Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
As truckers and railroads mark the 30th anniversary of their freedom from government bondage, they find themselves in a position they and the lawmakers who deregulated both industries in 1980 could have scarcely imagined back then.
Partners.
To be sure, the day has not arrived when both can shake off all the vestiges of their traditional rivalry. Truckers chafe at the notion that railroads could receive federal subsidies to modernize privately owned track and rolling stock. The railroads have no problem boasting about how their operations are more fuel-efficient and environmentally friendly than trucking, a tack that doesn't win the rails many friends among trucking interests, who happen to be their largest customers.
In addition, unless the trucker is tendering freight in very large quantities, it is unlikely to receive more favorable pricing or customized service than any other intermodal customer, according to Thomas Finkbiner, who headed Norfolk Southern Corp.'s intermodal operations in the 1990s and is now executive vice president, sales and marketing for Railex, a provider of refrigerated rail transport, warehousing, and distribution services.
For all the political infighting, however, the two industries are increasingly discovering their respective strengths can be mutually beneficial. Trucks provide railroads with a steady and growing stream of intermodal business, while intermodal helps trucks obtain additional capacity while reducing their operating expenses compared to over-the-road transport. Shippers also gain from increased service options at lower cost and with enhanced environmental benefits.
If there is a loser in this scenario, it might be the truck driver community, which could see reduced work opportunities should more freight that once moved over the road be converted to rail.
A more passionate tango
The rail-truck intermodal tango is not a new dance —UPS Inc., which many would still consider a trucking company, has been for years the railroad industry's largest individual customer. But increasing acceptance of the rails' energy, environmental, and infrastructure advantages, combined with improvements in intermodal reliability and velocity (consultancy FTR Associates today clocks average intermodal train speeds at 33.5 miles per hour, much higher than the historical averages of 30 mph or lower) is sparking more rail-truck intermodal interest than ever before.
Another plus is that trucking firms bring a depth of sales and marketing expertise to the intermodal table that railroads, for the most part, do not have. Larry H. Kaufman, a long-time rail executive, consultant, and writer, says rail management is more comfortable working with its traditional base of captive commodity shippers than with businesses using intermodal service to move merchandise traffic. Given that, rails are happy to let the truckers handle the intermodal marketing, Kaufman says.
Recent events and anecdotes underscore the growing bond between the two modes:
In early November, trucking giant J.B. Hunt Transport Services and Norfolk Southern dramatically expanded their 10-year intermodal relationship in a deal that will cover a swath of the East Coast equivalent to roughly one-third the area of the United States.
Con-way Truckload, Con-way's full-truckload division, will begin intermodal service this year in an agreement involving a major shipper and Eastern railroad on a lane along the Eastern Seaboard. Con-way Truckload would not provide specifics at this writing.
Less-than-truckload (LTL) carrier Averitt Express continues to be actively courted by as many as four railroads eager for Averitt's over-the-road freight that could be converted to intermodal service. Averitt spokesman Brad Brown would say only that the company is "working to establish strategic relationships with the railroads to deliver world-class intermodal options for our customers."
At the same time, the railroads are expanding their domestic intermodal networks in a bid to attract more trucking business. Norfolk Southern has launched a "Crescent Corridor" intermodal initiative with service stretching from New England, northern New Jersey, and Pennsylvania southward to Memphis, Tenn., and New Orleans. As part of the project, the railroad will build new intermodal terminals in Birmingham, Ala.; Memphis; and Greencastle, Pa. The three terminals are set to open in early 2012. Norfolk is also developing the "Patriot Corridor" project with Pan American Railways that will link Boston and Albany, N.Y., with intermodal service.
In the Midwest, the state of Kansas applied in September for $50 million in federal stimulus funds to build a Burlington Northern Santa Fe Railway intermodal facility in Edgerton, near Kansas City. If the state's application is approved, work could begin this year, BNSF said in a statement.
