Train or Truck? New Index Indicates Where Cost Savings Lie

Date: Thursday, August 15, 2019
Source: Sourcing Journal

New data indicates shippers might have fewer reasons to turn to trains when moving goods across the U.S.

Though more than 70 percent of goods in the U.S. make their journey from point A to point B solely on semis, many shippers have relied on intermodal transportation—that is, a combination of trains and trucks—as their best option for minimizing costs.

That pricing advantage is on the decline, however, according to a new index published by JOC, the Journal of Commerce website that’s owned by the global business information firm IHS Markit. Intermodal’s edge began shrinking in Q1 2018 and continues to contract, the company noted.

Shippers look at a number of metrics when comparing intermodal versus trucking. Beyond transit times, each method’s performance in meeting time expectations as well as total end-to-end costs fall under review.

According to the index, trucks have gained the upper hand when looking at journeys of 2,000 or fewer miles. With a base of 100 where numbers above that translate to intermodal boasting more competitive spot rates, the index through the first two quarters of 2019 stands at 106.7.

That might seem to signal good news for intermodal players but IHS Markit was quick to point out that spot rates for that particular freight-moving method have been on a downward slide since 2015—and the advantage went to trucking from August through October of last year “as intermodal spot market rates shot up higher than trucks in major markets across the country,” the company added.

“The new data from the U.S. Domestic Intermodal Savings Index illustrates how shippers and brokers are becoming increasingly sensitive to whether intermodal or trucking is best for the various lanes they manage,” said JOC associate editor Ari Ashe, associate editor, who authored the report. “With C-Suite pressures to keep transportation costs down, shippers are looking to make the most informed decisions about modal choices to wisely spend down.”

IHS Markit released the index amid trains’ freight growth slowing to a crawl and excess trucking capacity on the upswing, “creating a new buying dynamic for U.S. shippers moving goods via 53-foot containers and trailers.”

 

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