Rail Intermodal: Where Rail Meets Road

Double Stack APL train heading East on the Gila Sub between Yuma and Tucson Arizona

Intermodal solutions gather steam as shippers track the financial and efficiency benefits of combining truck and rail transport.

The U.S. railroad has always been measured by time. At the outset, it was a uniform system to mediate time differences across the United States, and build reliability into an erratic and rapidly expanding rail network. Railroad time remains a lasting standard.

By the time the Staggers Rail Act of 1980 rolled around a century later, however, the railroad’s relevance as a mass means for moving non-commodity freight had waned considerably. It was no longer symbolic of an industrial and cultural awakening; rather, it became an indictment of an archaic and constrained mode of transport that had been quickly passed by a freewheeling motor freight industry.

Switch tracks to the present, and history is repeating itself. The transportation industry is turning back time. Supply chains have become more sophisticated in accurately forecasting and responding to demand. In turn, this flexibility allows for longer transportation moves, making time slightly less relevant. Cost and capacity are critical flashpoints, so shippers are willing to trade lead times for space availability at a lower price. They also recognize the advantages they can gain by pairing over-the-road flexibility with longer-haul economy. Past misconceptions about rail are now largely muted as industry moves toward an intermodal tipping point.

Over the past 30 years, the rail industry has made great strides re-inventing itself within a 21st-century supply chain defined by efficiency, economy, and sustainability—all hallmarks of today’s railroads.

“This is not the old railroad. In the past, rail deliveries took up to two weeks,” says Jim Kleist, vice president of operations for Railex, a Riverhead, N.Y.-based rail distribution company. “Companies that shipped by rail lived with long lead times because they had no other options. It was the nature of the system.”

“Twenty years ago, shippers perceived intermodalism as unreliable,” says John Lanigan, executive vice president and chief marketing officer for Fort Worth, Texas-based BNSF Railway. “Over time, their concerns have been erased.”

Uncorking Efficiencies

Woodinville, Wash.-based Ste. Michelle Wine Estates takes great care with its product shipments. In the wine industry, every ounce of attention and detail helps ensure the product’s quality remains uncompromised from source to cellar to sommelier. Rail transport was never a viable option for Ste. Michelle—until it began working with Railex.

Railex, which began operations in 2006, is a transportation company moving in a 3PL direction. Its U.S. network features three rail-served, refrigerated mega-transload distribution centers in Delano, Calif.; Wallula, Wash.; and Rotterdam, N.Y., and a 55-car refrigerated unit train with multiple weekly departures. Railex’s service can transport the equivalent of 220 trucks of refrigerated merchandise coast-to-coast in five days.

The rail carrier’s on-time assurance turned Ste. Michelle in its direction. “Railex is located just 40 miles from the Columbia Crest winery, our major production facility,” says Rob McKinney, vice president of operations at Ste. Michelle Wine Estates. “The price of fuel was rising, so we consulted Railex.”

The winery had explored rail transportation before, but never found the appropriate circumstances or partner to meet its stringent requirements.

“We evaluated rail shipping, and considered the metrics of breakage, product damage, and temperature control, but couldn’t find a way to bridge our quality concerns to minimize damage and move shipments efficiently,” says McKinney.

Careful attention to temperature control and handling during warehousing and intermodal transport helps ensure the quality of Ste. Michelle Wine Estate’s products.

In previous test runs, the rigors of intermodal transit resulted in bottle scuffing and product damage. Temperature is the biggest concern. If it’s too cold, certain wines produce sediment or tartrate fallout; conversely, too much heat can push the cork and oxidize the wine. Ste. Michelle’s second-highest expense after the wine is its packaging. Damage to either is unacceptable.

But the winery’s business was growing, and it needed a partner to manage its transportation and logistics. “We had been our own distribution point and warehouse, and oversaw truck traffic and orders,” McKinney says. “We reached the point where it would require significant capital to expand infrastructure.”

Railex was well aware of Ste. Michelle’s expectations when the carrier entered the picture. “When you ship French fries, for example, you deal with experts in moving frozen food,” says McKinney. “But when you manage wine, you may be dealing with the winemakers. It’s their passion, their creation—an art form.”

