C., June 15, pp. 3 and 7.
28
Intermodal Transportation and the North Texas Region
Figure 21 Map of the Heartland Corridor, Source: Norfolk Southern
The Heartland Corridor is an example of a PPP focused on improving intermodal
service (Figure 21). Norfolk Southern pursued a PPP since the return on investment
was insufficient to justify their sole investment, but construction of the corridor would
provide substantial benefits to the port, surrounding communities, and states through
which the rail line passed. The public sector was also receptive since public funds
alone would also have proven insufficient to support the project and due to the benefits
that would accrue. Funding came from the Norfolk Southern, three states, and the
Federal Highway administration. The project increased 28 tunnel clearances to permit
double stack trains, increased the capacity of the rail lines to permit more trains and car
volumes, shortened the rail journey from Norfolk to Chicago by 250 miles, and added
several intermodal terminals along the route. The Norfolk Southern Railroad made the
investments in the portions of the corridor which benefitted rail services while the public
sector invested in those improvements where public benefit would occur such as the
elimination of highway – rail crossings. By shifting freight from motor to rail, the region
has benefitted through reduced highway congestion, less wear and tear on the highway
infrastructure, less fuel consumption, and lower carbon emissions.
Intermodal Market
Intermodal transportation was experiencing a compound average growth rate (CAGR)
of 4.5 percent over the past three decades with volumes peaking in 2014. Rail
volumes, including intermodal, fell in 2007, and many transportation experts believe this
drop was a harbinger of the upcoming recession which began in 2008 (see Figure 22).
As consumer demand fell in 2007 and 2008, so did the demand for intermodal
transportation. Intermodal and all other forms of transportation have derived demand.
The demand for transportation is derived from the demand for goods. Volumes started
to climb once again in 2010 with domestic intermodal experiencing higher growth rates
than international. Supporting this trend is the total container volumes moved by the
Intermodal Transportation and the North Texas Region
29
Ports of Los Angeles and Long Beach (LA/LB). The volume of TEUs lifted at these
ports has not increased as rapidly as overall intermodal volumes.
18
Millions of units
16
14
12
10
8
International
6
Domestic
4
2
0
Year
Figure 22 Comparison of Domestic and International Intermodal Volumes in the United States 8
The container volumes inbound to LA/LB are especially important to the North Texas
region (Figure 23). North Texas serves as one of several inland ports supported by
these ports. The overwhelming majority of international containers inbound to this
region pass through these ports. These volumes provide a leading indicator for both
transportation and consumer demand in the region, if not the United States.
Intermodal rail car movements accounted for 46% of US rail traffic in 2014 (Figure 24).
Intermodal volumes exceeded 50 percent among two Class 1 railroads: the BNSF and
CSX. The proportion of intermodal moves is expected to increase as the railroads
continue to invest in intermodal hubs and rail infrastructure and as more shippers
convert truck to intermodal rail to overcome rising fuel costs, increased government
regulation and a shortage of truck drivers.
8
Source: Center for Logistics Education and Research, compiled from the Intermodal Association of
North America, Intermodal Market Trends and Statistics, used with permission of IANA.
30
Intermodal Transportation and the North Texas Region
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
LA/LB Imports
LA/LB Exports
West Coast Imports
West Coast Exports
Figure 23 Inbound Loaded TEUs for Ports of Los Angeles and Long Beach
Chemicals, 1,562,440
Coal, 5,824,630
Total Intermodal Units,
13,496,941
Agricultural
(excl grain,
864,091
Forest
Products,
582,897
Nonmetallic
Minerals,
1,855,735
Grain,
1,062,005
Metallic Ores and
Metals, 1,335,571
Other, 414,157
Petroleum and
Petroleum Products,
798,519
Motor Vehicles and
Parts, 876,790
Figure 24 Proportion of Rail Car Movements in US 2014 (Total: 29,119,977)
Source: Weekly Railroad Traffic, Week 53, 2014, American Association of Railroads
Intermodal transportation represents a relatively small proportion of the total freight
spend in the United States. Logistics expenditures on motor carriers were $657 billion
Intermodal Transportation and the North Texas Region
31
in 2013. 9 The total spend on rail was $74 billion. Approximately 25 percent of rail
revenues are intermodal-related or approximately $18.5 billion. Due to the difference in
market size, Wolfe-Trahan estimates that just a two percent conversion of trucking to
rail could increase the intermodal market by at least 20 percent.
Intermodal currently represents the single largest source of revenue for the Class 1
railroads. In 2014, the Class 1 railroads earned $20.4 billion in revenue (Figure 25).
Intermodal surpassed coal as the single largest source of rail revenue in 2003 and has
been the leading source of revenue ever since. However, coal continues to be the
single largest commodity moved by the railroads when measured in ton-miles.
Railroad
Intermodal
Revenue
Kansas City Southern
BNSF
Canadian National
CSX
Canadian Pacific
Norfolk Southern
Union Pacific
$
$
$
$
$
$
$
Total:
$
396
7,048
2,748
1,790
1,375
2,562
4,489
2014 Total
Revenue $M
$
$
$
$
$
$
$
2,577
22,714
11,455
12,669
6,464
11,624
22,560
20,408 $
90,063
Figure 25 Class 1 Intermodal Market Share by Revenue
9
Wilson, Rosalyn, CSCMP 25th Annual State of Logistics Report, National Press Club, Washington,
D.C., June 17, 2014
32
Intermodal Transportation and the North Texas Region
Intermodal containers & trailers
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
2012
2013
2014
BNSF
4,661,015
4,918,882
5,426,157
UP
3,649,807
3,679,776
3,731,411
NS
3,349,642
3,560,342
3,886,275
CSX
2,444,515
2,571,532
2,757,100
CP
985,214
967,666
966,347
CN
1,728,681
1,893,003
2,110,699
KSU
914,200
956,600
1,019,600
Figure 26 Class 1 Intermodal Rail Car Volumes by Railroad
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
-
2008
2009
2010
2011
2012
2013
2014
Containers 11,722,676
2007
11,380,401
10,272,664
11,964,417
12,621,619
13,331,191
14,051,049
14,824,345
Trailers
2,578,839
1,723,455
1,765,488
1,778,955
1,609,459
1,567,704
1,642,580
2,713,893
Containers
Trailers
Figure 27 Annual Intermodal Rail Car Volumes 2008 - 2014 10
Intermodal volumes have been increasing for the past several years (Figures 26 and
27). Intermodal volumes fell at the end of 2008 due to the recession and remained low
throughout 2009. Volumes began to increase in 2010 and have steadily grown reaching
record levels in 2014. As will be discussed later in this paper, several factors are
contributing to the steady growth in intermodal volumes. Both the Intermodal
10
Source: Center for Logistics Education and Research, compiled from the Intermodal Association of
North America, Intermodal Market Trends and Statistics, used with permission of IANA.
Intermodal Transportation and the North Texas Region
33
Association of North America and the American Association of Railroads reported record
volumes in 2014. Domestic intermodal volumes are driving these volumes due to
shippers converting from truck to rail.
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
Trailers
Domestic containers
Sep-14
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
-
ISO Containers
Figure 28 Comparison of Trailer, Domestic Container and International Container Volumes 11
The volume of trailer on flatcar movements appears be decreasing. In 1990, trailers
accounted for 56% of the intermodal market. However, they now account for only 10%
(Figure 28). Many shippers are converting to 53 foot intermodal containers for domestic
shipments. The railroads have incentivized the use of containers to double container on
flatcar service and obtain greater efficiencies.
Factors Shaping Intermodal Growth
Intermodal transportation is expected to continue growing in the United States and at a
rate faster than gross domestic product. Several factors are contributing to this growth.
These factors include greater acceptance of intermodal by trucking companies, truck to
ail conversion, Class 1 railroad investment in intermodal facilities, driver shortage, and
fuel prices.
11
Compiled from the Intermodal Association of North America, Intermodal Market Trends and Statistics,
used with permission of IANA.
