July 5, 2022 | Business insights
The challenges of the supply chain crisis look set to persist through 2022 and even into 2023.
The future of transportation and logistics lies in embracing the right technologies, as well as accurate, real-time data. Companies need to stay agile and responsive to changing conditions. For these reasons, the right strategy is vital.
Intermodal transportation is yet another area facing challenges since the onset of the Covid-19 pandemic. The pandemic upended global supply chains, causing a worldwide crisis in transportation. As we enter the third year since the pandemic’s onset, these supply chain crises show no sign of abating anytime soon.
Import and export channels remain congested, and chaos reigns in West Coast ports, where infrastructure simply cannot cope with incoming cargo volume. Production shortages, goods scarcities, long delays, and escalating transport and storage costs have put businesses under threat. And all the while, consumer prices trend upward. These challenges look set to persist through 2022 and even into 2023.
While intermodal transportation has many advantages in a globalized world, the current conditions have also made its flaws evident. Worse, there’s no convenient quick-fix for the problem at hand, with so many moving parts entangled. It will take time, concerted effort, and substantial investment—in warehouses, technology, and labor, as well as ships, trucks, and other transport modes—to remedy the situation. In the meantime, producers and retailers should proactively explore new strategies to minimize disruptions.
Current State of Intermodal Transportation and Logistics
US container ports have struggled to absorb record cargo volumes since mid-2020. Operating above capacity for so long has resulted in overstuffed warehouses and congested rail and truck yards, not to mention a lack of vital equipment such as containers and steel trailers.
This lack of capacity goes beyond physical assets, extending to labor as well. Although demand for long-distance freight transport remains strong, these logjams have adversely impacted intermodal transportation services.
Rail transport has been the hardest hit. Blockages at intermodal hubs due to insufficient containers for rail freight, along with a lack of manpower and storage space, have crippled operations. In an effort to get goods where they need to be in the fastest time possible, cargo that would normally travel via rail is moving on trucks, even though it is more expensive. Tens of thousands of container loads are diverted from rail to the road every month on account of this crisis.
Are Global Supply Chains Too Complex?
This global supply chain disruption didn’t emerge out of just anywhere. Although the pandemic may have served as a catalyst, it simply exacerbated pre-existing vulnerabilities that had been growing for years. An overly complicated shipping network to move highly specialized products across oceans and continents has left supply chains stretched taut—and primed to snap at the slightest pressure. Covid-19 simply provided that pressure.
Many argue that simpler supply chains could cut global freight demand. A 2021 report from supply chain solutions provider, Thomas, indicates that 83% of North American firms are now looking at reshoring, in the wake of the current crisis. The goal is to future-proof supply routes and guard against the prospect of additional disruptions. Smaller transit networks, in theory, result in fewer cataclysmic breakdowns when something goes wrong.
Warehousing and Transportation Logistics
A deficit of transfer stations, distribution centers (warehouses), and transmodal terminals also play a major role in the supply chain bottleneck. According to a 2022 Logistics Manager’s Index (LMI) Report®, both warehousing and transportation capacity are shrinking rapidly.
Warehousing capacity has decreased consistently since mid-2020, while both warehouse utilization and prices trend upward. At the same time, insufficient storage space for goods is leading retailers to seek upstream distribution centers. Supply chain visibility in respect of last-mile delivery and third-party logistics has also been identified as a major challenge.
Railroads and Truckers Face Challenges
Even if the international shipping and warehousing issues could resolve themselves today, railway and trucking services would still pose a logistical problem. A shortage of labor has strained railway services since 2020.
After scaling back on staff early in the pandemic, the sharp rebound in intermodal demand caught them on the back foot. Operators have subsequently battled to replace key workers, and this struggle has been reflected in their lackluster performance metrics. From longer transit times to cars stranded in yards, these delays have only brought customers additional costs.
And while some railroads do have the capacity to handle increased loads, they run into a problem of truckers and shippers not returning containers fast enough. According to Union Pacific, the dwell times for boxes in the fourth quarter of 2021 were 44% higher than earlier in the year. This puts the spotlight back on a lack of warehouse, labor, and dray capacity.
But these obstacles aren’t confined to railway freight alone. Truckers also have to negotiate shortages of drivers and container chassis. Once again, the bottleneck can be traced back to over-burdened warehouses full of forward-stocked inventory and stranded containers.
Key Strategies to Minimize the Effects of Intermodal Transportation Congestion Due to a Lack of Facilities and Transport Stations
As evidenced above, the present congestion in intermodal transportation is the result of a host of disruptions, all at interplay with one another. Although many leading players in the industry and government agencies are tirelessly seeking to resolve the crisis, there is no end in sight yet.
While they work to remedy the situation, logistics and transportation companies cannot afford to remain idle. Succeeding (or even simply staying afloat) in this difficult climate calls for a reexamination of operational strategies to develop smarter solutions.
Leverage Technology to Increase Supply Chain and Intermodal Transportation Visibility
Supply chain visibility is key to managing the elevated traffic volumes that freight transportation providers are currently experiencing. From tracking and monitoring to capacity procurement, increased visibility can minimize the delays and additional costs associated with bottlenecks.
