A company has entered the market to provide smaller freight brokers and third-party logistics companies (3PLs) with better and more affordable access to the country's rail intermodal network. The service will also help truckers reduce the number of surplus trailers that might otherwise sit empty or be too costly to reposition to areas where loads are available.
The company, Minneapolis-based Capacity Connection Inc., aims to match smaller intermediaries with motor carriers in an effort to improve equipment utilization and to provide shippers and third parties with a viable intermodal option. The service allows truckers to post online where they have empty trailers that are needed in another location or city. Logistics companies can view the locations on the pOréal and choose the equipment and the subsequent rail option that fits their customers' needs.
For example, a 3PL with a load moving from Dallas to Chicago can browse the Capacity Connection site and find a trailer that is sitting idle in Dallas and needs to get to Chicago. Once a deal is struck, Capacity Connection manages the physical and financial aspects of the equipment-repositioning move. That includes providing the dray on either end (though equipment users have the option of providing their own drayage services), paying the asset insurance premiums, and managing the rail portion of the move. Capacity Connection has struck deals with railroads to provide line-haul services on about 2,500 U.S. city-pairs.
All of these services are free to the motor carrier; Capacity Connection gets paid by the logistics company using the equipment. The equipment owners do not share in the revenue generated by the intermediaries' loads, according to the company.
Capacity Connection's goal is to exploit two voids in the intermodal supply chain. Smaller logistics providers have traditionally lacked the volume to demand rail intermodal access at affordable rates. Meanwhile, there is a large quantity of trailers often sitting out of position because irregular traffic patterns place equipment in locations where backhauls are not always available. Truckers can face costly repositioning expenses to get their equipment where it needs to go.
Michael Smith, Capacity Connection's president, said the company's mission is based on the age-old principle that an asset in motion is more profitable than an asset at rest.
"Having equipment where the opportunities exist for trucking companies is critical, which is why they pay large sums of money to reposition equipment," he said in an e-mail late last week to DC Velocity. "With their relationship with us, [truckers] receive a number of benefits: reduced dwell time, free repositioning, asset insurance coverage, and a marketing tool that helps them pre-plan network operations based on future customer requirements or sales opportunities."
For trailer owners, the savings in free and fast repositioning fall straight to the bottom line because the equipment is an already paid for, or "sunk," cost, according to Smith, who steers the company along with Tom Burke, a long-time intermodal executive, who is founder and CEO. Smith, for his part, was vice president, sales and marketing at Kansas City Southern, the Kansas City-based railroad, until October 2008.
Smith said the service would be a backstop for smaller logistics providers that normally use trucking services but might not find available capacity when it's needed. It will also supplement truckload carriers' capacity-allocation strategies, especially as more of their trailer equipment shifts to support regional moves of 300-500 miles, making intermodal a viable option for longer-haul shipments that are often more cost-effective to put on the rail.
At one time, large so-called trailer pools dominated the aggregation and deployment of equipment. However, most of the bigger pools were disbanded over time, leaving an aggregator gap that Capacity Connection also hopes to fill, Smith said.
Smith said Capacity Connection is exploring the potential of expanding the model into the container segment.
Containers have become the dominant equipment in present-day domestic intermodal service because of their relative ease of handling and their efficiencies in double-stack moves, where boxes can be stacked two high in a well car, allowing for much more freight to be moved on a single car. Some companies, like giant Schneider National Inc., have converted their entire fleets from trailers to containers to take advantage of those benefits.
In 2012, more than 5.5 million containers moved in domestic intermodal service, up 12.2 percent from 2011 levels, according to data from the Intermodal Association of North America (IANA). By contrast, intermodal trailer use dropped 10.1 percent year-over-year to 1.52 million moves, IANA said.
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