34
Intermodal Transportation and the North Texas Region
Truck to Rail Conversion
Many large truckload motor carriers have been entering the intermodal transportation
segment. JB Hunt has been particularly aggressive in becoming an intermodal carrier
(Figure 29). Intermodal transportation now accounts for over half of its gross revenues.
Their traditional truckload business is now only 6% of their revenues and has steadily
decreased since 2002. Intermodal provides larger margins and has a higher barrier for
entry that has made intermodal attractive to these carriers.
Intermodal Focus for Trucking
• Intermodal accounted for over
61% of JB Hunt’s 2014 gross
revenues
• Intermodal fleet now contains over
58,962 pieces of company controlled
trailing equipment—primarily 53 foot
intermodal containers
JBT
6%
ICS
12%
DCS
22%
JBI
61%
$6.165B
Source: JB Hunt 2014 Fourth Quarter Earnings
Numbers are in $ millions
Figure 29 JB Hunt Focus on Becoming an Intermodal Provider
The US Department of Transportation has indicated that a significant portion of the
truckload market could be converted to rail (Figure 30). The range most likely for
conversion is at distances over 500 miles where rail competes effectively with trucking.
For example, the Union Pacific Railroad has identified 11 million potential conversions
with an average length of haul of 550 miles that originate and terminate within 75 to 100
miles of an intermodal hub. They believe these loads could be converted since the
distance is over 500 miles combined with a reasonable drayage distance.
Intermodal Transportation and the North Texas Region
35
Figure 30 Potential for Truck to Rail Conversion 12
The truck to rail conversion has taken place as a result of several factors. These factors
include fuel prices, labor, government regulation, capacity in the truckload industry, and
improved intermodal rail service. A discussion of each of these factors follows.
Fuel Prices
Diesel fuel is currently one of the largest expenses for most trucking firms. Diesel
prices have recently dropped but most analysts predict they will eventually return to
levels between 3.50 and $4.00 per gallon (Figure 31). Due to wide swings in global
supply, fuel prices will likely remain highly volatile and unpredictable. Intermodal rail
consumes only 25 percent of the fuel required for the same truck movement, and much
of this savings can be passed along to the shipper. Depending on fuel prices, the length
of the drays, and the length of the intermodal rail movement, shippers often obtain a 15
percent reduction by converting to intermodal.
12
Federal Railroad Administration, National Rail Plan, September 2010
36
Intermodal Transportation and the North Texas Region
U.S. Diesel Fuel and Crude Oil Prices
dollars per gallon
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Jan 2011
Price difference
Retail diesel fuel
Forecast
Crude oil
Jan 2012
Jan 2013
Jan 2014
Jan 2015
Jan 2016
Crude oil price is composite refiner acquisition cost. Retail prices include state and federal taxes.
Source: Short-Term Energy Outlook, February 2015.
Figure 31 Department of Energy Projections for Diesel Fuel Prices
Labor
The trucking industry continues to confront a shortage of drivers. The American
Trucking Association estimates the shortage to be approximately 25,000 drivers with a
projected shortage of 239,000 by 2022 (Figure 32). The demand for drivers combined
with downward pressure on carrier margins has caused the driver turnover rate to climb
to near record levels (Figure 33). Large for-hire carriers have turn-over rates above 90
percent. Less-than-truckload (LTL) and private carriers have turn-over rates in the
teens. These carriers benefit from more predictable routes and a network which
generally enable the drivers to return and spend more time at home.
Figure 32 Driver Shortage Projections
Source: ATA, Truck Driver Shortage Update
Intermodal Transportation and the North Texas Region
37
120%
100%
Percent
80%
60%
40%
20%
0%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2008
2008
2008
2008
2009
2009
2009
2009
2010
2010
2010
2010
2011
2011
2011
2011
2012
2012
2012
2012
2013
2013
2013
2013
2014
2014
2014
Large TL Fleets
Small TL Feets
LTL Fleets
Figure 33 Driver Turnover Rates
Source: Quarterly ATA Driver Turnover Reports
Regulation
Federal safety regulations have negatively affected driver productivity and reduced
carrier capacity. The hours of service (HOS) regulations which took effect in 2013
reduced the available drive time from 82 to 70 hours per week by eliminating one 34hour restart. 13 Since most drivers are paid per mile, the loss of 12 hours driving time
per week had a devastating effect on many drivers’ income. The HOS rule changed
and the loss of income is causing drivers to exit the profession. As the construction
industry recovers, even more drivers exited as trucking often competes for the same
labor pool.
The new HOS rules further affected drivers in two key areas. First, drivers were
required to take a 30-minute break during the first eight hours of driving. The break
requirement forced drivers to take breaks whether they require one or not. They also
had to find a place to park, and the time spent searching, pulling into a parking area,
and then getting back on the highway further reduced driver productivity. Second, the
new restart provisions required two consecutive nights of rest overlapping the 1AM to
5AM time period. To meet this requirement many drivers were forced to operate during
peak traffic periods. The result was drivers were less productive, capacity was further
reduced, and highway congestion increased.
These provisions were suspended by the FMCSA as required by the Consolidated and
Further Continuing Appropriations Act, 2015, enacted December 16, 2014. The FMCSA
13
Federal Motor Carrier Safety Administration, “Hours of Service,” www.fmcsa.dot.gov/regulations/
hours of service, accessed June 28, 2014
38
Intermodal Transportation and the North Texas Region
suspendsedthe requirements regarding the restart of a driver’s 60- or 70-hour limit that
drivers were required to comply with beginning July 1, 2013. This suspension will
continue through September 15, 2015 or until the Secretary of Transportation provides
a report on this provision.
Implementation of the Compliance, Safety, Accountability (CSA) program by the Federal
Motor Carrier Safety Administration (FMCSA) has further reduced motor carrier
capacity. Despite deficiencies in the scoring mechanism, shippers and brokers have
used the CSA scores as part of their carrier selection process. Carriers and drivers with
low scores have been forced to exit the industry.
Capacity
The first quarter of 2014 demonstrated the precarious balance between supply and
demand in the motor carrier industry. Rates remained high until the drop in fuel prices
at the end of 2014. Although carriers have begun to increase capacity, a growing
economy and driver shortage will like cause rates to increase in the future (Figure 34).
$2.70
$2.50
$2.30
$2.10
$1.90
Spot Van Rates
Spot Reefer Rates
$1.70
Spot Flatbed Rates
2/19/2015
1/19/2015
12/19/2014
11/19/2014
10/19/2014
9/19/2014
8/19/2014
7/19/2014
6/19/2014
5/19/2014
4/19/2014
3/19/2014
2/19/2014
1/19/2014
12/19/2013
11/19/2013
10/19/2013
$1.50
Figure 34 DAT Spot Market Rates 14
Carriers have not adjusted capacity [size of their fleets] in response to increased
demand and anticipated growth in the economy. Current margins will not generate
sufficient return-on-investment to justify the acquisition of additional capacity. Even if
14
Compiled from weekly releases from www.dat.com
Intermodal Transportation and the North Texas Region
39
capacity were added, carriers would unlikely be able to obtain the drivers to fill these
tractors.
Rail Service
Intermodal rail has provided a transportation option for shippers concerned with or
experiencing a capacity shortage in the motor carrier industry. Rail carriers have been
able to provide competitive service at a lower cost due to the large investments
previously made in rail infrastructure. Rail carriers are investing over $10 billion per
year to enhance their networks by double-tracking key intermodal routes, raising tunnel
clearances to open double stack trains to more regions, and opening or re-opening
intermodal hubs to accommodate the growth in intermodal volumes.
Potential issues may affect future rail service. The growth in intermodal volumes will
require a sustained investment in intermodal hubs, locomotives and rail cars. The
railroads are experiencing a shortage of locomotives, and increased movements of
crude oil by rail will further strain rail capacity. Federal emission standards may affect
future locomotive production and reduce capacity as manufacturers attempt to meet
standards.
Conversion to natural gas has the potential to negatively affect intermodal rail volumes.
Lower natural gas prices will enable motor carriers to compete more effectively with rail
over longer distances. Most OTR trucking companies have not shifted to natural gas in
large numbers. This shift may accelerate if diesel prices increase or if the cost of
natural gas tractors decreases.
