LOGISTICS

Intermodal transportation is emerging as a popular mode of transporting cargo owing to its economic and environmental benefits. While companies preferred over-the-road (OTR) transportation as it offered higher flexibility, a significant surge in freight rail infrastructure (especially across the USA and Europe) and a decline in availability of OTR drivers have led to several companies shifting to intermodal shipping. However, intermodal transportation has its own share of challenges, which, if not addressed effectively, can severely impact the entity’s operations.

As shippers are looking to cut costs as well their carbon footprint, they are steadily shifting towards intermodal transportation. This is further boosted by countries investing heavily to improve their intermodal infrastructure. However, growing popularity of intermodal transportation has resulted in shortages in chassis equipment and severe traffic jams at ports and terminals, among other challenges. Companies that manage to overcome these challenges by better planning and use of technology can definitely reap savings offered by this mode of transportation.

EOS Perspective

The question regarding intermodality is not of a yes or no, but more of a ‘how much’. While intermodal transportation offers several benefits over OTR, it is very critical for companies to assess the extent to which intermodality can work for them. Moreover, given the improvements in infrastructure and technology, companies that currently feel that intermodal does not work them, should not dismiss it once and for all, but should continue to re-evaluate the situation every six-monthly to annually.

Global container shipping industry has suffered through five unprofitable years and still does not seem to see much light. The industry is battling overcapacity, declining freight prices, and stiff undifferentiated competition, and with the new capacity expected to come online, these challenges are likely to persist. But the hurdles also present hidden opportunities for ship liners to improve performance across organizational, commercial, and operational activities. Moreover, extracting more from strategic alliances to include joint procurement and operational benefits can also help the industry in whole.

As the industry suffers from a host of challenges, it is imperative for the carriers to step up and develop plans that could improve their profits. It is believed that several sound initiatives could potentially elevate these companies’ earnings by up to 15%, which could be enough to can steer them back to profitability.

To realize these benefits, companies need to bring about significant changes in their organizational structure, operational management, commercial management, and nature of alliances. Carriers that manage to introduce these changes will be in a better position to combat the current depression in the business and return to profitability.

While these changes might be challenging to embrace, the industry has reached a stage where only drastic measures can keep them afloat and profitable. Carriers that can initiate a comprehensive transformation in their operations and organizational structure are likely to be to only ones able to steer ahead of competition.