Intermodal shipping fascinates me. I’ve been seeing more conatiner trains, longer trains, often with piles of empties on the back.
So if a container arrives by ship, what determines if it gets transported by truck or get loaded on a train? We have the Rutherford yard in Harrisburg that handles containers. If the container arrives from overseas at Philidelphia, and its destination is between there and Harrisburg, does it go to Rutherford, get transferred to truck, only to backtrack?
Managing logistics is all about time and money. A can coming off a ship in Philadelphia destined to say - Reading can be trucked in roughly two to three hours for around $500. Moving that same can rail via Harrisburg then truck back to Reading is simply counterintuitive. It would likely take three days to make the same trip at perhaps three to four times the cost and a truck would still have to move it over the road.
I forget the old “rule of thumb” concerning rail versus intermodal but, I seem to recollect that if the move was within 400 or 500 miles it made more sense to handle it over the road than to move by rail. This may have changed some depending on driver availability and truck freight but, I’d guess it’s still fairly close.
Almost all shipping, via any mode, is done on a bid/contract basis. Every shipper (like travelers, too) looks at/considers/solicits price quotes and chooses whatever combination of price, schedule, and consistency best suits their needs.
US shippers may choose an ‘single source’ shipping firm such as Schneider that provides door-to-door service in which the customer loads a Schneider container, a Schneider truck takes it to a nearby intermodal ramp, at the destination intermodal ramp, another Schneider truck picks it up and delivers it to the consignee. Schneider may DRIVE the load end to end as well…it all depends on cost/benefit to the shipper (eg, the customer that pays the shipping bill).
As an aside, Schneider will do everything possible to find a nearby load for a container that had been emptied at the consignee. The empty container may go 2 miles or maybe 40 miles to the next shipper for that container. It doesn’t matter what routing that container will follow. It may come back to the CSX ramp it was pulled from, it may go to a different CSX ramp, or even a NS ramp! The container may be driven to the consignee if it’s close enough or there’s no reasonable direct intermodal routing. Until 2016 or so, Schneider containers were put on pool chassis (TSXZ, etc). Since 2016, they have their own ‘private’ set of chassis exclusively for their use. Trying to keep a sufficient number of chassis at each intermodal ramp is a challenge when chassis don’t ‘come back’. Hopefully, it balances out when we’d get a ‘new to us’ chassis that was formerly usually at a different ramp.
US shippers may deal directly with the intermodal division/subsidiary of a railroad (their sales staff likely calls or visits them regularly looking to drum up some business) and deal individually with intermodal-experienced trucking companies at each end, looking for the lowest cost per container, of course.&
I have a background in LTL trucking a few decades ago, and have a customer base of trucking companies in my current career so I have a little knowledge of the trucking industry.
Plus, I tend to look at revenue per carload figures for railroads, to get a handle on what carloads and containers are generating per unit.
Here is my question(s) regarding intermodal. Lets say JBH which has big agreements primarily with BNSF and NS, also with CSX on certain lanes. Is the revenue generated by NS based on the “per container” (in other words, say $700 per container point to point), or are those revenue agreements based on a certain percentage of the total move revenue…lets say Chicago to Harrisburg generates $1400 of revenue for JBH, does NS get a percentage of that?
Also, with the preponderance of freight moving from west to east and the need to move empty containers back to the loading points, do the rails receive same consideration (say $700 per container) for moving an empty back from Harrisburg to Chicago?
These agreements are buried deep within the confidential walls of railroad and trucking companies, but any general ideas would be great.
Ed
I wish I could tell you – and my interests are such that I should know, at least in principle, how some of this is currently ‘customarily’ arranged. But I do not know specifics, and will be carefully reading the posts from those who do know to see what it is and how it has evolved from TOFC practices.
