Insights - March/April 2018 - 28

E-commerce Effect
"Add in the extra push for last mile delivery in major
metropolitan areas in 'Prime' type of service levels and
transloading has become a necessity for many customers,"
Critchfield said.
The rise of Amazon and its
fulfillment center approach to meeting
customer needs also has been fueling
the growth of Inland Empire locations,
said Greg Stefflre, co-founder of Rail
Delivery Services. That area, roughly
75 miles from Southern California
ports, offers lower real estate costs
and available land.
"The hub and spoke model they
[Amazon] use invites [more use of]
Stefflre
port to IE drayage and seems to be
making those costs far more acceptable to beneficial cargo
owners. Hence, we will quite probably see a continuation of
shifting of near-port and mid-cities transloading to the IE."
"Transloads are on the way up," said Jeffrey Brashares, a
senior vice president at SunteckTTS.
"More DCs have shifted off the West
Coast to the Midwest/South Kentucky
for example to get closer to their
customers and for cheaper labor. This
is only expected to increase as the
steamship lines raise rates to inland
points to avoid having to reposition
empties, which costs them millions of
dollars a week."
Transloading is attractive to
Brashares
retailers, who want to take advantage
of routing decisions when freight arrives in North America, rather
than having to make the far-earlier transportation determination
when freight is loaded overseas, said Brashares. He added that
ocean carriers still prefer transloads unless they have an export
load to match with an IPI move.
"Current IPI moves with heavier
export reloads are more attractive
than transloading into 53-foot units for
trucking or intermodal movement to
destination," said James Hertwig, who
now heads his own consulting firm
after having recently retired as the
CEO of Florida East Coast Railway.

Weighing Options
"I believe customers will look at
Hertwig
more direct [IPI] loading into regional
DCs directly from Asia, where products will be available for final
delivery, versus spending the time and cost to transload into
53-foot domestic containers that ultimately end up at the same
regional DC," he said.
Other factors are also affecting how transloads are evolving.
Critchfield noted that transloading is benefitting because the
alternative of warehousing a product is becoming significantly

28 Intermodal Insights | March/April 2018

more expensive due to space constraints in that sector,
especially near port areas.
"I think the biggest issue in Southern California may be the
cost of real estate," said Stefflre, who noted the high cost of land
near the ports and the desire of property owners there to use the
facilities for their own port-related business needs rather than
sorting freight.
Trucking costs are a factor as well in transloading decisions.
Critchfield explained that transloading requires more truck
moves than an IPI move, which adds to what he termed "the
already dire shortage of commercial drivers."
It's a more complicated issue than just finding drivers.
"The costs of near-port drayage increased significantly,"
Stefflre said, citing abrupt changes in truck engine emissions
and organizing efforts to convert independent contractors to
employee status.
These circumstances have made transloading at new,
modern facilities in the IE more competitive since the costs of
drayage are only 25 percent higher than for near-port facilities,
he said. Meanwhile, land costs of near-port transloading facilities
are now 100 percent greater than newly constructed IE facilities.
In addition, there are more skilled warehouse workers in
those inland areas where new facilities are being built, he said.

Cost Parameters in Flux
However, those cost advantages could be offset.
Drayage costs are rising as warehousing and DC activity
moves farther away from port areas, said Hertwig, diluting the
economic advantages of transloading.
"The further inland these big operations move, the more
problematic import drayage becomes," Stefflre said. Trucking
costs for transloads are also rising because of the continued
practice of "split moves" that require return of chassis and
containers to different locations. An efficient chassis pool could
reduce those expenses, he noted.
"Distribution patterns have changed considerably because
the mix of companies importing and retailing goods has changed
considerably," said Rob Leachman, a University of CaliforniaBerkeley professor who specializes in operations research. "IPI
will never go away. But it will never be what it once was, either."
He cited several reasons why transloading will continue to
grow in favor, as well as reasons why there still will be a place for
IPI moves.
IPI is well-suited for one-time sales or lower value goods, but
retail goods with higher value and year-round selling patterns are
fueling transload growth, he believes.
One key reason for transloading's growth is retailers are
insisting that the original equipment manufacturers of products
such as flat-screen TVs import these goods to the U.S. initially.
Then the retailers buy the goods domestically, closer to the time
they can sell them, according to Leachman. This arrangement
means that 100 percent of goods are transloaded because
different parties arrange and pay for international and domestic
transportation. The result is lower inventory cost and reduced
risk for retailers, who typically pay for domestic transportation
of goods whose international component was paid for by
manufacturers.



Table of Contents for the Digital Edition of Insights - March/April 2018

IANA News
Washington Begins Work on Infrastructure
Equipment Condition, DVIRs Benefit Terminal Throughput
Effective Steps Can Be Taken When Terminal Capacity Is Tight
Freight Report
Chassis Market Changes Focus on Pools, Efficiency
Blockchain Presented as Option to Aid Intermodal Information Flow
Buying Decisions, Truck and Real Estate Costs Transform Transloads
Gender Diversity Makes Good Business Sense
Government News
International Intermodal News
Intermodal Information Services News
New Members
People News
Intermodal Calendar
Insights - March/April 2018 - Cover1
Insights - March/April 2018 - 2
Insights - March/April 2018 - 3
Insights - March/April 2018 - IANA News
Insights - March/April 2018 - Washington Begins Work on Infrastructure
Insights - March/April 2018 - 6
Insights - March/April 2018 - 7
Insights - March/April 2018 - 8
Insights - March/April 2018 - 9
Insights - March/April 2018 - 10
Insights - March/April 2018 - Equipment Condition, DVIRs Benefit Terminal Throughput
Insights - March/April 2018 - 12
Insights - March/April 2018 - 13
Insights - March/April 2018 - 14
Insights - March/April 2018 - Effective Steps Can Be Taken When Terminal Capacity Is Tight
Insights - March/April 2018 - 16
Insights - March/April 2018 - 17
Insights - March/April 2018 - 18
Insights - March/April 2018 - Freight Report
Insights - March/April 2018 - Chassis Market Changes Focus on Pools, Efficiency
Insights - March/April 2018 - 21
Insights - March/April 2018 - 22
Insights - March/April 2018 - Blockchain Presented as Option to Aid Intermodal Information Flow
Insights - March/April 2018 - 24
Insights - March/April 2018 - 25
Insights - March/April 2018 - 26
Insights - March/April 2018 - Buying Decisions, Truck and Real Estate Costs Transform Transloads
Insights - March/April 2018 - 28
Insights - March/April 2018 - Gender Diversity Makes Good Business Sense
Insights - March/April 2018 - Government News
Insights - March/April 2018 - 31
Insights - March/April 2018 - 32
Insights - March/April 2018 - International Intermodal News
Insights - March/April 2018 - 34
Insights - March/April 2018 - Intermodal Information Services News
Insights - March/April 2018 - New Members
Insights - March/April 2018 - 37
Insights - March/April 2018 - 38
Insights - March/April 2018 - Intermodal Calendar
Insights - March/April 2018 - 40
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