Perhaps no logistics mode of transportation was hit harder by the COVID-19 pandemic than intermodal.
COVID-related production and transportation shutdowns caused intermodal volumes to drop Y/Y in 2020 by 12.9%. But while demand rebounded in 2021, capacity did not.
Labor and equipment shortages combined with changes in consumption and distribution patterns to stifle a potential comeback year for rail freight.
Intermodal volumes bounced back a disappointing 3.9% in 2021, falling short of far more optimistic predictions.
So midway through 2022, where do we stand?
Some real strides are being made to get intermodal rolling again year, but it’s going to take a concerted effort by shippers, carriers, IMCs and railroads to really get it back on track.
Here are six intermodal trends that are impacting the mode and its market this year as well as three things shippers can do to get better service for their intermodal freight.
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6 Intermodal Market Trends for 2022
1. People are more aware of supply chain issues — especially intermodal ones.
2021 was the year “supply chain issues” became a topic of conversation at both the dinner table and the boardroom table.
The biggest supply chain story of the year was the West Coast port backlog. For ordinary Americans, it meant lengthy delays for goods they had already ordered.
For business executives, it meant a new understanding of logistics a key competitive advantage rather than a hidden cost center.
With long-dwelling containers dominating the news, intermodal shippers, railroads and drayage carriers alike saw the inner workings of their corner of the logistics landscape suddenly put in the spotlight.
The result? In 2022, both business leaders and the general public know to look to container volume and movement as a key indicator of whether or not our supply chains are “back to normal.”
2. Capacity issues have improved, but they persist.
The issues that created challenges for intermodal shippers over the past two years remain ongoing, but we are seeing some improvement.
The port situation is looking better in 2022, but it’s far from resolved — there are still just under 30 ships waiting outside the Port of Los Angeles, down from a high of 109 last year.
The factors that are stalling recovery are the same ones that caused the issues in the first place:
- Labor issues in all facets of intermodal shipping. Ports are struggling to hire dock workers, shippers are struggling to hire loading dock workers and the driver shortage is well-documented.
- Mispositioned equipment and equipment shortages. Shipping patterns changed in 2020 and 2021, with more freight moved directly inland to rapidly meet new direct to consumer demand. There were not enough chassis to deal with this influx, causing containers to pile up at ramps.
- Warehouse saturation. Retailers amassed too much inventory, and they’re still working on liquidating it so they can keep new containers moving.
3. Railroads are introducing new technology to improve velocity.
The key indicator of whether or not intermodal transit is getting healthier is how fast containers are moving on average through the various parts of their journeys.
In 2021, as many as five extra days of transit time were added to intermodal shipments in the U.S. Much of this is due to excess dwell time, and steps to improve it need to take place at the origin ramp.
To improve velocity, railroads are doing everything they can to get drayage drivers into and out of ramps as efficiently as possible.
This includes investing in novel technologies like Union Pacific’s Precision Gating Technology (PGT).
When deployed in tandem with their mobile app, this mobile gating technology can eliminate kiosk check-ins at ramps and allow drivers to proceed directly to designated parking spots.
It’s a glimpse into the future of intermodal, where many of the barriers that have slowed movement in the past are falling away.
4. Drayage driver experience is more important than ever.
To alleviate the labor issues that continue to plague truck driving, the quality of life for drivers is going to have to improve.
This isn’t just the responsibility of trucking companies — everyone involved in intermodal shipping is in this together, and railroads are working to do their part.
Railroads are looking to improve the driver experience in ways both drastic and simple, from using the technology described above to reduce wait times to simply installing a bathroom for drivers to use at their ramps so they don’t have to stop at a truck stop on the way in.
They’re also replacing signage to improve visual guidance throughout their ramps so drivers — especially new ones — can be confident that they’re heading in the right direction.
5. Railroads are purchasing chassis to help with the equipment shortage.
The railroads aren’t just trying to help address the lack of drivers. They’re stepping in to address the equipment shortages impacting intermodal transit as well.
By the end of last year, Norfolk Southern and Union Pacific had ordered nearly 10,000 combined new 53’ domestic chassis, with several thousand of them already online midway through 2022. These chassis can be deployed at ramps nationwide to get containers moving again that would have been stuck waiting last year.
Intermodal equipment providers such as DCLI are also adding to their chassis stockpile, acquiring both domestic- and international-sized equipment to help handle any container riding the rails.
6. AB5 is now the law in California, and it could impact drayage rates and capacity.
On June 30, the Supreme Court declined to hear the California Trucking Association’s appeal of a U.S. Court of Appeals decision. This means California’s controversial AB5 labor law now applies to the state’s trucking industry.
As a result, many carriers will have to reclassify their owner-operator drivers currently working as independent contractors to employees eligible for benefits and subject to payroll tax — at least if they want to keep working with those drivers. The independent contractor model is common in the drayage community, and AB5 will impact carriers that operate in and out of ports and intermodal ramps.
While near-term enforcement might be limited, and the exact portion of the driver base impacted by AB5 is unknown, it will likely have some impact on rates and capacity.
Forward-looking drayage carriers should have already been planning for its impact, but many could have been counting on the law being overturned. In the coming months, we’ll have more clarity on how much it will impact the California drayage carrier community.
Three Tips for Successful Intermodal Shipping in 2022
1. Prioritize communication more than ever.
The issues affecting the intermodal market won’t get resolved unless everyone involved is on the same page.
As an intermodal shipper, you should remain as open as possible with relevant information so your providers are best able to serve you.
Communicate any delays or schedule changes as soon as possible so your drayage drivers don’t waste time traveling to you for a missed pick-up.
The system is already so strained as it is that you owe it to yourself and everyone else using it to avoid adding unnecessary inefficiencies.
If you can trust your shipper counterparts and your providers to make the same good faith effort, you should all be able to remain agile in the face of exceptions.
2. Identify your ideal intermodal freight.
If you want to get the most out of intermodal shipping — in 2022 or in any year — you need to know what freight makes sense to send on the rails and what doesn’t.
This means meticulously keeping clean and robust internal data about your freight volumes and lanes so you can understand:
- If it will be cost-effective to utilize intermodal.
- If intermodal timetables will work for you (i.e. if it’s not especially time-sensitive freight).
- If you can potentially realize sustainability benefits by shipping intermodal.
Once you’re found your intermodal-ready freight, commit to sticking with it on the rails for a period of time. This will help you refine your own process for handling it and let you really start to see the benefits of this mode.
3. Stay as flexible as possible.
While it’s still true that intermodal takes more planning than truckload shipping, you should avoid getting married to even your best laid plans.
In the past several years, it’s been more likely than not that intermodal shipments will encounter some sort of exception — the only way to make it through has been to roll with the punches and adjust with agility.
Even as capacity improves, this remains true. In fact, it might make the most sense to get out of a modal shipping mindset and into one focused more on identifying what every shipment needs to get where it’s going.
This doesn’t mean disregarding the advice above about committing to intermodal as a long-term play, however.
It just means that for each load you move, you should keep your eye on current market conditions and leave yourself open to alternatives like a spot truckload shipment here and there to help you stay ahead of delays.
Ship Intermodal With Coyote in 2022 and Beyond
Want to know the current state of the intermodal market and whether you should convert some of your upcoming truckload freight? Just ask an experienced intermodal marketing company (IMC).
Our intermodal specialists have their eyes open, their ears to the ground and a robust suite of operational data at their fingertips to guide your next load efficiently toward its destination.
If you’re ready to ship intermodal today, you can request a quote right now. We’ll get back to you promptly with rates, timing information and advice for how you can best send your freight on the rails.