Intermodal Intermediaries
Intermodal adds additional complexity to an already complicated and diverse
transportation network. To assist shippers and carriers, several intermediaries
specializing in intermodal transportation have emerged. This section of the paper
describes several intermediaries playing important roles in integrating and facilitating
the intermodal system. These intermediaries include: intermodal marketing companies,
brokers, non-vessel owning common carriers (NVOCCs), drayage firms, transload
operations, and foreign trade zones (FTZs).
Intermodal Marketing Companies (IMCs)
An intermodal marketing company, or IMC, is a third-party intermediary that arranges for
the movement of its customers’ intermodal freight in containers and trailers. The IMC’s
customer is typically the end-user such as Wal-Mart or Home Depot. The IMC also
maintains contracts with the railroads to provide for the long-haul transportation of the
shipment and drayage companies to arrange for the local pickup and delivery of the
same shipment. In addition to negotiating rail and drayage rates on behalf of its
customers, an IMC tracks shipments in transit, consolidates billing, and handles claims
for its freight loss or damage on behalf of its customers.
40
Intermodal Transportation and the North Texas Region
The IMCs reduce the marketing and other transactions the railroads would have to
perform to attract intermodal freight. As a result, the railroads prefer to do business with
only IMCs or very large intermodal customers such as UPS, JB Hunt or the large ocean
shipping lines. Smaller shippers approaching the railroads about transporting
intermodal shipments will be referred to an IMC.
The large trucking companies perform intermodal marketing company, or IMC, activities
in addition to moving their intermodal containers and trailers by rail. JB Hunt, which is a
trucking company, is also the largest IMC in the United States (Figure 35). Companies
such as the Hub Group and Pacer International may own containers, but they are not
also considered to be motor carriers. The overall IMC market is about $10 billion in
size.
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Company
J.B. Hunt Intermodal
Hub Group
Pacer International Inc.
Swift Transportation
California Cartage Co.
Evans Network of Cos.
Bridge Terminal Transport
IMC Companies
RoadOne Intermodal Logistic
Quality Distribution Inc.
Universal Truckload Services
TransX
Marten Transport
Landstar System
Dart Intermodal
Celadon Trucking Services
Total
2013
$3,456,000
2,150,786
759,100
350,093
318,000
310,000
218,244
202,404
175,000
140,638
131,400
95,951
92,513
73,820
43,620
37,960
$8,555,529
2012
% Change
S3,071,000
12.5
2,042,286
5.3
1,179,600
-35.6
333,938
4.8
311,000
2.3
275,000
12.7
207,347
5.3
177,650
13.9
175,000
0.0
130,576
7.7
120,381
9.2
74,790
28.3
71,324
29.7
73,932
-0.2
52,400
-16.8
23,145
64.0
$8,319,369
2.8
Figure 35 IMC Market Share (note: does not include privately held firms such as Schneider National) 15
Brokers
Transportation brokers, such as NT Logistics, have entered the intermodal market as a
means to provide additional value to their clients. Although most are non-asset based,
some brokers such as CH Robinson have invested in containers to provide more rail
carrier options. Through their relationships, brokers obtain intermodal services for their
clients. They can purchase intermodal transport at “wholesale”, sell at “retail”, and use
the margin to cover the cost of providing the service and earn a profit. Intermodal
provides an option for brokers to reduce their clients’ transportation costs while
providing nearly the same level of service. As intermodal networks expand, railroads
15
Transport Topics, Top For Hire Carriers
Intermodal Transportation and the North Texas Region
41
market to the broker community as a means to access a wider range of shippers and to
fill existing intermodal capacity.
Two options exist for brokers to handle intermodal shipments: door-to-door and rampto-ramp. For door-to-door, brokers can work directly with the railroads, through IMCs,
or trucking companies with intermodal operations. With door-to-door, the broker obtains
a single quote and does not arrange the inbound or outbound drayage. Ramp-to-ramp
differs in the broker deals with the rail carrier and arranges the dray portions of the
movement. These moves require more sophisticated information systems for the broker
to coordinate, price, and pay for three separate moves. In addition, the broker must
develop a network of dray firms both on the pick-up and delivery sides of the intermodal
move. The choice between these options depends on whether the broker has the ability
to arrange the dray and how the margins work.
Shippers are now asking their brokers to quote both all truck as well as intermodal.
Brokers capable of making the investment in systems and a network of providers can
achieve a competitive advantage by being responsive to shipper requests. Brokers can
create considerable value for shippers, especially mid-tier shippers lacking sufficient inhouse logistics expertise, without the ability to leverage their transportation spend, or
possessing sufficient information systems. In addition, brokers are often in a better
position to better assess whether intermodal presents a viable option based on the
traffic lane, carriers involved, pricing, length of haul, and the length of the dray.
International Freight Forwarders
International freight forwarders perform functions similar to brokers. They operate as an
agent for the cargo owner to manage the transportation of the freight from origin to final
destination. They maintain relationships with carriers and other intermediaries. They
maintain contracts with carriers for cargo pick-up, transfer to a ship or plane, port and
mode transfer, and final delivery. They often assist the shipper in preparing the
documentation required for import or export. Some forwarders may own pick-up or
delivery terminals and provide local pick-up and delivery service.
Forwarders do not issue a bill of lading, or contract of carriage, for the ocean portion of
the shipment. As a result, the forwarder isn’t liable for damage for the ocean movement
or where it has contracted for transportation. The forwarder’s liabilities extend over
possible errors on their part like incorrect or incomplete documentation. 16
Non-Vessel Operating Common Carrier (NVOCC)
An NVOCC is an ocean carrier which does not own or operate vessels. They are often
referred to as non-vessel owning common carriers, or outside the United States as nonvessel owning carriers. In some respects, they operate similar to a forwarder or a
16
“Difference Between Freight Forwarder and NVOCC,”
http://www.differencebetween.net/business/difference-between-freight-forwarder-and-nvocc/, accessed
June 27, 2014
42
Intermodal Transportation and the North Texas Region
domestic less-than-truckload company. They accept less than container load (LCL)
shipments and consolidate them into full containers. NVOCCs may own or lease the
containers. They contract with ocean carriers for container slots aboard containerships.
The NVOCC issues the bill of lading [contract for carriage] and is liable for damage.
NVOCCs may operate a network of terminals and pick-up and delivery networks to
support container moves. They may also contract with other transportation agents,
such as drayage firms, to serve areas where they may not have a terminal.
Three important differences between a forwarder and an NVOCC include: 17
1. An NVOCC acts as a carrier while a forwarder does not;
2. An NVOCC issues a bill of lading, and a forwarder does not;
3. An NVOCC is responsible for damage whereas a forwarder is not.
Drayage
Figure 36 Drayage of Containers
The motor carrier portion of the intermodal movement is frequently referred to as
drayage. Trucks typically move the containers a short distance to and from seaports or
inland ports to the final destination (Figure 36). Many trucking firms have specialized in
the drayage industry; however, larger carriers such as JB Hunt have entered this
industry and move their own containers. In the past, drayage companies were relatively
small, and the industry was very fragmented. More recently, consolidation has been
taking place with larger drayage firms purchasing smaller companies to offer nationwide
service. Due to the short distances and the picking up and dropping off of containers,
drayage services are relatively expensive. Drayage usually does not occur more than
250 miles from an intermodal hub due to the expense.
17
“Difference Between Freight Forwarder and NVOCC,”
http://www.differencebetween.net/business/difference-between-freight-forwarder-and-nvocc/, accessed
June 27, 2014
Intermodal Transportation and the North Texas Region
43
Transloading
Transloading has greatly facilitated the development of inland ports. Transloading
concerns the transshipment of loads from truck to rail and vice-versa (Figure 37). It is
done to exploit the respective advantages of trucking and rail, namely avoid long
distance trucking.