Railex proved to be up to the task, providing reliable and secure five-day service from Wallula to Rotterdam. The railcars are temperature-controlled, and Ste. Michelle can track the shipments during transit. With pre-determined temperature thresholds in place, it can be alerted if conditions change. Then Railex can coordinate with its rail partners—Union Pacific in the western United States and CSX in the eastern states—to manage the problem.

The transportation company’s value to shippers is its capacity to be multi-dimensional. In addition to moving product by rail, it also stores inventory and arranges truck transportation—which is especially convenient for Ste. Michelle on the East Coast, where it imports product from partners in Italy. Railex can move shipments via truck out of its Rotterdam facility instead of sending them to the West Coast for re-distribution.

Prior to working with Railex, Ste. Michelle was transporting approximately two million cases per year by truck, in 10 to 15 loads daily. While it still uses over-the-road transport to make shorter-haul deliveries in the west, the rail/intermodal component now serves a large share of its business.

Railex moves roughly one million cases annually, and stores about 500,000 units. More telling, it can squeeze three times as much wine on a train than a truck, which provides considerable sustainability gains in terms of reducing fuel use and carbon emissions.

Pulling the Trigger

Ste. Michelle’s patience in waiting for the right opportunity to come along before it made the switch to intermodal has served the company well. For other intrepid users that jumped in early on, experiences weren’t always successful.

“Some shippers started using intermodal extensively, and the results weren’t always what they expected,” says Dave Howland, vice president of land transport services for APL Logistics, a global third-party logistics (3PL) provider with U.S. headquarters in Scottsdale, Ariz. “Companies coming back into the marketplace now are more disciplined—opening one lane, then another. They are working their way into the business rather than jumping in with both feet. That works better, because they are in a more controlled environment.”

The 3PL only recently re-entered the domestic market after a 10-year absence following ocean carrier NOL’s acquisition of its steamship line and divestiture of the intermodal business. APL Logistics continued to invest in and develop intermodal capabilities elsewhere around the world, and by 2011, the time was right to get back into the U.S. domestic game. “Many ocean shippers were asking when we’d begin serving them domestically again,” Howland explains.

APL handles half a million intermodal loads annually, including 100,000 automotive moves between the United States and Mexico, so getting back into the U.S. game didn’t require a huge leap of faith. Plus, U.S. market demand for intermodal has been on a marked growth trajectory.

In the first quarter of 2012, domestic intermodal container volume increased 14.9 percent year-over-year, according to the Intermodal Association of North America’s Intermodal Market Trends and Statistics report. Gains were largest in the east, where intermodal faces more competition from trucking.

In 2011, intermodal container volume set a new record with 12.4 million moves, surpassing 2007’s record year by nearly four percent. Over the past five years, international and domestic growth has progressed at a steady clip, despite the recession (see chart, below).

The reasons for this surge are myriad. Welch’s, a Concord, Mass.-based food manufacturer famous for its grape juice, made the switch to intermodal about four years ago—largely to offset rising fuel costs, but also to achieve sustainability gains.

Intermodal Traffic: Movin’ On Up

Over the past five years, international and domestic intermodal traffic has grown steadily overall, despite the recession. In 2011, more than 12.4 million intermodal containers moved worldwide.

Source: IANA Intermodal Market Trends and Statistics

“Intermodal was a less expensive approach,” says Dan Biggs, director of customer logistics, Welch’s. “The downside lies in the longer lead times, which are not always well-received by customers.” Consignees often fear rail service is inconsistent, or that they will have to hedge risk by carrying more inventory.

Intermodal is a small part of the total freight mix for Welch’s. The company has used it in certain lanes—such as between Michigan and the Pacific Northwest, and from Erie, Pa., to Florida—where it doesn’t have a distribution presence or can get competitive transit times. It also has the ability to switch between intermodal and truck transport, as it plans to do in the Pacific Northwest per promises to customers.

While some shippers foreign to intermodal are still cautious, there are also reasons for optimism. For example, on-time delivery times are becoming more competitive with trucks in certain lanes.

“Intermodal services are becoming more dependable, with most service lanes in the high-90 percentile for on-time delivery,” says Howland. “Industries across the board are coming to us. If fuel costs stay high and the driver pool remains tight, intermodal will be more competitive in the 700-mile length of haul. In the eastern United States, it is used for even shorter distances.”

