GE Lighting Brightens Its Logistics Scene with Intermodal

Intermodal transport has in general been growing faster than just about any other transportation mode, but has a lot of room to grow even more.

That was clearly the message during a presentation on intermodal by Amy Rice of rail carrier CSX and David Slates of GE Lighting, at the CSCMP conference in Denver last week.

Rice said CSX has built a tool that analyzes a company's truckload shipments and looks for opportunities where intermodal might be a good option. Across more than 100 shippers, Rice said that on average 14% of those truckload moves are either an excellent or good fit for a switch to intermodal, with additional moves not included in the 14% also being potential candidates.

While the data might be seen as self-serving, SCDigest editor Dan Gilmore talked to Rice about how the tool works, and believes this is a pretty accurate assessment.

So, is that 14% of current truckload shipments sort of the ceiling for where the intermodal industry can grow? No, said Rice, because as intermodal networks improve, additional track is built, etc., new current truckload moves will emerge as good candidates. The industry has been steadily pushing down the minimum miles for which intermodal may make sense for a shipper.

GE's Slates said that within all of GE, growth in use of intermodal has been strong, but that there is still a long way to go. In 2012, GE spent about $70 million on intermodal transport, versus some $400 million on straight truckload. While a substantial portion of that current truckload spend could probably be converted to intermodal, and more will be, some business units or pockets of logistics operations are still resistant to the change, for a variety of reasons.

That's not true at GE Lighting, where intermodal growth was 25% from 2010 to 2012.

Why the aggressive switch to intermodal? Slates cited a number of factors:

Cost: Intermodal can often reduce shipping costs more than 30%.

Capacity: At certain times of the year, obtaining needed truckload capacity can be challenging. Intermodal rarely has capacity constraints, Slates noted.

Environment: Use of intermodal substantially reduces CO2 emissions for a given move.

Competitiveness: GE Lighting belies it will gain the advantage if it gains the benefits of intermodal earlier than its rivals do.

"You don't want to be at the end of the line on this transition," Slates said.

Of course, one barrier to greater adoption of intermodal are concerns about service, but Slates said that while these worriers may have been valid even 5-6 years ago, "Those days are long gone. Service is simply no longer a factor."

Slates described how GE Lighting currently brings in containers to the port of LA, and then drays them to the BNSF yard, where they are moved to Chicago. There, the containers are transferred to CSX, which moves them to Atlanta. From there, they are trucked to a GE factory in Tennessee.

Total transit time: six days - and rarely is there any deviation from that. That intermodal transit time is just one day more than the five days it takes to move a container from the West coast to Tennessee via truck, Slates said, and that the trucking move today actually has more variability.

And the benefit: shipping costs some 40% lower than truckload costs.

Slates added that the idea of a hand-off between rail carriers often gets logistics managers nervous, and thus serves as a barrier to greater us e of intermodal. But he said shippers should simply use a less-than-truckload (LTL) analogy.

"Shippers don't even really know how their pallets move across an LTL provider's network, or what terminals it passes through," Slates noted. "That doesn't make them nervous - the goods still usually arrive on-time. You should think about intermodal hand-offs the same way."

Slates added that there are big opportunities to link inbound and outbound moves by sharing equipment like containers and chassis, either with other units within your own company or with trading partners. He said GE's customers were increasingly interested in such relationships, as well as almost totally supportive of the switch to intermodal, contrary to some perceptions of customer resistance. That is very isolated and shrinking, Slates said.

Slates then offered a simple four-step process for building an intermodal program:

1. Data Gathering: Get together current lanes, costs, and transit time requirements. Identify the opportunities.

2. Start Small: Pick one or two lanes of the most attractive conversion opportunities. Demonstrate success. Learn in more detail how it works.

3. Expand: Start scaling up the program to other lanes

4. Optimize: Connect moves across the network, and find ways to bring in moves that are more challenging to make work

Slates said GE Lighting is just about out of level 3 and heading into its optimize phase.

He also said you can pick other spots to get going. Seasonal spikes can be a great place to get started, Slates noted. Ditto for unexpected demand surges. He notes the company recently had an unexpected giant order for 20 truckloads of goods coming out of an Ohio factory that would have been difficult to service using only trucks. So Lighting moved 12 of the loads using intermodal, and the other eight via truckload, a combination that worked very well.

He also said shippers need to be more conscious of inventory levels.

"I've seen times when logistics managers are worried about a small increase in transit times when the target DC already has plenty enough inventory there already to meet demand," Slates noted.

Year to date intermodal volumes are up about 3.7% in 2013, according to the Association of American Railroads.

Source: http://www.scdigest.com/