(The following story by Eric Smith appeared on The Daily News website on September 30, 2009.)
MEMPHIS, Tenn. — Most of the logistics and transportation headlines these days revolve around railroads beefing up their operations in Memphis, one of the most significant intermodal centers in the country.
BNSF Railway Co. is completing a $200 million renovation of its intermodal terminal at Lamar Avenue and Shelby Drive.
Canadian National Railway Co. just finished a $100 million overhaul to its Johnston Yard switching facility, which it renamed Harrison Yard after outgoing CEO E. Hunter Harrison.
And Norfolk Southern Corp. soon will begin construction on a massive, $129 million intermodal site in nearby Rossville.
Not only that, but the railroads have been on a public relations kick that touts intermodal transportation – the movement of goods mostly by rail with minimal road movement – as the greenest of them all. Norfolk Southern, for example, brags about taking “a million trucks off the road” by creating a 2,500-mile rail corridor to compete with interstate highways.
Lost among these high-dollar, high-profile news stories is the trucking industry, which often gets labeled as an antiquated, environmentally unfriendly means to transport cargo.
But Dave Huneryager, president of the Tennessee Trucking Association, said the perceived snub toward truckers isn’t as harsh as it appears. If anything, the railroads’ rise should be a boon for truckers.
“The railroads consider trucking companies their biggest customers nowadays, because they’re hauling a lot of their stuff,” he said. “They’re a big part of a trucking company’s operational savings. If they can work that in their operations and still meet their customers’ needs, that’s a good thing.”
Just fine, thanks
Specifically, Huneryager said if a railroad is successful in taking “a million trucks off the road,” that would account for only a fraction of the nation’s truck traffic. Recent statistics show 8.5 million trailers already travel on rail cars each year, which amounts to about 1.3 percent of all the truck traffic in America.
“Say they want to take 25 percent of trailers off the road,” Huneryager said, “they’d have to increase rail capacity by almost 2,000 percent,” which is nearly impossible because of infrastructure constraints.
Placing trailers onto rail cars – or “flat cars” as they’re called – actually helps trucking companies save money because it reduces the overhead of assets and drivers, and it saves fuel.
“You’re not paying a driver, you’re not paying for fuel, you’re not paying to return that piece of equipment if it has to come back empty,” Huneryager said. “It’s somebody else’s piece of equipment when it gets there.”
Mike Bruns, president of Memphis-based Comtrak Logistics, said the increase in intermodal investment by the railroads has been positive for companies like his, which specializes in drayage, or moving containers between intermodal terminals.
In that model, if a cargo container is hauled by Union Pacific Corp. from the West Coast to Marion, Ark., and needs to continue by rail to the East Coast via Norfolk Southern, Comtrak would be contracted to pick up the container at the UP yard and deliver it to the Norfolk Southern yard.
“It’s been that way for a long time, where the economies are such that it’s always been cheaper to ship intermodal, so we’ve always enjoyed that cushion,” Bruns said. “What’s happening lately, over the last five or so years, is that it’s not only cheaper, but they’re becoming more consistent in their service, so that helps.”
Customer’s always right
Bruns said it doesn’t necessarily matter if intermodal is faster or slower than trucking alone, only that it’s consistent in its delivery model. A third benefit, he added, is the green factor. If shippers are choosing a combination of modes – centered on rail – to leave a smaller carbon footprint, then that is a boon for companies like Comtrak.
“I don’t care what reasons you want to ship intermodal – whether they be for consistency, whether they be for cheap and inexpensive or whether they be for green – whatever works, I’ll take it,” Bruns said.
Bruns said the railroads’ intermodal investment here bodes well for trucking companies for two reasons: “One, there will be more efficiencies generally speaking and allow people to try intermodal that otherwise (would) not do it,” he said. “The second reason, for me personally and other drayage companies, is it will allow us greater productivity among our own fleet because they’re newer, they’re more modern and they’re more conducive to driver-friendliness.”
Clifford Lynch is executive vice president for Memphis-based CTSI, a global supply chain technology and services company, and marketing chair for the Greater Memphis Chamber’s Regional Logistics Council. He agreed that railroads increasing their presence and capacity in the Memphis area is generally a positive for local trucking companies.
“The improvement in intermodal service has been a plus for many of the motor carriers, because they’re able to put their trailers on flatcars and move them long distances without having to worry about fuel or a driver,” Lynch said.
He said that for anything fewer than 1,000 miles, or short hauls, shippers are better off using trucks. For example, intermodal still requires trucks to get containers to the originating rail yard and then from the terminating rail yard.
“There’s some messiness to it. It’s not all sweetness,” he said “You’re better off many times to put it on one truck and send it on its way.”
In that regard, trucking remains a viable option for many cargo movements. And, as Huneryager pointed out, the economy and the demands of the customer will determine which mode fares better than the other.
“Ultimately, for trucking or for the railroads,” he said, “it’s the customer who determines what way freight is going to get moved.”