Improved service levels, the environmental benefits of converting truck to rail, and the availability of capacity are all intermodal drivers. “The flex capacity that rail brings—such as the ability to add units or train starts—allows responsiveness not available to motor carriers that are overbooked or short of drivers,” says Lanigan. “The threat of a driver shortage has caused shippers to hedge bets in case the trucking industry experiences capacity issues. The move to intermodalism is a combination of all these factors. Are they weighted equally? No. Each shipper has its own trigger points.”

After the Conversion

Ste. Michelle’s trigger was recognizing it could transport product across the United States more economically and sustainably without sacrificing quality. That its partnership with Railex has moved beyond a functional need and now allows it to grow more organically on its own is an added bonus.

“Handing off transportation to an expert allowed us to focus on our core business,” says McKinney. “We’re maintaining our staff; we haven’t reduced labor. We’re taking the opportunity internally to re-train employees and build a flexible, agile, cross-functional work team that can float anywhere within our winery operations.”

As Railex expands its network—it is considering a distribution location in the Southeast—Ste. Michelle benefits by being able to deliver product closer to customers via rail, reducing the last-mile dray. Intermodal also provides a security blanket as looming capacity concerns threaten transportation economy and efficiency.

“Shippers are weighing two factors: transportation costs and space availability,” says Kleist. “Where is capacity, and what will it look like down the road?”

Ste. Michelle’s conversion has also compelled it to evaluate all the inbound raw materials it transports via truck—empty glass and packaging, for example—to determine if there is an opportunity to use rail.

“We transport thousands of barrels by truck annually,” says McKinney. “We can analyze our freight needs to determine if it makes sense to leverage rail and Railex’s buying power with other carriers. We’ll consider anything that increases efficiency and improves quality.”

Ste. Michelle expects Railex to eventually take care of special projects, such as export orders that require compliance labeling. The service provider may also manage Ste. Michelle’s direct-to-consumer business, because it is already tasked with storing inventory and building orders. All these functions are currently performed on- site at the winery’s Columbia Crest facility. In the future, they will be transitioned to Railex to free up space and resources.

“If we’re holding all the product, we need to be able to perform the peripheral tasks,” says Kleist. “Our focus is on ensuring we provide the necessary care, custody, and control through the rest of the chain, from pickup to delivery. Ste. Michelle and Railex are finding all the savings possible in the entire process.”

No Time Like the Present

As a transportation concept, intermodalism is far from new. It has always been an important part of the global supply chain. Motor freight is the anchor at both ends of the divide, with air and ocean in between. But on the U.S. domestic side, intermodal has never been compulsory. Ample opportunities exist for shippers and consignees to leverage the economy of rail transport—whether it’s converting truckloads to railcars, or expediting containers in and out of congested cities and ports.

Intermediaries such as Railex and APL Logistics understand the value of pushing more freight onto the tracks, as well as their importance in liaising between railroads, shippers, and truckers.

“We view our role as being an integrator,” says Howland. “Many shippers have outsourced transportation management, not just intermodal, to us. Our goal is to take the entire book of freight, find the best solution, and uncover more intermodal and load consolidation options. We’re converting 10 to 15 percent of over-the-road moves to intermodal with many customers.”

The railroads play their own unique role, as well. For example, BNSF Railway’s Next Generation Intermodal service provides a platform for trucking companies and shippers to work together more collaboratively.

“We’re rewriting the script on what an acceptable dray is from a length-of-haul standpoint, and how shippers can access denser markets and take advantage of intermodal opportunities by draying a little farther to origins and destinations,” says Lanigan.

Then there’s the matter of site selection. Railex’s Wallula distribution center is 40 miles from Ste. Michelle’s Columbia Crest winery, providing a relatively short truck haul by West Coast standards.

“In eastern Washington, many frozen and fresh food processors are migrating from the west side of the state closer to where the product is being grown,” explains Kleist. “Companies may follow a similar pattern with transportation. Businesses gain options if they are located near an intermodal facility. Intermodal won’t be the complete answer for every company, but it can be a bigger part of the solution.”