Figure 37 Transloading--Conversion of Containers to Trailers
A producer relying on long distance trucking to service a set of customers is facing
many difficulties. The most significant one is the likeliness of empty travel for return
trips in addition to the requirement of having a large fleet of trucks to insure a service
frequency. By relying on transloading, the producer can ship its freight to a nearby rail
terminal where truckloads are transshipped into trainloads. The larger loads are then
shipped to a rail terminal in close proximity, say within 150 to 200 miles, of a group of
customers.
A vast array of value added activities has also emerged at transloading facilities
depending on the type of commodities, such as storage, blending, packaging,
consolidated invoicing, combined product shipments, bar-coding and labeling.
Transloading has increased in popularity for another reason. Most international
shipping containers have a 40 foot length. Motor carriers can operate 53 foot trailers in
all 50 states. As a result, the use of 40 foot containers decreases motor carrier
productivity and increases costs. Many shippers use transloading as a means to
reduce the costs associated with motor carriers. The contents of four 40 foot containers
can be unloaded and loaded back into only three 53 foot trailers. Transloading
eliminates the need to use one drayage truck to move goods to their final destination.
This process also allows shippers to take advantage of intermodal rail and further
reduce their overall transportation costs.
44
Intermodal Transportation and the North Texas Region
Foreign Trade Zones
Many shippers route their containers through intermodal hubs located in a foreign trade
zone (FTZ) to take advantage of their unique capabilities An FTZ is an area within the
United States, in or near a U.S. Customs port of entry, where foreign and domestic
merchandise is considered to be outside the country, or at least, outside of U.S.
Customs territory. Certain types of merchandise can be imported into an FTZ without
going through formal Customs entry procedures or paying import duties. Customs
duties and excise taxes are due only at the time of transfer from the FTZ for U.S.
consumption. If the merchandise never enters the U.S. (for example exported from the
FTZ to a location outside the U.S., then no duties or taxes are paid on those items. 18
Foreign trade zones provide several benefits including: 19
•
Deferral of Duties. Customs duties are paid only when and if merchandise is
transferred from within the FTZ into U.S. Customs and Border Protection
territory. Shippers can store the merchandise in the FTZ until needed or a sale
has occurred. The duty can then be paid as the merchandise is withdrawn.
•
Reduction of Duties. Shippers may sometimes be able to reduce the duty paid
on their merchandise by processing it through an FTZ. In some instances, the
conversion of an unfinished product(s) into a finished product within the FTZ may
result in a lower duty rate being applied to the finished good.
•
Elimination of Duties. Shippers re-exporting merchandise can eliminate paying
duty by conducting their operations within the FTZ. The use of an FTZ eliminates
the requirement to file for a duty drawback.
•
Labor, Overhead and Profit. Companies conducting production operations in an
FTZ have the ability to reduce the costs of processing or fabrication, general
expenses and profit in the duty calculation.
•
Taxes. Shippers can avoid state and local ad valorem taxes by storing imported
merchandise, or merchandise produced in the US for export, in an FTZ.
•
Quotas. Quota restrictions do not apply to merchandise admitted to an FTZ.
However, quotas will apply when the merchandise leaves the FTZ and enters the
U.S.
18 National Association of Foreign Trade Zones, “Foreign Trade Zones Explained,”
http://www.naftz.org/issues/foreign-trade-zones-explained/, accessed June 29, 2014
19 National Association of Foreign Trade Zones, “Benefits of Foreign Trade Zones,”
http://www.naftz.org/issues/the-benefits-of-foreign-trade-zones/, accessed June 29, 2014
Intermodal Transportation and the North Texas Region
45
Foreign trade zones can provide a significant advantage in the form of cost savings. US
customs charges a process fee of .21 percent for all merchandise entering the United
States with a minimum of 25 dollars or maximum of 485 dollars per entry. Firms located
in a FTZ can achieve considerable savings through the weekly entry program. 20
Customs allows these firms to process multiple shipments under one entry per week.
They just need to project what will be shipped and provide a summary of the actual
shipment when paying the processing fee.
A comparison between a non-FTZ and a FTZ-user can demonstrate the magnitude of
the potential savings. Assume a large shipper making ten shipments per week with
$230,952. The non-FTZ user would pay $485 per shipment on each of the ten
shipments. Over the course of a year, the non-FTZ user would pay a total of $252,000.
However, the FTZ user would pay the fee only once per week. Over the course of a
year, the FTZ user would pay $485 each week, or $25,200. The annual savings would
be $226,980. For larger shippers, the decision to locate in an FTZ can provide
considerable savings. As a result, many large international shippers choose locations
that offer an FTZ.
Inland Ports and Intermodal Hubs
The use of intermodal transportation, containers, and land bridges has resulted in the
concept of an “inland port.” An inland port is a specialized logistics hub developed to
support the efficient interchange between modes and the onward movement of freight.
These locations are typically built around an intermodal rail hub or inland barge terminal
that is linked to a major maritime port with regular inbound transportation services. 21
Inland ports are part of a highly integrated transportation network to efficiently access to
inland consumption points and handle inbound and outbound traffic from the region. To
support this high volume of freight traffic, a large number of logistical activities are
typically concentrated within an inland port including distribution centers, foreign trade
zones, transload facilities, public and bonded warehousing, drayage, motor carrier
terminals, postponement and other value-added services.
Inland Port: Key Attributes
Inland ports share several key attributes. They offer low inland rates usually by
intermodal rail. The inland port offers the ability to transfer from one mode to another.
This transfer requires considerable space for the storage and staging of containers.
Infrastructure is required to support the follow-on domestic movement to the final
destination. To accommodate international shipping, these facilities usually offer FTZs
and provide customs clearance. Due to the large investment and collaboration with
government organizations, inland ports usually are a private-public partnership.
20
Foreign Trade Zone Resource Center, “Why Companies Use Foreign Trade Zones,” http://www.foreigntrade-zone.com/benefits.htm, accessed June 29, 2014.
21 Source: Rodrigue, J-P et al. (2009) The Geography of Transport Systems, Hofstra University,
Department of Global Studies & Geography, http://people.hofstra.edu/geotrans
46
Intermodal Transportation and the North Texas Region
Figure 38 Inland Port Connections 22
Location of Inland Ports
The location of inland ports is highly dependent on transportation access and proximity
to major consumption points (Figure 38). Inland ports require connection to a major
maritime port, and typically an intermodal rail hub or inland water terminal is the
connection. To facilitate the transfer to other modes, highway connections or outbound
domestic rail must be present. Air freight connections enable some inland hubs to take
advantage of postponement and customization strategies for high value goods and to
provide next or same-day delivery throughout North America. Close proximity to major
metropolitan areas is also required to reduce expensive “last mile” deliveries to retailers
or the end-user (Figure 39).
Infrastructure Requirements
An inland port requires an extensive investment infrastructure. The development of
intermodal rail facilities have ranged between $68 and $370 million depending on the
region and number of planned container lifts. 23 Infrastructure is driven by the required
capability to receive large volumes of containers, simultaneously accommodate multiple
inbound and outbound container trains, temporarily stage tens of thousands of
containers, and transfer to outbound containers. For example, the BNSF intermodal
facility in AllianceTexas receives twelve to sixteen double stack intermodal trains daily. 24
22
Jones Lang LaSalle, “Growing US Exports Will Drive Inland Ports,” Summer 2012
Stifel Transportation Research, “How Far Can Intermodal Grow? Conference Call Featuring Jason
Kuehn, June 25, 2014.
24 Hillwood A Perot Company, “Alliance Global Logistics Hub,” http://www.alliancetexas.com/Portals/0/
PDF/Alliance_Global_Logistics_Hub_Brochure.pdf, accessed June 28, 2014
23
Intermodal Transportation and the North Texas Region
47
Each double stack train averages about 200 containers. The combined inbound and
outbound daily flow would require 4,800 truck moves each day. To accommodate the
transfer, inland ports require significant investments in rail sidings, container cranes,
hostlers and container handling equipment, switching locomotives, intermodal rail cars,
intermodal truck chassis, and sufficient space to stage the containers. To manage the
flow, sophisticated information technology as well as security is required.
