As the demand for fast and on-time delivery of products and materials increases, more and more end-user companies rely on intermodal transportation to move freight, according to a report by Persistence Market Research.
End-user businesses are companies that actually receive the freight as inventory, as opposed to middle-man importers and exporters who typically sit in the supply chain between the manufacturer and the retailer. Industries affected by this trend include chemicals, construction, consumer and retail, energy, food and beverage, industrial and manufacturing, mining, oil and gas, pharmaceutical and medicine, and many others.
Intermodal transport refers to the transportation of goods and materials (freight), or persons, by multiple means — some combination of road, sea, and air, for example. Sea transport is a particularly major player in the realm of intermodal transport of freight since it allows large quantities of goods to be transported large distances at relatively low costs.
What Factors are Driving the Transition to Intermodal Transportation?
A favorable regulatory environment is a key to the rise in intermodal transport among end-user businesses. Regulatory organizations like the World Trade Organization (WTO) increasingly support “Open Door Policies,” which encourage global trade. Businesses take advantage of these policies by expanding their reach internationally, sourcing products and services overseas to deliver to their local customer base.
The containerization of freight makes intermodal transport especially efficient and cost-effective. Using the same container, goods and materials can be hooked up to trucks, stacked onto cargo ships, or loaded onto airplanes and trains without ever opening the container. This not only decreases the cost and increases the speed of freight transportation but reduces the chance of breakage and loss because the container is never disturbed.
As a result of favorable trade policies, exports account for roughly 25% of GDP worldwide, compared to roughly 15% from 20-30 years ago. In the United States, the trucking industry cannot manage the extra freight, leading to an increased diversion of freight to railroad transport.
Countries that do not accept Open-Door Policies, like India, see less growth in intermodal transport. High taxes on imports keep the manufacturing base local, allowing local products to compete favorably with foreign products. Other developing nations face the challenges of inflation and poor infrastructure (roads, rails, ports, etc.) which make intermodal transit impractical, prohibitively expensive or both.
The Benefits of Intermodal Transportation to End-User Businesses.
For the countries where it is practical, intermodal transportation offers fast delivery with improved security with less cargo handling, reducing the likelihood of damage. End-user companies use these advantages to provide the rapid order fulfillment modern consumers expect.
The increased efficiency of end-user intermodal transport allows warehouses to be used more efficiently, with fewer resources devoted to transportation management. Atlanta, Chicago, and Dallas, all U.S. cities with high freight traffic, have seen a year-over-year increase of warehouse inventory of between 3% and 12% between 2013 and 2018, partially due to the practicality of intermodal transport.