Defining Asset & Non-Asset Intermodal Providers - Advantages of Both
As an IMC, in the 53’ intermodal market helping companies transition their truckload volume to intermodal, we often hear the comment: "we only work or will only work with asset intermodal providers". The asset comment is easy to relate to in the truckload world, but it is not as easy to describe the asset concept so succinctly in the 53’ intermodal transportation segment.
The 53’ intermodal market is comprised of various types of intermodal providers: asset truckload intermodal carriers, asset IMC providers, non-asset IMC's, rail retail and brokers.
In the next few paragraphs, we will cover the various methods the intermodal service providers assemble their solution for the market, along with providing some advantages and disadvantages of both. This is a question we often are asked to address with buyers of intermodal transportation services and when we participate on various industry panels or webinars sponsored by the Intermodal Assosication of North American IANA throughout the year.
When discussing the asset truckload intermodal carriers, JB Hunt comes to mind as the market dominant player in this segment. The truckload segment has a model where they own the COFC (container on flat car) boxes and do the dray work with their company owned power units. During peak times, a portion of their dray work is outsourced to other companies. The asset truckload intermodal carriers use one West Coast and one East Coast railroad. The JB Hunt model utilizes the BNSF for the West and Norfolk Southern for the East. Another segment within this intermodal model, although shrinking, is the TOFC service, which stands for trailer on flat car. This segment of intermodal service continues to decrease because of the economies gained through double stacking the COFC containers on a flatcar that cannot be had with a TOFC solution.
The next segment of intermodal providers includes asset or asset-light IMC’s. Examples of companies in this segment include Pacer and the Hub Group. The asset IMC providers own the COFC boxes and a portion of their drayage. In peak season, the drayage is outsourced to other companies to help cover customer requirements. Also, while the asset IMC’s owns COFC boxes and dray, they also dip into the railroad owned equipment and service when their customers’ volume dictate on lanes they do not have company owned capacity. Like the asset truckload intermodal carriers, these providers typically utilize one West and one East railroad.
The non-asset intermodal IMC providers do not own COFC boxes or dray assets. Companies that fall into this category of intermodal service providers are CH Robinson and InTek Freight & Logistics. CH Robinson recently took a position of owning a few COFC boxes, but not enough to put them into the asset IMC group. Companies like CH Robinson and InTek Freight & Logistics work directly with the railroads on either ramp-to-ramp or door-to-door services. The non-asset ramp-to-ramp IMC providers assemble a door-to-door service through their own outsourced dray relationships, while other IMC’s in this segment use the railroads door-to-door service divisions to leverage the railroads’ dray buying power and influence to deliver their door-to-door solution to customers.
Another segment of the intermodal market is the railroads selling retail direct to shippers. There are three companies that come to mind quickly: NS Triple Crown, CN and CP. These three company solutions are the only railroads that go direct to shippers. Also, two of the three are Canadian railroads and the other is limited to specific NS ram-to-ramp combinations.
The last segment of the intermodal service providers are transportation brokers. In this segment, brokers typically do not have a direct relationship with all the railroads, but instead utilize the services of all the intermodal service provider segments to deliver their market solution.
All the above intermodal service solutions have their advantages. In the asset truckload intermodal segment there are tremendous synergies the likes of JB Hunt can utilize internally, which translates very well to their customer base for particular lanes. This group also has the option to run some unconventional door-to-door intermodal lanes by balancing their truckload lane capacity. The companies in this segment also have the advantage of leveraging their brands into the intermodal market. The downside is they are limited to their company owned capacity and to the two railroads they work with.
The asset IMC’s also have their niche. Like asset truckload intermodal carriers, they too run some non-standard intermodal lanes. These intermodal providers do have the advantage of tapping into the railroads owned COFC equipment pool and the 40 and 20 foot ocean container market for additional capacity.
The non-asset IMC’s have the advantage of the being able to tap into all the various railroad owned COFC boxes, along with tapping into the asset IMC’s and asset truckload intermodal COFC boxes. This model provides the most options and for a customer to have a one-stop relationship for their intermodal needs. These providers also tap into the re-positioning (re-po) 40 and 20 foot ocean container market. Below is the intermodal ramp network non-asset IMC's have access to.
The three intermodal railroads that sell retail is a solution that works great for some, but for shippers not accustom to running intermodal may find it hard to work for their business needs because the sales and customer service support is not what customers have been trained to within the truckload market, which is where the new intermodal shippers are found.
The long-and-short of it is shippers have numerous intermodal solutions to choose from and like other problems to solve, there are a number of ways to work the solution. Also, after reading this we hope we’ve been able to show there really is no one company in the intermodal market that owns all the equipment from the point of origin to destination. The place where the standard asset designation falls down in the intermodal segment is the “asset” intermodal providers do not own the tracks, the intermodal ramps, the intermodal railcars or the locomotives.
The good news for customers is they have a number of great options to choose from as they implement their intermodal strategy. The solution can be the best of breed solution or they can go with a single type of intermodal solution. Of course there are exceptions to every rule, but what we tend to find is the bigger shippers go with a best of breed solution of asset truckload intermodal, asset IMC and non-asset IMC, while the smaller to medium size companies choose the non-asset IMC’s for simplicity of being able to call one provider for all their intermodal needs. Either way, there are plenty of options to transition truckload lanes over 700 miles into a money saving, capacity rich 53’ domestic intermodal solution.