Can't Find Intermodal Capacity: Reasons Why Per Major IMDL Rail Ramp
We are living in unprecedented times with the world slowly recovering from the COVID-19 global pandemic.
The effects on supply chains have been felt far and wide with demand coming in different forms of consumer purchases favoring goods over services and online buying. As a result, the freight network is out of balance, and demand for trucks to move product is significantly higher than the supply motor carriers, freight brokers and logistics companies have to service the requirements, which has truckload pricing at all-time highs.
Intermodal was the initial relief valve for shippers to offset the shortcomings in truckload freight capacity, but it’s now under pressure with shippers’ demand outstripping the available supply IMC’s can provide the market, as can be seen in the intermodal spot market pricing trend.
The mismatch in demand and supply of intermodal capacity pushed all the US-based North American class I railroads to call off certain markets as constrained. This allows them to limit capacity by shipper and charge “peak” surcharges for each box supplied to individual shippers beyond their allocation based on prior 12 to 16-week usage average per week.
The constrained announcements took place in February, which is an action that the industry has never seen this early in the year. For historical purposes, “peak” typically begins in late July and runs through November.
Below are the highlights of the highest volume, most critical intermodal rail ramps that impact shippers across the US.
Constraining Issues at Major US Intermodal Rail Ramps
SoCal (Los Angeles) Intermodal Rail Ramps
- Dray Constraints
- Dray carriers are taking the easy and best-paying lanes to optimize their operating ratios and profits. Shippers can help themselves by setting their operations to accommodate the following:
- Drop and Swap
- First Come First Serve (FCFS)
- No Appointment Loads
- Short Miles
- Gate Reservation Restrictions
- Los Angeles, CA to Chicago, IL is extremely difficult to obtain if a shipper is on or not on an MCP (mutual commitment program) through the Union Pacific (UP).
- UP placing additional surcharges to every intermodal box a shipper ingates that is in excess of its MCP volumes.
- Intermodal rail dray is competing with dray opportunities associated with the port.
Memphis Intermodal Rail Ramps
- Bad Order Equipment and / or No Equipment
- Bad Chassis
- Limited Dray Options
- Carriers are pulling in capacity from the Dallas market.
- Reduced Capacity Due to Auto Shutdown - Driven by Chip Shortage
- Intermodal is competing with the cotton season freight opportunities carriers often choose over rail.
- The I-40 bridge shutdown has caused big issues getting around Memphis. The issue is so bad that dray carriers are refusing intermodal loads because of the excessive out of mile routes they are directed to move freight in or out of Memphis intermodal rail ramp. The expectation is for the I-40 bridge to be under repair for several months.
New York Intermodal Rail Ramps
- Dray Constraints
- Limited Gate Reservations Inbound and Outbound
- The Norfolk Southern, NS, is limiting the number of loads shippers can send into Chicago, IL.
- Freight is plentiful, and dray carriers are picking and choosing what areas they are willing to move in NY.
Chicago Intermodal Rail Ramps
- Major Congestion
- As a result of the congestion, railroads are changing ingate ramps which are then impacting lane transit times.
- Limited Gate Reservations
- Dray Constraints
- Dray carriers picking and choosing the freight loads that work best for their network of customers.
- As a result of the above, the one-way intermodal markets out of Chicago are even more capacity challenged.
Laredo Intermodal Rail Ramp
- There is a limited amount of equipment due to the semiconductor chip shortage, which is not pushing containers into the market.
- Drayage is constrained as carriers at the US - Mexico border find they can make more money on long haul over-the-road truckload shipments versus profitability on short dray freight moves.
Conclusion on Challenged Intermodal Ramps
For more on the current state of domestic intermodal, truckload and how to plan for more success in logistics, please keep watch for new articles every week at the InTek Learning Center.
Below are examples of some of the articles you can find about how to help your company in capacity challenged freight markets: