How Does Intermodal Shipping Work?

January 20, 2023
Cassandra Gaines

In today's fast-paced world of logistics and transportation, understanding the intricacies of intermodal shipping is key. So, how does intermodal shipping work? In this article, we’ll break down intermodal transportation, when to use it, its pros and cons, drayage, rail pricing, rail tariffs, and much more.  

What is Intermodal Shipping?

Intermodal can mean many things depending on the person or company you talk to. Simply put, intermodal is the use of two modes of transportation. But, for a complete description, you could say it’s using multiple modes of transport without touching the cargo.  

For example, a truck moves the cargo to the railyard, then rail, and then another truck moves it to delivery.  

For ocean shippers, their intermodal department considers any domestic rail movement, which includes containers picked up at a rail ramp or port that requires delivery.

The Benefits of Intermodal Transportation

Intermodal freight transportation is a versatile and efficient solution that seamlessly combines the strengths of railways and shipping to move goods across vast distances. This dynamic partnership offers a multitude of benefits, making it a preferred choice for businesses and industries around the world.

Cost Efficiency

Intermodal freight shipping allows companies to optimize their shipping costs by combining different modes of transport, such as rail, road, and sea, to find the most cost-effective routes. This can lead to significant savings in fuel, labor, and other operational expenses.

Improved Transit Times

The intermodal shipping process often leads to shorter transit times and loading and unloading times, as cargo can move continuously without unnecessary delays. This speedier delivery benefits both companies and consumers, ultimately boosting customer satisfaction.

Enhanced Reliability

Intermodal transportation is known for its reliability and predictability. By leveraging a variety of transportation modes, companies can mitigate disruptions caused by factors like road congestion, adverse weather, or accidents. This results in more dependable supply chain operations.

Environmental Sustainability

Intermodal transportation helps reduce the carbon footprint of freight shipping. Trains are more fuel-efficient and produce fewer emissions per ton-mile than trucks. When combined with ocean shipping, which is among the most energy-efficient modes of transportation, intermodal transport is a greener alternative to long-haul trucking.

Reduced Congestion

By shifting a significant portion of long-distance cargo from highways to railways and ships, intermodal transportation contributes to easing road congestion, reducing the wear and tear on road infrastructure, and improving overall road safety.

The Limitations of Intermodal Transportation

Intermodal transportation offers numerous benefits, including cost-efficiency and environmental advantages, but it is not without its disadvantages. These drawbacks can impact its suitability for certain logistics and supply chain scenarios. Here are some of the key disadvantages of using intermodal transportation:

Limited Accessibility

Intermodal transportation is not universally available. It heavily relies on the availability and connectivity of different modes of transportation. Some regions may lack the infrastructure required for seamless intermodal operations, which can limit its feasibility.

Complex Coordination

Intermodal transportation requires intricate coordination among various carriers, terminals, and equipment. This complexity can lead to delays and errors in the supply chain, making it challenging to meet tight delivery schedules.

Infrastructure Limitations

One significant drawback of intermodal transportation via railways is the reliance on existing rail infrastructure. Many rail networks are aging and may not be adequately equipped to handle the demands of modern intermodal freight, leading to congestion and delays. Expanding and maintaining rail networks can be a costly and time-consuming endeavor.

Equipment Compatibility

Intermodal transportation often involves different types of shipping containers and equipment for rail and ocean shipping. Ensuring compatibility between these various elements can be a logistical challenge. If the equipment is not readily available or if there are compatibility issues, it can disrupt the smooth flow of goods.

What is Drayage?

A simple definition of drayage is moving containerized cargo that’s usually on a chassis. Many drayage companies do not move outside of their State.  

How to Ensure Better Drayage Pickup Timing?

An excellent solution to improve the drayage time, if you’re an intermodal freight broker or an intermodal shipper, is to hire a carrier for the day. This way, you’ll ensure your freight is delivered on time, and the carrier only focuses on your goods instead of trying to make various pickups to earn more money.  

