Rail and Intermodal Trends in Logistics for 2023

The logistics industry, particularly rail and intermodal transportation, is experiencing a period of mixed performance and challenges as it navigates through 2023. The dynamics of supply chains, intermodal volumes, and rail carload numbers have shown varied trends, prompting stakeholders to reassess strategies for future growth and resilience.

Current State of Rail and Intermodal Volumes

As of December 15, U.S. rail carload volumes have shown a decline, echoing a similar trend observed in November where intermodal volumes also saw an annual decrease. Despite these declines, there is a hint of potential rebound in the rail and intermodal sectors, as reported by the 36th Annual State of Logistics report. However, the year has not been without its challenges. November witnessed a mild decline in overall logistics growth, and the mixed performance in carload and intermodal volumes indicates an environment of uncertainty.

Intermodal volumes have reached a three-year high, suggesting an underlying robustness in the system. Yet, the industry remains cautious, given the mixed results reported across different periods. The link between intermodal volumes and international trade continues to be significant, influencing the rise and fall of freight numbers. The demand for future volume growth persists as a concern, with economic uncertainty further affecting the railroads and intermodal markets.

Challenges in Logistics and Supply Chains

The logistics operations face a human capital crisis, compounded by labor shortages that impact performance. Rising customer expectations place additional pressure on warehouse leaders, who must deliver reliable service that meets a 95% on-time delivery benchmark to ensure customer satisfaction. This reliability is crucial but not sufficient on its own, as intermodal transportation must also be economically viable, requiring it to be 15% cheaper than trucking. Intermodal pricing remains controlled by the trucking industry, making competitive pricing strategies essential.

Furthermore, the industry grapples with the challenges of fewer terminals and shorter lengths of haul reducing highway miles, which impede intermodal economics. Increasing truck miles further impact these economics, necessitating that two-thirds of miles must be on rail to optimize costs. More terminals are needed to enhance intermodal competitiveness, enabling a broader reach and flexibility in operations.

Technological and Strategic Adaptations

The logistics industry is seeing transformations driven by AI-powered digital freight matching, which is revolutionizing brokerage processes. Companies like Zebra Technologies are exploring robotics automation options to enhance efficiency and productivity. There is an opportunity to convert more freight to intermodal solutions, yet traditional Precision Scheduled Railroading (PSR) approaches may not suffice in the current climate.

Flexibility is becoming a key requirement for intermodal operations to adapt to changing market conditions. Reliable service, while necessary, must be complemented by strategic innovations and adaptations to remain competitive. Preparing supply chains for 2026 involves a comprehensive approach that addresses nonstop disruptions and anticipates future manufacturing rebounds.

Economic and Regulatory Influences

Economic uncertainty continues to cast a shadow over the railroads and intermodal markets, influencing freight demand and strategic decisions. Trucking executives face unpredictability in freight demand, and the regulatory landscape presents additional complexities. The opposition by Teamsters to the proposed Union Pacific-Norfolk Southern merger reflects the regulatory and labor challenges that the industry must navigate.

The Association for Supply Chain Management (ASCM) has highlighted the top 10 supply chain trends, underscoring the importance of strategic foresight and agility in this evolving landscape. Despite the challenges, there remains a significant opportunity for growth and innovation within the rail and intermodal sectors. As the industry moves forward, stakeholders must balance the demands of reliability, cost-efficiency, and adaptability to ensure sustained success and resilience.

“Reliable service is required but not sufficient; intermodal must be 15% cheaper than trucking.”

In conclusion, the rail and intermodal sectors are at a crossroads, with potential for growth tempered by the need for strategic adjustments and technological innovations. The path forward demands a proactive approach to address the multifaceted challenges and leverage opportunities for a more resilient and competitive logistics landscape.