The rails are moving ahead with these initiatives because they understand domestic intermodal is where their future bread is likely to be buttered. In 2009, domestic services accounted for 48 percent of total intermodal volumes, with international accounting for the balance, according to the Intermodal Association of North America (IANA). In 2006, domestic service accounted for only 41 percent of all intermodal traffic, IANA said.
From September to October 2009, domestic container intermodal traffic grew 9 percent, the strongest sequential growth of the year, IANA said. The domestic container segment was the one bright spot in an otherwise dismal 2009 for intermodal and rail traffic.
Given an inch, will they take a mile?
As railroads focus more attention on domestic intermodal, they will likely be asked to perform over shorter lengths of haul than they are accustomed to handling. That could put railroads in direct competition with truckers on regional services that have not only been the trucks' traditional realm but which have been the fastest-growing category of U.S. transportation.
The rails are not there yet. According to FTR data, the average length of haul of a domestic intermodal movement in the third quarter was 1,507 miles, hardly a short stage length.
In the past, rail executives have said they couldn't provide a profitable and cost-effective intermodal service at hauling lengths of less than 900 miles. But thanks to improved service levels and better traffic density that cuts the time a train needs to be held for full loading, rail executives say they can today offer competitive intermodal service between 750 and 1,000 miles, and even as short as 500 to 600 miles.
"Today, 500 to 600 miles is right around the break-even point," says Finkbiner of Railex.
Even some of the truckers are cognizant of the potential for increased competition from the railroads. In its press release announcing the intermodal deal with Norfolk Southern, J.B. Hunt said the service would be "competitive with truckload moves."
Jim Bolander, Norfolk Southern's assistant vice president of intermodal pricing and development, says the railroad's short-haul freight —known within the company as "low cal" freight —posted double-digit annual gains from 2003 through 2008 and even showed modest growth during a difficult 2009. The average length of haul is 500 to 700 miles between intermodal ramps, and 600 to 1,000 miles door to door, according to Bolander.
"This has been our domestic growth story," he says.
Bolander says the railroad is simply going with the customer flow, which today often means regionally based shipping and distribution. "We are not looking to shrink our length of haul. But we are following the freight," he says.
Truckers, for their part, don't seem too concerned. Nor should they be, according to some analysts. Trucks are unencumbered by the need to find railheads, track, or rail ramps. In addition, they have the edge over railroads when it comes to travel distances. Because the foundations of the nation's rail network were laid before 1900 and follow the contours of America's coastal and inland waterways, which were not the shortest distance between two points, the average rail move remains about 20 percent longer than the typical truck move.
Then there is the expense of the dray —the delivery to and from the rail ramps —that can often offset the economic benefits of the rail move itself.
On longer hauls, there is enough revenue mileage for a railroad to incorporate the drayage expense and still provide savings to the shipper and consignee. On shorter distances, however, there is less of a cushion. With fewer rail miles to work with, the high cost of drayage will often make a rail move more expensive than a door-to-door movement by truck, analysts say.
Larry Gross, an analyst for FTR, says the only way railroads can compete with trucks over shorter lengths of haul is if railroads built more local or "secondary" terminals that would allow drayage to be performed within 50 to 60 miles of a shipper's plant or the consignee's dock.
"The more secondary terminals that are established, the greater intermodal's competitiveness at the shorter lengths of haul will be," Gross says.
Given that railroads are far from building out such dense infrastructures, Gross doesn't see much of a competitive threat to trucks from intermodal. "I don't think that truckers operating in the 500- to 750-mile lengths of haul have too much to worry about," he says.
Herb Schmidt, president of Con-way Truckload, agrees, saying that "short-haul on rail is trying to stick a square peg in a round hole." And Curtis Whalen, executive director of the American Trucking Associations' Intermodal Motor Carriers Conference, says he's not worried about where his members' next load is coming from, especially as a truck must be a part of every intermodal move. "Our guys will keep pretty busy," he says.
Observers like Finkbiner of Railex believe a spike in diesel fuel prices similar to what occurred in 2008 could shift the balance in favor of rails even at shorter lengths of haul. Gross insists, however, that the most important factor is "not the price of the fuel but the footprint of the rail intermodal network."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.