Figure 39 Inland Port Flow
Effect on Economic Development
Inland ports often serve as a catalyst for economic activity. Shipper position their DCs
close to these inland ports to have access to the low-cost inbound flow of product and to
shorten the outbound trucking segment. Third-party logistics providers may offer similar
logistics services as well as value-added assembly or product customization.
Manufacturers are frequently attracted to inland port locations to obtain increased
transportation access and the density of supplier and customer distribution centers in
the area. The concentration of distribution and manufacturing activity creates
employment opportunities for the surrounding community, and these positions tend to
be relatively resilient to changes in the economy.
Railroads and Intermodal Hubs/Inland Ports
The railroads have invested heavily in developing their intermodal network. The
Western railroads directly compete with ocean shipping that can move through the
Panama Canal, and they have developed intermodal routes that can deliver freight
faster and more reliably than a longer water route. In addition to improving their
infrastructure to provide faster and more dependable service, the railroads have
constructed intermodal hubs or inland ports.
These intermodal hubs are major collection or dispersal points for containers and
trailers. For example, the Dallas – Fort Worth area has five intermodal hubs (Figure
41). International containers arriving from the west coast are unloaded in the area and
48
Intermodal Transportation and the North Texas Region
drayed to their final destination. Also, domestic shipments arrive and depart from
Dallas-Fort Worth to other major markets in North America.
Figure 40 Intermodal Hubs in the North Texas Region 25
Union Pacific Railroad
The Union Pacific Railroad provides intermodal service to the western United States
and the North Texas region (Figure 42). Intermodal accounted for 20% of revenues, or
approximately $4 billion. The Union Pacific moved 3,812,795 container rail cars and
214,925 intermodal trailers in 2014. 26
Figure 41 Union Pacific Intermodal Network 27
25 State of Texas, Office of the Governor, Economic Development and Tourism Business Research,
Texas Logistics Hub of the Americas 2013, page 7
26 Union Pacific Corporation, Weekly Carloads and Intermodal Traffic Report, Week 53, 2014.
27 Union Pacific Railroad, “Intermodal Facilities Map,”
https://www.uprr.com/customers/intermodal/intmap/index.shtml, accessed June 29, 2014
Intermodal Transportation and the North Texas Region
49
Figure 42 Union Pacific Intermodal Facility Near Wilmer, Texas 28
The Union Pacific operates a state-of-the-art 360 acre intermodal facility (Figure 43)
constructed at a cost of $100 million and located in the International Inland Port of
Dallas (IIPOD). The facility has a capacity of 360,000 container lifts per year. The
containers arriving at the Union Pacific yard in South Dallas come primarily from the
West coast; however, container service has been provided from the Port of Houston on
a limited basis. The Union Pacific intermodal hub anchors the IIPOD and has
generated economic expansion in the South Dallas area. The Union Pacific also
operates a domestic intermodal yard in Mesquite that provides domestic container and
trailer on flatcar service within the United States and North America. The Dallas and
Mesquite facilities are two of the ten largest Union Pacific intermodal facilities and lifted
310,000 and 238,000 containers respectively in 2013.
BNSF Railroad
The BNSF is the largest intermodal rail carrier in the world. In 2014, the BNSF moved
4,352,274 container rail cars and 637,254 trailers. 29 Intermodal represented 47.9
percent of the rail cars moving on BNSF in 2014. Intermodal constitutes the bulk of
revenue generated in BNSF’s Consumer Products Division which had revenues of $7
billion in 2014. 30 Overall, intermodal represents 32.47 percent of BNSF’s rail revenue.
28 Union Pacific Corporation, “Intermodal Facilities Maps, Dallas – Mesquite, TX,”
https://www.uprr.com/customers/intermodal/intmap/dallasup.shtml, accessed June 29, 2014
29 BNSF Railway, “Weekly Intermodal and Carload Units Report Week 53,” Week Ending January 3,
2015.
30 BNSF, 2015 10K, page 9.
50
Intermodal Transportation and the North Texas Region
Figure 43 BNSF Intermodal Network 31
Figure 44 BNSF Intermodal Facility at AllianceTexas 32
31
BNSF, “Intermodal Map,” http://www.bnsf.com/customers/pdf/maps/intermodal-map-large.pdf,
accessed June 29, 2014
32 Source: Hillwood Properties
Intermodal Transportation and the North Texas Region
51
The BNSF Alliance intermodal facility anchors North America’s model inland port, the
Alliance Global Logistics Hub in North Fort Worth, Texas (Figure 44). The facility has
the capability to lift over one million containers per year. This facility currently lifts over
600,000 containers per year. International containers arrive mostly from the West
Coast; however, the facility also handles domestic containers which account for
approximately 60 percent of the volume. 33 Twelve to sixteen intermodal trains arrive at
the facility daily. 34 Many companies such as JC Penney have located at AllianceTexas
due to the ability to access intermodal transportation at this facility. The intermodal
facility supports an auto processing facility. In addition to the intermodal facility, BNSF
also operates a manifest rail yard at the same location.
Kansas City Southern Railway
The Kansas City Southern Railway (KCS) is one of three Class 1 railroads providing
intermodal service to the North Texas region (Figure 45). In 2014, the KCS moved
1,019,600 intermodal carloads or 44.8 percent of the total units moved. Revenues from
intermodal operations were $395.8 million or 15.9 percent of total revenue from rail
operations. 35
The KCS currently operates an intermodal hub in Dallas, however, groundbreaking for a
new facility recently took place in Wylie, TX. The current Dallas facility has a planned
annual capacity of 168,000 container lifts per year, but actual volumes have regularly
exceeded capacity. The new facility will be comprised of two 5,000 foot intermodal
tracks, 1,500 parking spaces, and a state-of-the-art information systems including
biometric driver identification. The Wylie facility will have a capacity of 264,000
container lifts per year.
33
The contents of many domestic containers may be international freight transloaded at a maritime port.
Source: Hillwood Properties, “Alliance Global Logistics Hub”
35 Kansas City Southern Corporation, 2014 Annual Report.
34
52
Intermodal Transportation and the North Texas Region
Figure 45 Kansas City Southern Railway Network 36
Inland Ports in the North Texas Region
The Dallas-Fort Worth area has benefitted from the presence of two major inland ports
and five intermodal hubs. The Alliance Global Logistics Hub located between Fort
Worth and Denton along interstate 35W is considered to be the premier inland port in
the world. The International Inland Port of Dallas (IIPOD) is also rapidly emerging as a
major distribution hub in the region and North America.
Alliance Global Logistics Hub
The Alliance Global Logistics Hub is located within the 17,000 acre AllianceTexas
development. Several features make this logistics hub unique among inland ports
across the globe. First, two Class 1 railroads provide service to this location. The
BNSF Alliance Intermodal Facility anchors the inland hub. With over 600,000 lifts
annually and a capacity of 1,000,000 lifts, this inland port rivals the volume of container
lifts of several U.S. maritime ports. Twelve to sixteen double-stack intermodal trains
36
Kansas City Southern Corporation, 2013 Annual Report, p. 21.
Intermodal Transportation and the North Texas Region
53
arrive and depart daily and provide regular access throughout the US and to the West
Coast. The Union Pacific Railroad provides manifest rail service along the eastern
portion of the logistics hub. Second, the Alliance Global Logistics Hub is home to
Alliance Fort Worth Airport, the world’s first 100 percent industrial airport which provides
air cargo, corporate and military aviation services. The airport supports the Southwest
FedEx Regional Sort Hub. Third, Foreign Trade Zone #196 encompasses 9,600 acres
of the inland port, and this FTZ has been the number one general purpose FTZ in the
United States for four years (2006-2008, 2010). Fourth, the logistics hub has onsite US
Customs and Border Protection staff and an on-site centralized examination station.
Fifth, the inland port is adjacent to Interstate 35W with direct access to the Dallas – Fort
Worth metroplex and connections to Interstates 20, 30, and 45. Sixth, twenty-two third
party logistics firms and freight forwarders are located within the logistics hub.