Could you, or someone, expand on that a bit? Perhaps I was naive, but the picture I always had in my head was of loaded containers coming into this country on a ship. Craned onto a train at a harbor, moved by rail to a distsnt hub, and then moved the last 100 miles by truck. Then, having to find it’s way back to the source to repeat the cycle.
What little concept I had of “domestic containers”, was that they were for shipments originated in this country, and sent to a distant destination.
The whole idea of bringing a container into this country, and moving it’s contents to a domestic container, which is then shipped to a distant domestic destination…never ocurred to me .
Is this type of a move common? Seems to me that the extra labor involved would kill the efficiency of containerization. What are the reasons for doing this?
Is it also true that there are no 53’ international containers?
Ship containers can be loaded more heavily than even rail moves would permit. Alternatively in some cases containerized goods received from different ports might have parts of an order forwarded either as part of LCL to a given destination or lane, or as a container shipment to a particular consignee.
If this is done within an intermodal port facility it may make sense to transfer ‘container to container’ rather than arrange for, say, a dry van or box truck with a common floor height or liftgate to be brought into the yard for crossloading. Likely a more common alternative would be to send inbound marine containers to some sort of crossdock or distribution-center facility, where it might logistically make sense to forward ‘repacks’ as COFC (or TOFC) on the same basis as domestically-originated traffic.
Thanks for the reply. I guess that makes sense. In the back of my mind I was wondering if it had anything to do with the one-way flow of containers dilemma we often hear about, where they might be putting the 20’ and 40’ containers right back on the boat to return to Asia, letting the domestic 53 footers do the cross-continent shuffle…
I would imagine that all intermodal contracts between transportation company (Schneider, JB Hunt, UPS, Werner, Martrac, etc) are based on X number of loaded containers from A to B on railroad K per month, for 36 months. As the companies named have their own private containers and trailers, they also pay for ‘repo’ (repositioning) costs to ship some quantity of empty units from B to A, or even A to B. Because of contracted volume, the bigger transportation companies get a lower price per container if one were to calculate $2,100,000 for 3,000 containers/month = $700/container. I’d imagine that it’s a ‘fixed price’ contract in that if fewer than 3,000 loaded containers go A to B, they’ll still pay the full amount. Any overages would likely be at a higher rate, maybe $800 each times the number of additional containers. I’ve been involved in enough non-transportation ‘fixed price’ contracts to know that’s generally how it’s done.
Do the transportation companies have one contract for A to B, another for A to C, and still another for B to D? I suspect it might be more like one contract for city pairs 700 miles or less, another for 701-900 miles, and another for 901-1100 miles (using CSX, for example). That way there’s only a small number of contracts to deal with, less lawyer time, etc, etc.
Obviously, if business drops off significantly between A to B, or a significant increase during the life of the contract, there might be some modification of the contract to raise or lower the total price accordingly.
Don’t forget there’s ‘storage fees’ at each ramp for loaded containers not taken out within 48 hours as well as some fee per privately owned chassis (Schnieder, for example) that is ‘stored’ there between uses. Storage fees are charged on a per container per occurrence basis. I think CSX
When I worked in the industry ('90’s - early '00’s), contracts between the railroads and their customers typically included a minimum volume commitment, but the amount billed/paid was calculated on a shipment-by-shipment basis. Typically, the shipper was billed monthly with detail on each unit (city pair, container size, load/empty, etc) so they could see exactly how the amount due was calculated. The contract included negotiated rates for each city pair and container size the shipper planned to use. When I started, the normal practice was for the railroad to pay a rebate once the volume commitment was met, but that was a pain to administer so we simply began offering lower rates based on the volume, and if the shipper didn’t meet the commitment they could expect to see higher rates in the next contract.
