Intermodal shipping gains steam as faster, cheaper alternative

Font Size:
Default font size
Larger font size

Posted: Monday, March 3, 2014 12:00 am

In a typical year, Iowa Interstate Railroad's intermodal terminal on the eastern edge of Council Bluffs transfers about 50,000 shipping containers from trucks to railcars, or vice versa.

That's a little more than one every five minutes the facility is open, and trends across the transportation industry indicate that number is going nowhere but up.

“We believe that intermodal is the singular greatest growth engine for railroads in the long run,” said Keith Schoonmaker, a transportation analyst with Morningstar Inc.

In recent years, intermodal shipping — container shipping using any combination of road, rail or water — has proven a cheaper and quicker alternative to single modes of transit, and more loads moved in intermodal containers in 2013 than ever before, the Association of American Railroads reported.

Omaha-based Union Pacific Railroad, for which Iowa Interstate contracts freight movements at the Council Bluffs ramp, reported intermodal shipping as its No. 1 source of freight revenue in 2013 and 2012.

Intermodal accounted for $4 billion, or 20 percent, of U.P.'s total freight revenue in 2013 and, for the second year in a row, supplanted coal as the railroad's top revenue-producing segment.

Shippers across the world have found intermodal to be a more reliable, less expensive and often faster alternative to moving freight strictly by road or rail. Schoonmaker estimates the practice saves shippers 10 percent to 30 percent over trucking.

From the bottle of French wine in your kitchen to most of the clothes in your closet, odds are good that if a product was made overseas, it spent some time in a shipping container.

Situated behind a 250,000-square-foot warehouse in north Omaha are a handful of khaki-colored containers no more remarkable in their appearance than the thousands that traverse U.S. highways and railways every day. You'd never know it by looking at them, but these steel boxes hold the deconstructed swimming pools shipped into and put together in Omaha for the 2008 and 2012 U.S. Olympic Trials.

They came here from Italy, said Terry McMullen, managing director of AIT Worldwide Logistics' Omaha operations, which helped coordinate the pools' shipment. And their journey to Omaha portrays a paradigm shift that has changed how shippers and transportation companies move freight.

“If we brought ocean containers into Los Angeles and loaded them into a 53-foot truck trailer, it would cost $4,000 to bring it to Omaha,” McMullen said. The main driver is fuel efficiency, as a train can pull one ton of freight about 476 miles on a single gallon of fuel, or about four times farther than a truck.

Money Talks

Find the latest in local business and development, from who's saying what to what's going in at that corner, in the

Money Talks blog.

Those same containers cost $900 to ship inland via rail, McMullen said, but they require trucks to get them from port to rail and then from rail to their destination, which shippers refer to as first- and last-mile, or drayage.

As a third-party logistics provider, McMullen's outfit works as a liaison among ocean shippers, railroads and trucking firms that are constantly seeking the fastest, most cost-effective way to transport goods from point A to point B.

“We're basically a travel agency for boxes,” McMullen said.

Unique as they may be, the pools packed up behind McMullen's warehouse represent only the more conspicuous goods that increasingly are being packed into shipping containers to ensure quicker and less expensive delivery across the country. Shippers of products ranging from homebuilding supplies to frozen fast food are turning to intermodal shipping.

Omaha-based ConAgra Foods Inc. reported in October 2013 that it has increased by more than 30 percent the amount of product moved via intermodal since fiscal year 2008.

Trucking still accounts for almost 88 percent of the packaged foods company's shipping volume, but intermodal is helping it and other companies across the world decrease its carbon footprint.

And trucking companies remain an integral part of the supply chain.

“If it can move on a truck, it can typically move intermodal,” said Derek Leathers, president and chief operating officer for Werner Enterprises.

Sarpy County-based Werner is one of the biggest trucking firms in the country, but its relationship with ocean carriers and railroad operators has made it a more dynamic and profitable organization in recent years.

Where railroads and trucking firms once saw each other as fierce and direct competitors — and still do, to an extent — the global supply chain has made them more or less inseparable links.

Leathers said intermodal shipping has had a “significant” impact on revenue generated by Werner's Value Added Services line, which totaled $361 million in 2013 and grew about 12 percent from 2012. The company reported that annual intermodal revenue increased 18 percent from 2012 to 2013, a year in which Werner more than doubled the average number of intermodal trucks in service to 45.

In intermodal, Werner has found benefits both external and internal. The company has opportunities both in satisfying shippers' demands for less expensive transportation and in recruiting hard-to-find drivers.

That's because intermodal drayage typically requires shorter local or regional hauls, which Leathers said “are among the most attractive to drivers.”

Kansas City-based DNJ Intermodal Services, which expanded to Omaha in mid-2013, sees the same opportunities. DNJ has six trucks in service in Omaha and, like Werner, has leveraged shorter hauls as a selling point for recruits.

“You find drivers will go over the road for full van lines and they're out for two weeks to a month, depending on when they can find that back haul to their hometown,” said Brandon Sartain, regional vice president of DNJ's Midwest Region.

That's not the case with intermodal, a trend he sees gaining steam. “Everybody's always looking for the cheapest option, and now there are more options to actually get that,” Sartain said.

Data from the Intermodal Association of North America showed domestic container volume doubled from 2004 to 2013 despite falling significantly during the recession. All intermodal shipments are projected to increase at twice the rate of truck movements over the next decade, according to Joni Casey, president and CEO of the trade group.

Additional data from the IANA shows the Midwest consistently has the highest percentage of intermodal traffic in the country.

“It is both an inbound market and major destination for cargo entering the U.S. through the Southern California ports and an outbound market for exports and goods destined for domestic consumption,” Casey said.

That's meant significant windfalls for rail operators, and both Omaha-affiliated railroads have placed big bets on the segment's future growth.

BNSF Railway Co., which is owned by Omaha's Berkshire Hathaway Inc., in September 2013 opened its $250 million intermodal hub in Edgerton, Kan., southwest of Kansas City.

This year, U.P. plans to complete construction on a $400 million rail facility in Santa Teresa, N.M., to serve the port entry at El Paso, Texas, that includes an intermodal terminal.

Laurence Rilett, director of the Mid-America Transportation Center at the University of Nebraska-Lincoln, said the flexibility of shipping containers “allows people and companies that might otherwise be competing to cooperate.”

According to Morningstar's Schoonmaker, trucking long term could look vastly different than it does now.

“Trucking offers high service, since truckers typically haul directly from shipping dock to delivery dock in a dedicated container,” he said, “but within a couple of decades, we believe intermodal shipping will make long-haul trucking uncommon.”

Copyright ©2014 Omaha World-Herald. All rights reserved. This material may not be published, broadcast, rewritten, displayed or redistributed for any purpose without permission from the Omaha World-Herald. To purchase rights to republish this article, please contact The World-Herald Store.



Inside Business
To submit an announcement for "Inside Business", click here. For questions call (402) 444-1371 or e-mail

World-Herald Alerts

Want to get World-Herald stories sent directly to your home or work computer? Sign up for's News Alerts and you will receive e-mails with the day's top stories.