The Alliance Global Logistics Hub represents an $8 billion investment in development of
an inland port and related infrastructure and supporting facilities. This investment has
generated an economic impact exceeding $55 billion. Access to intermodal
transportation and logistics activities within the inland port has resulted in the
development of 34 million square feet of development and attracted a total of 303
corporate residents and 61 Fortune 500 companies, and created employment for more
than 40,000 people. Examples of firms with distribution-related operations at this
location include: Amazon.com, Wal-Mart.com, Kraft, Martin Brower, LG Electronics,
Nestle, Ford, General Mills, Behr Paint, UPS, JC Penney, Lego, Grainger, Bridgestone
Firestone, Genco ATC, DynCorp, FedEx, UPS, BNSF, DB Schenker, DSC Logistics,
Exel, Ryder, Trans-Trade, Bell Helicopter, General Motors, Amerisource Bergen,
Cardinal Health, McKesson, Callaway Golf, Coca-Cola, Lego, Michaels, Hyundai,
Volkswagen Audi, Nokia Siemens, Williamson-Dickie, and Texas Instruments.
The economic impact of the Alliance Global Logistics Hub extends beyond logistical
activities. Fidelity Investments, TD Auto Finance, and Deloitte University have located in
areas within the AllianceTexas development. Residential development has occurred to
support the workforce and local population including upscale homes and 3,500
multifamily residential units under construction or planned. To support the workforce
required to support operations in the inland port, The AllianceTexas development
includes a 500 acre community retail center with retail anchors including Belk, Best Buy,
JC Penney, Hobby Lobby, Sam Moon, Petsmart, and Cinemark. Medical facilities have
followed this growth with a 262,000 square foot Texas Health Resources Harris
Methodist Hospital, a 29,000 square foot Parkway Surgical and Cardiovascular
Hospital, and a 10,500 square foot ER at AllianceTexas.
International Inland Port of Dallas
The IIPOD in South Dallas represents one of the nation’s newest logistics hubs. The
IIPOD is a public-private partnership and is a coordinated effort partnering communities
and developers. The IIPOD is planned to serve as a catalyst for investment, job growth
and development of sustainable communities in South Dallas County.
54
Intermodal Transportation and the North Texas Region
Figure 46 Map of International Inland Port of Dallas 37
The impact area for IIPOD encompasses more than 7,000 acres and six municipalities,
including Dallas County (Figure 46). More than 12 million square feet of industrial real
estate space has been built or is currently under construction with just over 10 million
square feet leased.
37
City of Dallas, Office of Economic Development, http://www.dallas-ecodev.org/redevelopment/iipod/,
accessed June 29, 2014
Intermodal Transportation and the North Texas Region
55
Figure 47 Companies in the IIPOD area 38
The location and intermodal capabilities associated with IIPOD have attracted several
companies to the region (Figure 47). Among these companies include Ace Hardware,
American Standard, BMW, Home Depot, Kohl’s, L’Oreal, Mars Pet Foods, Owens
Corning, Quaker Oats, Unilever, and Whirlpool
Intermodal Transportation and the North Texas Region
The North Texas region has historically served as a major logistics hub, and the
presence of five intermodal facilities has enabled the region to become one of the
world’s major global logistics hubs. The region is currently the largest inland port in the
United States not located on a border or major waterway. Over $77 billion cleared the
DFW customs district in 2014 (Figure 48). The region has over 730 million square feet
in industrial space and ranks third after Chicago and Los Angeles in terms of distribution
space. Intermodal transportation plays a key role in making North Texas a major trade
center.
38
City of Dallas, Office of Economic Development, http://www.dallas-ecodev.org/redevelopment/iipod/,
accessed June 29, 2014
56
Intermodal Transportation and the North Texas Region
The North Texas region possesses the major attributes required to be a global logistics
hub. Yossi Sheffi in his book Logistics Clusters identifies these attributes and
recognized North Texas as one of the world’s global logistics clusters. The following
paragraphs describe how North Texas fulfills each of these attributes.
Country
China
Korea, South
Canada
Japan
Malaysia
United Kingdom
Germany
Taiwan
France
Thailand
Mexico
Netherlands
Philippines
India
Belgium
Uruguay
Israel
Vietnam
Hong Kong
Switzerland
World Total
Imports
$ 27,264,278,139.00
$ 5,280,276,652.00
$ 4,972,157,829.00
$ 2,717,938,101.00
$ 2,143,260,693.00
$ 1,699,764,232.00
$
856,722,256.00
$ 1,528,906,957.00
$ 1,034,779,395.00
$ 1,377,279,029.00
$
777,904,375.00
$
455,812,650.00
$
212,083,150.00
$
636,719,132.00
$
138,337,671.00
$
2,385,707.00
$
746,390,027.00
$
748,933,808.00
$
141,980,055.00
$
639,777,170.00
$ 56,758,498,521.00
Exports
$ 1,352,260,473.00
$ 3,681,017,254.00
$
136,590,481.00
$ 1,599,468,493.00
$
886,135,762.00
$
379,453,742.00
$
962,922,276.00
$
67,229.00
$
366,143,276.00
$
6,431,302.00
$
566,619,845.00
$
760,194,742.00
$
761,864,295.00
$
243,403,256.00
$
713,610,404.00
$
799,390,102.00
$
41,275,199.00
$
821,484.00
$
568,056,796.00
$
24,994,140.00
$ 20,613,827,336.00
Total
$ 28,616,538,612.00
$ 8,961,293,906.00
$ 5,108,748,310.00
$ 4,317,406,594.00
$ 3,029,396,455.00
$ 2,079,217,974.00
$ 1,819,644,532.00
$ 1,528,974,186.00
$ 1,400,922,671.00
$ 1,383,710,331.00
$ 1,344,524,220.00
$ 1,216,007,392.00
$
973,947,445.00
$
880,122,388.00
$
851,948,075.00
$
801,775,809.00
$
787,665,226.00
$
749,755,292.00
$
710,036,851.00
$
664,771,310.00
$ 77,372,325,857.00
Figure 48 DFW 2014 Imports/Exports by Country
Strategic Location
The North Texas region has historically held a strategic position from a logistics
perspective. Dallas initially became a trade post because the location provided a good
place to ford the Trinity River. The Republic of Texas proposed two highways which
would converge nearby. Later, the key to Dallas’ economic expansion was when the
city secured and became a crossroad for the Houston and Texas Central Railroad and
the Texas and Pacific Railroad. The combination of a strategic location and rail
transportation enabled abundant regional agricultural products to be accumulated at this
location for transport to manufacturing plants in the North and East. 39 Fort Worth’s
strategic location was first recognized by the US Army with the construction of an
outpost fort. The area later became a center for trade and a terminating point for the
Butterfield Stage Coach line. Cattle drives along the Chisholm Trail increased the
39
Texas State Historical Association, “Dallas, Texas,”
http://www.tshaonline.org/handbook/online/articles/hdd01, accessed, June 27, 2014
Intermodal Transportation and the North Texas Region
57
importance of Fort Worth as a center for trade. The local citizens recognized the
importance of transportation and were successful in initially attracting the Texas and
Pacific Railroad and later several additional rail lines. As meat packing plants located in
Fort Worth to take advantage of cattle moving along the Chisolm Trail and rail
transportation, Fort Worth became a livestock shipping center and its future growth was
closely linked to this industry. 40
The continued development of logistics capabilities in Dallas, Fort Worth, and the
surrounding area has led to the region becoming one of the major logistics hubs in
North America, if not the world. The area currently ranks as the sixth largest economy
in the United States (Figure 49) 41 based on gross metropolitan product—larger than
many states and entire countries. Extensive development of transportation
infrastructure and logistics capabilities have supported this growth.