An exception was the original contract between J.B. Hunt and Santa Fe. That called for Santa Fe to get a percentage of the total door-to-door revenue collected by Hunt. The percentages were calculated based on a complex formula that included not just the Santa Fe ramps used, but also the total trucking miles and total door to door miles. So, for example, two loads going to the same destination point in LA but originating in at points in Iowa and Ohio equidistant to Santa Fe’s Chicago ramp would pay Hunt roughly the same, to cover their similar trucking costs, but Santa Fe’s rate would vary widely. The end result was that the Iowa load paid much less than Santa Fe’s ‘normal’ Chicago-LA rate, but the Ohio load made up for it by paying more. This flexible formula was the key to the huge growth in Santa Fe’s intermodal volume in the 90’s. As far as I know it was unique, and Hunt had a more traditional arrangement with the other railroads. I don’t know whether the BNSF-Hunt contract still works that way - they might have done away with the formulas once the big highway-to-rail shift was over and the sit
Bratkinson and CNSF2, Thanks to both of you for the detailed “insiders” view of an aspect of the business we seldom see.
It amazes me that there is as much “feet on the ground” involvement with containerized freight as you indicate there is. Somehow I had always envisioned that for a shipper originating loads, once the doors were closed, the next person seeing the merchandise would be the customer.
I see how wrong I was about that now,
How can you tell that a container is empty?
One aspect of this is ISO box moves loaded and empty. Typically the steam lines don’t want their boxes traveling far inland if no back haul is available. They want maximum utilization of their boxes, meaning as many loaded miles as possible. Let’s say a Maersk vessel shows up at Pier 400 in the Port of LA. 4 40’ box loads of merchandise are headed for the Midwest. If there’s no backhaul on those boxes. More than likely they will head to places such as; Ontario, Colton, or San Berdoo California to get transloaded into a doemstic 53’ box. The ratio is 4:3. 4 40’s will fill 3 53’s. If a backahul was procured of let’s say soybeans sourced from Illinois going back to Asia. Those 4 40’s will ride all the way to the Midwest (Maersk contracts with BNSF) Get unloaded then grab those loads of soybeans and head back to the Orient.
I think he meant to say empty well cars.
Aha. Yes, that must be it.
Look at the doors to see if they have a seal on them. The empties don’t.
Jeff
Great discussion by the “insiders”. Thanks for the insite.
A few years ago, I had a project at a container yard in Chicago. They had thousands of containers stacked five high. A few months later (fall) the yard was nearly empty.
It was interesting to watch an operator place a container on the fifth level.
Ed
Yeah, I meant empty well cars and piggy backs.
The quick answer is “it depends”. For the JBHunts, UPS, et.al. were the RRs have, joint, through, service, the revenue split is no doubt in the contract for the lane. Where there is no contract with the shipper, the RRs decide the revenue split (published Rule 11? I’m not sure…). Shippers have also been know to cobble together their own “through” service, say NS to Chicago, private rubber tire to UP, UP to LA, paying three independent bills. Not sure how much of this happens these days, but in the 1990s, quite a bit.
My dad started working for railroads back in 1928 as a secretary ot an officer. What level, I have no idea. When I was about three, he worked for the MP and we lived in Chicago. Then he was moved to Milwaukee and when I was seven, we moved to Cincinnati. Around 1947, he was told they wanted him to move again and he aand my mother decided to remain in Cincinnati. So he left the railroad and worked for a local trucking company. He had studied and become licensed to practice before the ICC. He was proficient in filing tariffs and rating freight. He later worked as traffic manager at a few Cincinnati industries. Back in 1961, when I moved to Chicago, instead of using a moving company, I boxed up all my goods, books, utensils, TV, furniture, etc. and hauled it to a warehouse. After I located an apartment, he had an LTL truck company retrieve it from the warehouse and deliver it to my apartment in Chicago. Saved about $400 over what a mover would have cost. He knew the rates for books were low (hard to daage) and TV’s were higher (more fragile). Weight x Rate x distance = cost. I had to take everything up to my 2nd floor apt. as the trucker only delivers to the 1st floor door. I tell this to raise a question. Does any freight move under published Regulated freight tariffs any more? Or is it all negotiated contracts.