Some companies are looking to locate even closer to intermodal ramps so they can radically reduce trucking costs. Lanigan cites retailers that move a high volume of low-value product and can pad the bottom line by using rail. Craft supply retailer Michaels Stores, for example, has a major distribution center near BNSF Railway’s intermodal facility in Fort Worth. Companies that locate DCs in these areas can greatly reduce drayage time and expense.

This type of exposure is having a sea-change effect within the transportation and logistics sector. As more well-known brands make the jump, they raise the profile of intermodal solutions, making them an easier sell for carriers such as BNSF Railway. “When you can show a prospective customer a list of top companies that are moving freight with you, it’s pretty tough for them to say intermodal can’t work,” notes Lanigan.

The change in industry’s perception of intermodalism is pervasive enough that the only pockets of resistance Lanigan sees among shippers tend to be generational—people who were around 15 to 25 years ago and had a negative experience in intermodal’s early days.

Industry has come a long way in mediating the complexity of moving freight between modes and ensuring visibility through interchanges. The execution piece is no longer the sticking point. “What challenges us now is skepticism,” says Kleist.

For companies such as Ste. Michelle, Welch’s, and Michaels Stores, few doubts linger about intermodal’s potential. Its time is now.

Crossdocking Streamlines Freight Movement

How can an organization eliminate or reduce waste and increase speed in their supply chain? One answer is to replace warehouses and/or manufacturing locations with crossdock facilities or “landing pads.”

Tremendous pressure from global competition and just-in-time (JIT) operations in the marketplace has spurred many manufacturers to adopt a lean production philosophy—and a lean supply chain that supports that philosophy. An important element in the identifying and designing such supply chains is an effective line-haul/crossdocking end-user operation.

Crossdocking involves processing inventory or goods on incoming shipments so they can be easily sorted at a terminal, warehouse, or landing pad for outgoing shipments based on final destination to end user or distributor. The items are line-haul cleared as one shipment; moved from the incoming-vehicle docking point to the outgoing-vehicle docking point; then transported to the end user or distributor.

For example, business units headquartered in either Canada or the United States within 500 miles of the border should consider moving shipments by line-haul to crossdock facility and on to the end user. Many companies manufacture product in both the United States and Canada, duplicating their effort, risking product integrity, sourcing raw material and components from the same suppliers, and adding endless inventory to the bottom line—never mind the labor cost in managing that inventory.

Seamless Distribution

As companies strive to be more effective and cost conscious, many have taken distribution and crossdocking to another level by eliminating their current cross-border manufacturing and warehouse facilities. This allows them to secure product integrity and reduce major overhead expenses such as buildings, maintenance, and labor costs, while servicing the end user through seamless distribution. Having total control of customer orders and the ability to invoice the orders and control end-of-month target figures makes this operation favorable to many organizations.

Note that not only outbound shipments can be crossdocked, but also inbound raw materials and supplier components can be handled in this manner, resulting in a cost-effective and controlled distribution environment.

Inbound raw materials and components that are centrally crossdocked, then line-hauled to final destination, support Lean manufacturing and ensure JIT inventory for the organization’s needs and procurements goals.

A major consumer goods manufacturing organization based in Seattle, Wash., had major issues with inbound raw materials and component shipments being released by their East Coast suppliers. These orders were entered by purchasing, then released and tendered to common carriers with basically no tracking or correspondence from the supplier as to when the manufacturer could expect the product.

This organization was in the process of moving to JIT manufacturing, and the lead times of the raw materials and components weren’t going to further those goals. The costs of multiple LTL shipments were also adding up, and the lack of communication was a major factor.

The Seattle company identified where these valued suppliers were located, and developed a crossdocking operation. Suppliers released orders based on manufacturing requirements, and shipped goods directly to the crossdock location in Chicago. The crossdock facility documented the order details, then relayed them back to the company’s purchasing team, providing flexibility in loading the line-haul releases from Chicago to Seattle. The new process saved time and transportation spend, and gave the company more control.

Thinking Bigger

The landing pad concept can be used in strategic geographical locations, not only domestically but also internationally. These locations can service multiple needs, such as warehousing short-term product for tender; acting as a will-call destination serving a company’s field sales force or master distributor; and staging small and low-priority inventory for future needs.