Following consignments along the entire supply chain—from release to delivery—is only the first step. The goal is to leverage technology to achieve full integration of planning, data, and operational systems, spanning the full range of transport modes. This means using predictive analytics tools to accurately track freight and anticipate precise arrival times. However, such intricate calculations require constant, detailed data sharing between carriers and logistics providers.
What Comes Next?
Up until a few years ago, most research regarding transport tracking focused primarily on road transport via trucks, since it is easier to track these vehicles than individual containers in vast intermodal transportation chains. Efforts have subsequently been made to develop models that include railway operators, transport companies, and inland terminals, by analyzing capacity utilization and departure times and frequencies.
Tech-wise, many of the devices and software programs needed to track shipments are already out there. Railway operators have systems installed to provide clients with detailed information on cargo status. Extending these networks to share information between cargo ships and land-based transportation services could improve supply-chain-wide visibility significantly.
The port operating system is the most likely intermediary for exchanging data between ships and rail operators. Integrating terminal management systems with rail planning can offer substantial efficiency benefits for intermodal transport.
Shipping companies, port operators, railways, and truckers all require better tools if they are to effectively integrate technology and automation to improve visibility and scalability. Streamlining supply chains is essential for growth and success in the industry. While this also requires a significant financial investment, the costs of not embracing technology are likely to prove much greater.
Consider Over-The-Road Trucking for Better Mobility
Intermodal trucking involves transporting only the first and last miles of freight that has otherwise been shipped via rail. In contrast, over-the-road trucking (ORT) focuses on transport via truck for the long haul.
In light of current supply chain disruptions and clogged distribution centers, many have turned to long-distance trucking as a solution. While the mobility benefits of ORT are significant, especially in the current crisis, what are the other pros and cons of each system?
ORT has proven effective in its ability to ship freight quickly and efficiently. ORT also offers considerably more flexibility in terms of routes, loads, and delivery times, offering a better-tailored service than intermodal systems. This is quite different from transportation via rail or air, which is subject to prescribed schedules and routes.
The speed of ORT also makes it effective for shipping time-sensitive goods, such as foodstuffs. Because it taps into such a vast network of drivers, ORT systems can also respond more quickly to schedule changes. Tracking technology such as GPS and digital logs ensures you know where your cargo is at all times and gives you the power to accurately estimate its arrival.
The US’s extensive highway network makes deliveries to almost any area feasible. However, ORT has its own set of potential challenges. Bear in mind that the longer distances traveled increase the possibility of delays due to different state regulations, traffic, and driver fatigue. Further, ORT has a higher carbon footprint than intermodal transportation and contributes to significant increases in pollution.
Improve Your Strategic Plans for Further Supply Chain Disruptions and Shortages
Traditional supply chain systems and transport logistics are unlikely to ever be the same again on the other side of the Covid-19 pandemic. Companies have grown more prepared to invest in flexible and responsive systems. Whereas previously interconnectedness may have been placed at a premium, new models will value resiliency above all else.
Reaching these shifted objectives will naturally require new strategies. Supply chains need streamlining to run smarter, faster, and in a more user-friendly fashion. What exactly does this entail?
For starters, companies need to achieve an equitable balance between costs and services. To balance between just-in-time shipping vs. overstocking and potential waste, robust supply chain management strategies are essential. As discussed earlier, appropriate technology and adequate, timely data resources are key.
A data-driven strategy should also factor in past experiences and interactions with suppliers. This helps businesses contain costs and make evidence-based decisions. Real-time data is useful in that it provides transparency across the company’s entire supply chain. It also helps in measuring performance, highlighting any gaps in procedures, and can enhance team performance and morale.
Companies should also consider investing in automated facilities to reduce exposure to employee shortages. The reduced warehouse traffic and less demanding manual labor expected of staff that comes with automation can also improve speed and accuracy.
Responsive logistical networks allow for better risk mitigation. Maintaining adequate supplies of stock can ensure that your customer base is kept satisfied and your brand identity preserved.
Change management is another important part of the process. This means creating digital systems that can help manage the supply chain. Beyond simply digitizing existing systems, this also entails developing, adopting, and implementing cutting-edge technologies, such as the Internet of Things (IoT), cloud-based computing, blockchain, artificial intelligence, and more.
Implement the Right Strategy, Find the Right Partner
The Covid-19 pandemic upended most assumptions about long-standing shipping strategies and has forced businesses to recalibrate approaches. Even in light of the current challenges, however, companies that adapt can look forward to a brighter future.
The future of transportation and logistics lies in embracing the right technologies, as well as accurate, real-time data. Companies need to stay agile and responsive to changing conditions in global supply networks and local demands in order to mitigate risk.
The right strategy is vital. So too is a trusted and reliable financial partner with deep industry expertise like Citywide Banks, a division of HTLF Bank to help you realize your goals. We have the experience to help you adapt to the ever evolving transportation and logistics environment. Contact Citywide Banks, a division of HTLF Bank today to help you take the next step.