Intermodal grows as the most competitive freight mode in Mexico

Intermodal Station at Santa Teresa, New Mexico
By Graeme Stewart

Intermodal Stations have been hailed in some quarters as imperative for the growth of Mexico’s logistics and supply chain systems.
Raul Rodriguez, General Director Sales Mexico, XPO Logistics, outlined exactly what intermodal was and the benefits it can present to companies transporting goods across the country and beyond.
Speaking at the Logistics Summit Conference recently he said: “An intermodal system is a combination of modes of transportation, particularly focusing on the rail-truck combination so when you talk of intermodal, you’re referring to rail and truck. At the moment, there are about 10 public intermodal stations in Mexico and all the different automotive manufacturers have their own intermodal ramps. So the chances are that when you see an automotive manufacturing plant you will also see an intermodal ramp that is owned and operated by them.”
“The function of an intermodal station is very simple and a measure of efficiency. What we have is a truck arriving with a container, a crane unloads the container from the truck and loads it on to the railway. At the destination ramp, you do the opposite, unload from the train and then place the empty container back onto the truck so it is taken back to the original depot to start all over again.”
“There are a lot of benefits to using an intermodal station and the automotive industry understands those benefits better than most. The first is that because we are using the railway, the user gets the benefit of economy of scale that is translated into price reduction. The second is that because the train does not stop, or has very few stops, the transit time is comparable to that by road. The transit time can be a bit slower than by road but it is competitive in transit time.”
His views have been echoed by the Intermodal Association of North America which points out that every year, nearly 25 million containers and trailers are moved using intermodal transportation.

Containers being loaded at the Port of Veracruz
The Association said: “Electronics, mail, food, paper products, clothes appliances, textiles and auto parts all take a ride on the country’s intermodal network. In fact, Intermodal is growing faster than any other mode of transportation because intermodal combines the best abilities of different transportation modes to deliver service, savings and solutions to shippers.

“By working together, trucking companies, intermodal marketing companies, ocean steamship lines and railroads are providing a cost-effective, seamless, reliable, efficient, safe and environmentally friendly way to move freight from origin to destination. Throughout the process, intermodal facilitators, or third-party logistics providers, arrange for each piece of the move from pick up to drop off.”

“Today, all parties in the supply chain use state-of-the-art technology to monitor shipments every step of the way. With real-time information, today’s intermodal companies are keeping track of schedule changes and watching out for their customers’ shipments so they don’t have to.”

The Association said the days of sacrificing speed for savings were over as Intermodal transportation provides shippers with reliable, consistent service with cost savings compared to over-the-road transportation.

Another proud boast is that Intermodal transportation is safer today than ever before. The Association said: “With high-tech lift technology and articulated intermodal railcars, damage to freight is minimized. According to the Association of American Railroads, in 2003 Class 1 railroads charted the lowest freight loss and damage statistics in more than 10 years. In fact, in a study done by the AAR in June 2004, the ride quality environment on the railroad is similar to the ride quality on the highway.”

And, it continued, intermodal transportation was as environmentally friendly as it was possible to be.

Maersk container
The Association said: “Imagine getting 250 miles to the gallon for your SUV. It would be possible if that SUV were riding on the rails. Railroads move one ton of freight an average of 405 miles on a single gallon of gasoline. And according to the Environmental Protection Agency (EPA), railroads account for just nine percent of total transportation-related nitrogen oxide emissions while also alleviating highway congestion.”

Rodriguez concurred and welcomed the heavy investment that has been plowed into Mexico’s railways over the past decade and said: “Mexico is a good example of an economy that is developing, particularly in transportation. Over the past 10 years or so there has been a big push through companies like KCSM (Kansas City South de Mexico) which has invested in locomotives and all the different assets so rail freight has grown a lot.
“The other thing is that it has put pressure on different international and domestic companies to use different methods of transportation so that I can say that the country has moved nicely into using intermodal. There are now a lot of opportunities to grow in the rail freight market versus road freight but, all in all, it is a process and we are in the middle of that process.
“Of course, you are never happy, you always want more, but, because it involves a lot of capital and a lot of co-operation, in order to run an intermodal you have to involve several companies and a lot of people. But we can see that this is a process that is growing and will continue to grow.
“You always want to see investment in road and rail. The Mexican companies have invested millions of dollars since 1997-98 when they were privatized. Those have been substantial investments but there is always room for more. But I think we can be reasonably happy with the level of investment so far.”
Rodriguez said customers were using intermodal for a variety of reasons as intermodal often provides a much better proposition than the highway. Rail transportation was often more energy efficient and with the shortage of drivers in Mexico, increased fuel prices and implementation of new government policies that restrict hours of driving on the road, truck capacity was a challenge.
However, he added: “Customers are always looking for ways to cut costs and improve service and intermodal does just that. Once customers determine where intermodal fits into their overall strategy, they price it and provide a service matrix to their clients. The service matrix offers customers a comparative analysis of the available rail lines and trucking options in their geographic areas. That makes launching the strategy a much smoother process, with pricing and service laid out in an easy to understand format. When rethinking logistics strategies, the primary questions are how can this benefit my business? What is the value proposition?”
Reiterating, Rodriguez outlined the benefits of intermodal: “First there are lower costs. Customers can take advantage of lower rates, more predictable pricing and the flexibility of loading and unloading goods in a dropped trailer environment, which reduces handling costs.
“Secondly, intermodal is environmentally friendly. Customers can significantly reduce their carbon footprint by going intermodal because trains only emit approximately 5.4 pounds of carbon dioxide per 100 ton-miles, whereas trucks emit approximately 19.8 pounds.
“And thirdly, there are reliability, capacity and safety advantages. Customers have more access to equipment and standardized transit schedules. As companies move their freight to intermodal, there is also the opportunity to streamline their reverse logistics, providing additional savings.”
He said the nearshore trend was one obvious driver of the growth of intermodal as thanks to high prices and rising wages, Asia was no longer the obvious low cost location for companies manufacturing goods for the US market. The increase in large companies building factories in Mexico has boosted the flow of materials headed south from the US to Mexico and finished products heading north.
A second factor was Mexico’s central geographical location and the country provided access to raw goods from the USA and to countries such as Brazil that produce steel and other manufacturing necessities.
Rodriguez concluded: “Many large companies tried intermodal in the past, when the infrastructure and service providers were inadequate, and found that it didn’t work. Now they are trying it again. This time I am more confident of success.