What Should a Drayage Carrier Have for Onboarding With a Broker or Shipper?

There are many things to consider when onboarding a drayage carrier. The good news is that drayage shipments involve a lot less risk than full truckload shipments. So you do not have to be as stringent with your vetting requirements. The downside is that it is incredibly difficult to prevent double brokering. Drayage carriers should present during onboarding:

  • UIIA Insurance or interchange insurance of $25,000 to cover trailer damage
  • Standard carrier agreement
  • Experience handling multiple chassis and containers every day at the applicable port.  

Rail Transportation

Can a Shipper or Broker Contract Directly With the Rail Company?

In the U.S., because the network is so complicated, you cannot directly book with the railroad. So, you need to call an asset-based carrier or an Intermodal Market Company (IMC) to move the freight.  

In Canada, you can contract directly with the rail company. You can even hire door-to-door services with them where they’ll pick up the load from your warehouse to its destination.  

Why Do Shippers or Brokers Decide to Move Freight via Rail?

In most cases, it is because transportation by rail is cheaper; it's also more energy efficient. It’s cheaper because, through rail, you can transport a thousand containers, but with a truck, you can transport a truckload across the country.  

The advantage of intermodal shipping is that you have control over the freight once you pick it up from the rail, allowing you to deliver it in a timely manner.  

If I’m a Shipper, and I’m Transporting Through Rail; Do I Need to Buy a Container?

As shippers, you do not have to buy the container used for intermodal shipments. The container will be owned by the rail company or the carrier. Usually, however, drayage companies do not own the containers.  

Most of the time, shippers do not need to worry about the intermodal container logistics since the company they hire to transport or arrange to transport the freight will take care of the entire process. If the intermodal service provider you hire is good, it should feel like a door-to-door, over-the-road shipment.  

What Commodities Shouldn’t Be Transported by Rail?

  • Freight that’s completely time-sensitive: shelf freight, production freight.  
  • Fragile goods  
  • Sensitive electronics
  • High value commodities

How Much Time Does Rail Transport Take?

This will depend on the distances, the rail ramps you’re using, and the locations. The proximity to the rail head will also determine the amount of time your transportation process by rail will take.  

For example, if you’re transporting from L.A. to Chicago, there aren’t many transfers, so it could potentially take 4-5 days once the rail is loaded.  

What Are the Most Common Rail Lanes?

The most common lanes are long hauls from East to West.  

L.A. - Chicago  

Vancouver – Toronto

Texas – Chicago

Mexico – Chicago  

Rail Transportation Costs

To understand rail pricing, it’s essential to know about the truck market, specifically OTR trucking. To be competitive, your prices need to be 10% below truck cost, so customers choose to work with rail instead of trucks. Usually, IMC companies take care of the entire payment process so that companies do not have to pay the different companies that are part of the intermodal shipping process.  

How Many Free Days Do You Get To Recover Your Freight From Port Before Demurrage Starts? What’s the Rate Per Day?

This is generally negotiated with the VCO or the NVOCC for ocean containers. Usually, you’re going to have 2-3 free days, but that depends on the location of the freight. For example, if your shipment arrives at the L.A, Seattle, or Portland ports, you’ll likely get 5 free days. If you’re a bigger shipper, you can get 10 free days.  

Carrier Cargo Liability for Rail

There is a minimum cargo amount in the tariff, but when customers have sensitive freight, companies can create custom contracts to increase that tariff. Also, customers must be advised to get their own cargo insurance to avoid any issues throughout the transportation process. Usually, there aren’t many claims on rail transportation. But it’s essential to know about it.

Are There Size Limits for Rail?

Rail can carry very heavy loads, but what limits the customers are the over-the-road drayage part of the transportation process, where you must comply with the regulation. It also depends on the state regulations, where you’ll be able to get special heavy permits for your loads.  

Understanding these essential parts of intermodal shipping is crucial to ensure your cargo is transported in the correct mode of transportation and with the right companies.