In this economy, organizations are being forced to think outside the box for not only effective distribution practices as a cost-effective way of operating, but to be more efficient and customer-focused on service needs and staying far enough away from the competition.

The Best Companies Get This Right First

If your business lacks a solid foundation, even things like smart employees and great ideas can’t save you from trouble down the road.

One out of every two Inc. 5000 CEOs surveyed has the qualities of a “Creative Builder CEO” (see Inc.’s 2012 CEO survey). If you match those characteristics, you are similar to iconic leaders like Steve Jobs, not the worst company to keep for sure. However, in my experience there are some unintended consequences of this leadership approach.

See if any of these statements resonate with you:

  1. “I feel like we often get the hard things right and the easy things wrong in the areas of consistency, service, quality, or marketing.”
  2. “Sometimes it feels like the cobbler’s kids around here. We seem to get lots of things right for our customers but make mistakes in those exact same areas in our own company.”
  3. “I am just concerned that we can’t grow if we keep making fundamental mistakes.”

Sound familiar? If so, you’re probably familiar with the urge to get “back to the basics,” too. I have heard this phrase in all of its formats countless times from the mouths of CEOs who see the remarkable potential of their companies thwarted by seemingly small hurdles. Declaring that you need to get back to basics may be a well-intentioned first step, but it’s not actionable or sustainable in the long run.

So before you take that leap into the re-systemization of tasks and punch listing of performance (both of which have real benefits), I encourage you first to make certain that the underlying “basics” of your business are in place. The basics must capture the essence of excellence that drives all other behaviors.


“Act as if your loved one is on the (operating) table.”–IMS, Integrated Medical Systems (surgical and laparoscopic device repair, efficiency of operating room instrumentation, sterile processing management and consulting)

“Great food. Clean place. Friendly service.”–The Garden Café in Omaha

“Any size, any shape, any time, any place, always right, every day.”–Langham Logistics (3PL and 4PL freight logistics and transportation)

These simple examples of guiding precepts give a clear standard against which all decisions, procedures, and policies inside of those companies can be tested. Here are three tips to develop your own:

  1. Develop a simple message.Mine is, “We help companies double the speed that they double their company by landing transformational sales.” What is the underlying value that you are promising to your customers? Can you say it in a sentence that is about them in the language they understand?
  2. Say it everywhere, live it everywhere. I can ask any one of the employees in the companies that I have cited, and they can deliver their company’s basic line. Cool–memorization is a good first step. The real proof is in asking that employee the second question, “How do you make that happen for our clients in your job every day?” If they can answer that in one to two sentences, you have integrity in your claim, alignment in your team, and a really good chance that the basics truly mean something.
  3. Trust and verify.Final step: Measure how well the company is living up to this message. What are the metrics that will verify you’ve met those basic promises? The dashboard of performance metrics that rolls up for your operational performance should link clearly and causally to your basic promise.

More dashboards, punch lists, and training are not enough to overcome shortfalls in your organization’s performance of the basics. You need the driving essence to be defined, understood, and measured.

Langham Logistics adds Director of Intermodal and Brokerage


INDIANAPOLIS, March 20, 2012 – Langham Logistics continues to expand their supply chain services by adding a new and highly experienced logistics professional to their leadership team.  Jeff Routt brings 17 years of operational, entrepreneurial and business development experience in the intermodal, brokerage and supply chain arena.  As Director of Intermodal and Brokerage, Jeff is tasked with developing and enhancing Langham’s already strong supply chain value proposition.

“We are proud of what we’ve been able to offer our clients over the last 24 years and very much appreciate the relationships that have been developed” said Cathy Langham, CEO/Co-Owner of Langham Logistics.  “At the same time, we must continue to proactively add value for our customers.  As the logistics marketplace continues to gain new providers, companies like Langham that are established and are proven to be quality partners continue to stay ahead of the game”.

Langham has made the commitment and investments to put resources in place that will focus on the emerging challenges of the industry.  By leveraging their current infrastructure, people, and facilities, as well as executing on a strategy led by Mr. Routt  that benefits its existing and potential client base, Langham believes  that value, both monetarily and in enhanced service to their customers,  will be achieved for the long term.

