Global Logistics and Supply Chain Strategies - July 2008 - (Page 72)

Intermodal Is Gaining Ground on Long-Haul Trucking, Exec Says Michael Uremovich of Pacer International Rising gas prices and driver shortages are prompting shippers to seek surfacetransport alternatives. The chairman and CEO of Pacer International says intermodal is ready for prime time. The intermodal transportation business has had its ups and downs since the invention of the double-stack train more than 20 years ago. Shippers have been drawn to the mode’s natural economies, yet put off by service problems and congestion over the rails. Now, intermodal seems poised to capitalize on the woes of the trucking industry, including the rising cost of gasoline and a shortage of qualified drivers. Michael Uremovich, chairman and chief executive officer of Pacer International, talks here about his industry’s advances in service, and its hopes for growth in the near term. when volumes pick back up again? Will service remain at the level that it is today? Q: So congestion is not an issue right now, even at intermodal terminals within the port areas? Uremovich: Not really. The terminals and railroad systems are relatively fluid. You always have periodic interruptions in certain areas, if there’s a derailment or a local situation like there was last week in Northern California, where the cartage drivers had a work slowdown. But it’s not a systemic problem. Q: How is intermodal serving the needs of U.S. exporters, who stand to benefit from a weak dollar but are having problems finding containers? Uremovich: They can still move their freight by putting it in domestic boxes and then transloading it at the port. It’s been more difficult because the shipping companies have had an extraordinary increase in demand, and they only have so many boxes in the interior to fill. Also, because railroads have raised rates, international shipping companies have been less inclined to move their boxes inland. So exporters are being well-served, but in a different way. Q: How is intermodal faring against long-haul trucking today? Uremovich: Pressures on the trucking industry—particularly the issues of fuel and driver availability—have increased the favorable posture of intermodal relative to long-haul trucking over recent years. There’s no reason to expect that won’t continue. Q: How is the quality of rail service today, in terms of schedule integrity and reliability? Uremovich: Much better than it was several years ago, when there was a significant capacity crunch. To give you a specific metric on that, the turn time on our boxes today has improved over the 2006 time frame. We have gotten eight to 10 percent additional capacity without adding a new box. There was a massive meltdown in rail service in the West when the Union Pacific took over the Southern Pacific in the late 1990s. In general, reliability is much better. Q: Isn’t that an inefficient system for lower-value exports? Uremovich: It can be. Many exporters tend to be shippers of agricultural products and lowervalue commodities. But supply and demand works in most of these markets. That’s just the brutal reality of the business. The good news is that the exporters can sell more. The bad news is that there’s some crunch on export capacity from interior points. Q: Are we starting to see positive effects from new investments by railroads in equipment, technology and terminals? Uremovich: Yes. The hiring of more crew, locomotive investment, terminal investment and other [actions] have helped. It’s clear, however, that business is a little softer today than it has been in the recent past. So the real question is, what happens Q: What kind of green initiatives are we seeing in the intermodal sector? Uremovich: To date, it has focused primarily on local aspects. There are proposals in place at the 72 JULY 2008

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Global Logistics and Supply Chain Strategies - July 2008 Contents Editorial GL&SCS Exclusive Fastforward Up Front Introduction Menlo Worldwide & Electrolux PathGuide Technologies & Tile City Servigistics & Juniper Networks Transplace & Rock-Tenn ClearOrbit & Blue Bell Creameries Cadec Global & Northwest Food Products Transportation CaseStack & Greystar Products NGC & Parigi Group Supply Chain Consultants & Constar TransGroup Worldwide & Surgiquip Terra Technology & Campbell Soup Baxter Planning Systems & SGI Cadre Technologies & Kansas City SmartPort TransportGistics & FMC Technologies DSC Logistics & Tree of Life FORTE & Vera Bradley Penske Logistics & Eaton Cardinal Logistics & Weyerhaeuser JPMorgan & Black & Decker Opinion Opinion Industry Voices

Global Logistics and Supply Chain Strategies - July 2008

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