Most people associate the names Swift Transportation, Schneider National, and J.B. Hunt with long-haul trucking. What they don’t realize, however, is that all three are becoming major players in the world of railroad freight – specifically when it comes to intermodal shipments.

While “intermodal” is broadly defined as the movement of goods by more than one mode of transportation, such as from ocean carrier to railroad or air carrier to truck, the term is now most commonly associated with freight that moves by railroad and truck combination.

For much of their history in the United States, the railroad and trucking industries have been at loggerheads, fighting tooth and nail for long-haul freight. Today, however, there’s been a broad shift in those attitudes, largely as a result the “maxing out” of rail capacity. That factor has helped new cooperative intermodal ventures between railroads and truckers – though both still compete furiously in many of the same markets.

In December of last year, the Burlington Northern and Santa Fe Railway Company (BNSF) of Fort Worth, TX, and truckload giant Swift Transportation Co. of Phoeniz, AZ, joined forces to offer intermodal services for perishable commodities. The two companies have initially provided temperature-controlled services moving between the West Coast, the Midwest and the Southeastern U.S., with BNSF providing boxcar transportation services for long-haul moves and Swift providing short-haul highway transportation.

“Today, many shippers are hesitant to use a rail/truck transportation package because of the complexity of having to coordinate with multiple parties,” says Chuck Schultz, BNSF executive vice president and chief marketing officer. “We hope to make the transportation process seamless by providing one point of contact to make bimodal shipping easier and more economical.”

In the past, the Achilles heel of intermodal service has been the conflict between delivery time and cost. Generally, it has been less expensive to ship goods via an intermodal combination than by truck alone. However, as rail capacity diminished over the 1990s and freight demand increased, transit times took a beating, leaving many shippers reluctant to send their goods via intermodal options.

“Until now, truck level service and truck level transits have not generally been associated with intermodal business,” said Tom Bartel, director of TruckRail Express at truckload carrier Schneider National, Green Bay, WI. “Standard intermodal providers are generally not able to offer transits and reliability equal to a truck as traditional intermodal transit is usually a day slower than over-the-road.”

Schneider is seeking to change that with its own unique intermodal service, TruckRail Express, unveiled in November of last year. Schnedier hopes to combine truck-level transit of freight between 500 and 600 miles per day with intermodal-level savings via its TruckRail option. The service is offered for direct routes with origins east of Kansas City, MO, to destinations in California, Oregon, and Washington.

According to the Railroad-Shipper Transportation Advisory Council (RSTAC), created by the U.S. Congress as part of the Interstate Commerce Commission Termination Act of 1995, the growth of intermodal service has been a necessary trend to offset shrinking railroad capacity over the last two decades.

In 1980, prior to the enactment of the Staggers Rail Act, the rail industry was near bankruptcy, says RSTAC. Regulation impeded the railroads from operating efficiently and pricing their services competitively – resulting in a loss of market share to other transportation modes and a reduction in rail investment.

The RSTAC says Staggers deregulation strengthened the rail industry by permitting system and pricing rationalization. Yet since that act went into effect, the number of total rail miles in the United States has decline by 36% while total tonnage has increased by 41%.

Increasing intermodal business made sense in the 1980s because as long as variable costs are recovered, said the RSTAC, an increase in capacity utilization reduced the overall fixed cost per unit for the railroad providing such service. Thus, railroad balance sheets became increasingly attractive as railroads reduced excess capacity and overall cost per unit while increasing total revenues with the addition of the intermodal tonnage, it said. As a result, since 1986 intermodal ton-miles have increased 109%.

However, by 1997, the existing rail system arrived at a critical juncture, said RSTAC. The problems resulted mainly from the rail network reaching its operational capacity limit, coupled with the rail industry’s lack of resources to manage the current system or increase its capacity. In addition, the RSTAC found many communities are demanding a reduction in railroad traffic through key interchange points that would further constrain the system. “Whatever the cause, it is clear that today's demand for rail capacity outstrips the available supply,” the group said.

That’s why truckers have found more willingness to develop joint intermodal service offerings in the last few years – along with some healthy financial results, as well.

J.B. Hunt Transport Services of Lowell, AR, is a prime example. One of the largest truckload carriers in the U.S., J.B. Hunt – like every other transportation provider – has been hit hard by the slowing economy and the aftershocks of the September 11 terrorist attacks of last year. Yet, despite declining trucking revenues over the last half of 2001, its intermodal service showed some surprising growth.

During the third quarter of 2001, revenues of J.B. Hunt’s trucking operations grew 1%, while its intermodal revenues rose 9%, compared to the same period in 2000. Even its dedicated contract carriage operations didn’t post such growth, though it did come in a close second with revenues rising 8% during the third quarter of 2001.

“In fact, the increase in intermodal operating income out-paced the growth in intermodal revenues when compared to the third quarter of 2000,” the carrier said in its earnings report. “This improvement comes despite intense cost pressures and economic woes impacting the entire transportation industry. While the company’s overall financial results are disappointing and economic uncertainty clouds the near-term future, the company is encouraged by the earnings consistency of its intermodal business.”

That healthy growth in intermodal service and profitability in the face of an economic recession is not limited to just J.B. Hunt. Intermodal trucking service increased over the same period even as overall intermodal activity declined. The Intermodal Association of North America (IANA) said that, while third quarter 2001 total intermodal and highway loads declined 9.8% compared to the same period in 2000, its industry survey found that there was an increase of 1.5% in highway loadings, with average revenue per intermodal load increasing 16.9% compared to the third quarter of 2000.

Those results – posted in the face of an economy in recession – should encourage more trucking companies to whistle a new intermodal tune in 2002.