Current-Dollar Gross Domestic Product (GDP) by Metropolitan Area
Millions of dollars
2008
2009
2010
2011
U.S. metropolitan areas
13,269,057
12,994,636
13,461,662
13,953,082
New York-Newark-Jersey City, NY-NJ-PA
1,282,104
1,291,817
1,338,889
1,373,748
Los Angeles-Long Beach-Anaheim, CA
780,046
748,002
757,003
775,823
Chicago-Naperville-Elgin, IL-IN-WI
528,852
518,897
534,001
550,817
Houston-The Woodlands-Sugar Land, TX
417,335
375,438
402,383
447,911
Washington-Arlington-Alexandria, DC-VA-MD-WV
411,023
417,664
435,995
449,440
Dallas-Fort Worth-Arlington, TX
377,321
355,667
377,216
404,175
San Francisco-Oakland-Hayward, CA
343,156
327,531
334,610
347,758
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
344,292
346,536
354,528
362,802
Boston-Cambridge-Newton, MA-NH
317,076
315,377
331,168
343,045
Atlanta-Sandy Springs-Roswell, GA
278,250
272,865
277,282
284,644
Seattle-Tacoma-Bellevue, WA
241,874
240,074
247,902
256,107
Miami-Fort Lauderdale-West Palm Beach, FL
264,076
247,947
250,720
255,779
Minneapolis-St. Paul-Bloomington, MN-WI
196,547
192,686
200,702
211,326
Detroit-Warren-Dearborn, MI
203,304
187,124
199,528
208,600
Phoenix-Mesa-Scottsdale, AZ
193,233
179,998
183,248
192,242
San Diego-Carlsbad, CA
176,616
173,564
175,201
182,676
2012
14,606,938
1,435,294
805,437
575,828
489,186
460,012
432,356
378,188
375,652
358,837
296,300
273,632
269,554
219,706
218,227
203,531
190,940
2013*
15,079,920
1,471,170
826,826
590,248
517,367
463,925
447,574
388,272
383,401
370,769
307,233
284,967
281,076
227,793
224,726
209,523
197,886
2013
Rank*
.......
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Figure 49 Gross Metropolitan Product by Region
The North Texas region has extensive transportation infrastructure to support trade.
Three Class 1 railroads serve the area and operate five intermodal facilities (see Figure
41) providing international and domestic service. 42 These intermodal hubs are
instrumental for the region to serve as an inland port for maritime ports along the West
coast. The region has an extensive highway network including Interstates 20, 30, 35E,
35W, and 45. Multiple airports are located in the area with DFW serving as an
economic engine for the entire region. DFW airport ranks third in passenger traffic and
eleventh in air freight (Figure 50). American Airlines is headquartered at DFW. Love
Field provides passenger and cargo service throughout the US and Caribbean.
Southwest Airlines has its headquarters at Love Field. Alliance Fort Worth (AFW)
airport is the country’s first airport designed to support industrial operations. FedEx has
40 City of Fort Worth, Texas, “Fort Worth History,”
http://fortworthtexas.gov/government/info/default.aspx?id=3252, accessed June 27, 2014
41 US Department of Commerce, Bureau of Economic Analysis,
http://www.bea.gov/newsreleases/regional/gdp_metro/gdp_metro_newsrelease.htm
42 Office of the Governor of Texas (2012), Texas Logistics Hub of the Americas
58
Intermodal Transportation and the North Texas Region
a major sort facility at AFW, and several carriers provide charter freight services from
this location.
World
NAM
Ranking Ranking
City
2
1
Memphis TN
6
2
Anchorage AK
7
3
Louisville KY
11
4
Miami FL
14
5
Los Angeles CA
19
6
New York NY
21
7
Chicago IL
22
8
Indianapolis IN
33
9
Newark NJ
37
10
Atlanta GA
39
11
Dallas/Fort Worth TX
40
12
Cincinnati OH
44
13
Oakland CA
49
14
Houston TX
50
15
Ontario CA
52
16
Toronto ON
53
17
Honolulu
56
18
Philadelphia PA
61
19
San Francisco CA
72
20
Seattle WA
State/
Province
TN
AK
KY
FL
CA
NY
IL
IN
NJ
GA
TX
KY
CA
TX
CA
ON
HI
PA
CA
WA
Country
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Canada
USA
USA
USA
USA
Apt
Memphis Int'l Apt
Ted Stevens Anchorage Int'l Apt *
Louisville Int'l Apt
Miami Int'l Apt
Los Angeles Int'l Apt
John F. Kennedy Int'l Apt
O'Hare Int'l Apt
Indianapolis Int'l Apt
Newark Liberty Int'l Apt
Hartsfield-Jackson Atlanta Int'l Apt
Dallas/Ft Worth Int'l Apt
Cincinnati/Northern Kentucky Int'l Apt
Oakland Int'l Apt
George Bush Intercontinental Apt
LA/Ontario Int'l Apt
Toronto Pearson Int'l Apt
Honolulu Int'l Apt
Philadelphia Int'l Apt
San Francisco Int'l Apt
Seattle-Tacoma Int'l Apt
Total cargo Total cargo
2013
2012
% Change
4,137,801 4,015,997
3%
2,421,145 2,463,696
-2%
2,216,079 2,168,365
2%
1,945,012 1,929,889
1%
1,747,284 1,780,998
-2%
1,295,473 1,285,737
1%
1,228,791 1,254,183
-2%
991,307
922,414
7%
652,559
748,284
-13%
616,365
655,123
-6%
591,639
602,658
-2%
590,630
538,674
10%
484,092
481,280
1%
426,805
438,375
-3%
417,790
412,661
1%
414,263
417,022
-1%
412,807
412,270
0%
380,068
388,930
-2%
363,793
380,791
-4%
292,709
283,610
3%
Figure 50 DFW Air Cargo Volume (tons) 43
The flow of goods through the area has made the region a major distribution center.
For example, over 60 Fortune 500 companies have located in the Global Logistics Hub
at AllianceTexas. The region has over 710 million square feet of industrial space which
ranks third in the United States (Figure 51). 44
Figure 51 US Industrial Real Estate Markets
Geography
The North Texas region offers a central location for supporting logistics operations. The
distance from the West coast makes intermodal an attractive option. Intermodal is both
43
Airports International Council—North America, http://www.aci-na.org/content/airport-traffic-reports
accessed October 19, 2014
44 CBRE, US Industrial Marketview, Q4 2014
Intermodal Transportation and the North Texas Region
59
less expensive and faster than single-driver OTR trucking. Goods arriving from the
West coast can be distributed to 85% of the US population within a two-day or less drive
time (Figure 52). With the exceptions of the extreme Northeast or Northwest,
distribution centers co-located near the region’s intermodal hubs can reasonably serve
the continental US.
Figure 52 Truck Drive Time from North Texas
The region’s geographic location provides an advantageous position for companies
importing or exporting goods to Mexico, the United States’ third largest trading partner.
Interstate 35 serves as a major highway in the NAFTA corridor, and a large amount of
NAFTA trade passes through the area. Goods imported from Mexico can be stored,
merged in-transit, or have value-added or customization performed in the area before
redistribution throughout North America. The region has similar benefits when importing
or exporting to Latin and South America through DFW airport and the Port of Houston.
A unique feature of the region is that sufficient room exists for substantial growth. The
AllianceTexas industrial development is only 40 percent built out and additional open
space is available to the north along I-35W and I-35. This area has benefitted from the
close proximity to the BNSF intermodal hub which has additional space and capacity to
grow. The South Dallas area has only begun to be tapped as a major site for industrial
development with considerable space available adjacent to the Union Pacific intermodal
hub and interstates 35, 45 and 20. DFW and AFW airports likewise possess
considerable space to support continued development well into the future.
The region’s weather further facilitates trade. North Texas is close enough to the Gulf
to facilitate trade with South America or through the Panama Canal, but the area is far
enough away to greatly diminish the possibility of hurricane damage. With few
exceptions, transportation and distribution operations are not impeded by weather
conditions.
60
Intermodal Transportation and the North Texas Region
Proximity to Major Consumption Area
The logistics activities located in the North Texas region benefit from being adjacent or
close to several major consumption areas. The region has the sixth largest
metropolitan area in terms of GMP (see Figure 49) but is within a few hours of HoustonGalveston, the fifth largest metropolitan area. Several of the fastest growing cites in the
country are within the region or close by including Houston (#2), San Antonio (#4)
Austin (#6), Dallas (#10), and Fort Worth (#14). 45 Other major areas within a relatively
short distance are Oklahoma City, Tulsa, and Shreveport.