“As the driver shortage continues, and transportation demands continues to increase, Langham Logistics is now positioned to fill a much needed void for their clients and those looking for a quality partner to help with their shipping needs” said Langham’s newest addition, Jeff Routt.  “As market turmoil continues in the transportation industry, the economic recovery ebbs and flows, and the industry and environmental fundamentals continue to evolve, Langham, once again, stays ahead of the curve”.

Stay up to date with all the news from Langham Logistics and its customers with the Langham Logistics website (www.elangham.com) and on Twitter – @LanghamLogistics.

About Langham Logistics:  Langham Logistics, Inc. is a 23-year-old global freight management organization specializing in supply chain optimization and consulting services, domestic and international transportation, fulfillment, warehousing and distribution operations.  Langham operates from a global logistics center in Indianapolis, IN and maintains strong partner relationships across the globe to assist with tactical operations for its customers.


Langham Logistics lands deal to manage the marketing distribution for Toyota Motor Sales, Inc.

INDIANAPOLIS, January 16, 2012 – Langham Logistics has agreed on a 3 year contract with Toyota Motor Sales, Inc. to manage a logistics operation in Los Angeles, CA. This operation handles the fulfillment and distribution of Toyota’s marketing materials, its trade show events, and also the distribution of merchandise to dealerships throughout North America.   Langham has added 50 employees to its staff in California, and will operate a 90,000 square foot warehouse in Compton.

In addition to managing the fulfillment group, Langham will manage administration, graphics and print purchasing as well as a small personal transport service at Toyota Motor Sales headquarters in Torrance, CA.  The Toyota ”South Campus” where the transport service operates is a 40 acre office park with over 625,000 square feet of office space.  All of the vehicles are run on electric power and have zero emissions, meeting the green standards set by Toyota Motor Sales, Inc.

Stay up to date with all the news from Langham Logistics and its customers with the Langham Logistics blog (www.elangham.com) and on Twitter – @LanghamLogistics.

About Langham Logistics:  Langham Logistics, Inc. is a 23-year-old global freight management organization specializing in supply chain optimization and consulting services, domestic and international transportation, fulfillment, warehousing and distribution operations.  Langham operates from a global logistics center in Indianapolis, IN and maintains strong partner relationships across the globe to assist with tactical operations for its customers.

Indianapolis Airport Authority awards a multi-year contract to Langham Airport Logistics

Langham Airport Logistics has been awarded an exclusive contract to provide logistics support services for the Indianapolis international airport.

INDIANAPOLIS, January 9, 2012 – Langham Airport Logistics LLC (LAL), a subsidiary of Langham Logistics, was recently awarded an exclusive multi-year contract to provide logistics support services for the Indianapolis International Airport,  including all concessionaires, the IAA, the TSA, the airlines, rental car agencies, and all other tenants of the airport terminal.  Under this contract, LAL will manage the airport’s Central Receiving Dock with responsibility for shipment scheduling, product receiving and distribution, and overall Dock Master duties.

Langham was awarded this contract initially in November of 2008, and the company is delighted to have been chosen to continue its service to IND.  “The airport is a great asset for central Indiana, and we are very proud to continue to be part of its success” said Cathy Langham, CEO/Co-owner of LAL’s parent company, Langham Logistics.  “We welcome the opportunity to take on projects that continue to highlight our supply chain and freight management growth strategy.”

LAL will continue to be located on-site at the airport and operate to manage products coming into the airport terminal.  Russ Duvall will continue to lead the LAL team.  “We are pleased to award this contract to Langham Airport Logistics, and appreciate the level of technology, customer service and creativity they have dedicated to IND” comments Jeremiah Wise, Director of Retail for IND. “We are excited about continuing to grow Indiana companies.”

Stay up to date with all the news from Langham Logistics and its customers with the Langham Logistics website (www.elangham.com) and on Twitter – @LanghamLogistics.

About Langham Airport Logistics:  Langham Airport Logistics, LLC, is a 3-year-old subsidiary of Langham Logistics, a global freight management organization specializing in supply chain optimization and consulting services, domestic and international transportation, fulfillment, warehousing and distribution operations.  LAL provides logistical support to airport concessions facilities.

 CONTACT: Holly Reynolds, (317) 471-5145, hollyreynolds@elangham.com