High Density of Freight Volumes
High volumes of freight moving into and out of an area ensure lower rates and improved
market accessibility. In terms of freight tonnage moved, North Texas ranks sixth (Figure
53). For example, approximately 50 air carriers call on DFW airport which has allowed
250 air freight forwarders in the region to have access to the destinations served by
these carriers. Freight can often be moved in the “belly” of these aircraft. With the high
frequency of flights, high priority cargo can, in many instances, have same-day delivery.
Intermodal rail arrives six to eight times per day at the BNSF and Union Pacific facilities
from the West coast. Several thousand trucks pick-up or deliver these containers on a
daily basis. These large numbers of carriers generate not only greater accessibility to
other markets, they also stimulate competition and lower rates. For consumers in the
region, these volumes translate into ample availability of goods, a wide array of brands
and product offerings, lower prices, and a lower cost-of-living. For shippers, the
situation is very similar. The availability of carriers and accessibility to domestic and
international markets makes the region very attractive for locating distribution
operations. Shippers prefer to locate their distribution operations in high volume areas
to have access to a larger number of carriers, frequent service, lower rates, and the
ability to access more shipping points.
45
Pushnick-Masti, Rami and Jesse J. Holland (2014), “Census: Texas has 3 of 5 Fastest Growing
Cities,” Colin County Business Press, No. 318, June 2014, p. 14.
Intermodal Transportation and the North Texas Region
61
Figure 53 Freight Tonnage Moved by Metropolitan Area 46
Major Trade Lanes
The North Texas region straddles several major trade lanes (Figures 54 and 55). The
western Class 1 railroads major rail arteries pass through the region. Rail lines
supporting domestic and international intermodal, manifest freight, and NAFTA trade
flow through Dallas and Fort Worth. Trade from Mexico and Canada pass along the I35 corridor. Truck traffic passes east – west along Interstate 20 and north – south along
Interstates 35 and 45. Trade moving by international water reaches the area from the
Far East via maritime ports on the West coast and intermodal rail. Other international
freight flows into the region through the Port of Houston. AFW airport serves the air
cargo lane to and from Anchorage, AK and onto the Far East. DFW airport serves
many global trade routes to major population centers on six continents (Figure 56).
46
The United States Conference of Mayors and Global Insight, US Metro Economies, Lexington, MA, July
2012.
62
Intermodal Transportation and the North Texas Region
Figure 54 Major Trade Lanes Spanning the North Texas Region 47
Figure 55 Major Truck Routes on the National Highway System 48
47
48
Hillwood Properties, “Alliance Global Logistics Hub,” p. 4.
Federal Highway Administration, Freight Facts and Figures, January 2014, page 38.
Intermodal Transportation and the North Texas Region
63
Figure 56 Major Import/Export Lanes Serviced by DFW Airport
Late Stage Customization
Major distribution hubs, such as North Texas, provide excellent locations for late stage
customization of consumer products. Unfinished goods can be moved close to major
consumption areas using less expensive intermodal rail. These products can be
located with other components sourced from Mexico which are needed to produce the
finished product. Storage in an unfinished state results in lower risk and inventory
carrying cost for the manufacturer. When an order is received, the components can be
quickly assembled, customized, or have other value added services performed before
delivery to the end-user. Since the area is located on several major trade lanes with a
large number of carriers offering a high frequency of service, the finished goods can be
quickly transported and delivered to the final destination. The foreign trade zones
(FTZs) in the area further reduce the cost of late stage customization. While in the FTZ,
duties are deferred until entry into the US. In some instances, duty may not be charged
depending on the processes and combination of products occurring within the FTZ.
Companies in an FTZ can further reduce the material processing fee charged by CBP
through the weekly entry program.
64
Intermodal Transportation and the North Texas Region
Attraction of other Industries to the Region
Logistics clusters such as the inland ports in North Texas provide the infrastructure and
transportation capabilities required by many industries. The density of transportation
providers ensures the availability of transport services and competitive rates. A large
number of carriers across multiple modes provide access to a wide range of suppliers
and customers across the globe. The presence of air, motor, and intermodal rail
combined with distribution facilities provide the frequency and speed to support just-intime manufacturing, cross-docking, or other value-adding services. The North Texas
region has attracted several industries such as electronics, telecommunications,
medical devices, aerospace, and automotive. More recently, Amazon has located two
large fulfillment centers in Coppell and in AllianceTexas. These industries have largely
located here due to the availability and frequency of transportation offered by several
modes.
Employment
Transportation and logistics industries provide stable and resilient employment for North
Texas. Logistics activities often cannot be off-shored due to their very nature or to
achieve the lowest landed cost. For example, postponement and customization
operations often must be located near end-markets to keep transportation costs low and
service levels high. Some activities such as the physical movement of goods cannot be
off-shored, and for food and other essentials, transportation must occur regardless of
the state of the economy. The development of logistics hubs can result in a region
replacing manufacturing jobs lost to off-shoring with logistics jobs. The positions
created by logistics increase employment opportunities in a region and provide a
pathway to the middle class. In the case of the rail industry, rail employees in Texas
average over $100,000 in total compensation including benefits. Although not entirely
recession-proof, employment in transportation and logistics tends to be more resilient
during periods of economic downturns than other industries.
Education
Logistics industries are labor intensive and require well-trained and educated individuals
at multiple levels. The North Texas region continues to successfully attract distribution
operations to the area because of the many skilled distribution workers in the region and
the presence of higher education institutions offering logistics and supply chain
management programs.
The Dallas County, Tarrant County, and North Central Texas Community College
Districts offer logistics programs. Some programs are focused on providing skilled
workers and certifications for specific distribution functions; for example, one program
trains and certifies individuals in forklift and distribution operations. These institutions
also offer associate degree programs with several specializing in logistics to support
supervisory or technical positions.
Intermodal Transportation and the North Texas Region
65
The North Texas region can boast of two undergraduate programs which are ranked in
the top 25 in North America. Texas Christian University and the University of North
Texas graduate students with a near perfect placement rate upon graduation. Students
graduating from these programs are highly recruited within the region and by companies
throughout North America. The University of North Texas has incorporated a strong
intermodal focus in the logistics curriculum and is recognized as one of four scholarship
schools by the Intermodal Association of North America. Graduates from the University
of North Texas automatically qualify for the professional certification in transportation
and logistics (CTL) offered by the American Society of Transportation and Logistics
(AST&L).
Summary
Intermodal transportation has experienced tremendous growth since Malcolm McLean
initiated service with the Ideal X. The ability to obtain the lower costs of water transport
with the accessibility of motor carriers quickly made intermodal transportation a
competitive force. Many factors contributed to the growth of intermodalism including
decreased transit times and reduced damage and handling. Standardized containers
and handling equipment produced many of the benefits associated with intermodal
transportation. The reduction in transit times and handling facilitated the expansion of
global trade which further accelerated the acceptance and growth of intermodalism.
The connectivity made possible through intermodal transportation has transformed
North Texas from a regional distribution center to a global logistics hub. North Texas
has become the nation’s largest inland port [not on a border or coastline] with over 1.2
million container or trailer lifts per year, $77 billion of international trade clearing
customs in the region, the third largest industrial market with over 730 million square
feet of distribution space, two inland ports with the Alliance Global Logistics Hub
considered to be the premier facility in the world, three major airports with DFW among
the nation’s and globe’s largest, and the sixth largest economy in the U.S. The trade
flowing through North Texas has attracted logistics providers such as BNSF, the single
largest intermodal provider in the world, but also the distribution operations for hundreds
of companies including many on the Fortune 500. The concentration of economic
activity combined with the capability of intermodal hubs to generate employment
opportunities has led to North Texas becoming one of the fastest growing regions in the
country. Intermodal transportation continues to be the economic engine propelling the
North Texas economy forward.
66
Intermodal Transportation and the North Texas Region