Intermodal 101: Rates
Use of rail controlled, door to door offerings have some positive and negative components to consider. It is important to contemplate them when trying to determine if this option for intermodal shipping fits your needs. This product offering has been beneficial to the railroads and doesn’t show signs of changing, but to understand why it is good for the railroad, it is important to understand the dynamics that lead to this service. This post will discuss one of the major contributing factors – rates.
Historically, the rails went to market through a controlled network of 3rd Party Logistics (3PL) companies who held contracts with the rails to sell their service in a ramp to ramp environment. The 3PLs who held these contracts are known as Intermodal Marketing Companies (IMCs).
It was the job of the IMC to coordinate the origin drayage, rail linehaul and the destination drayage, to put together a complete move from origin to destination. This allowed the IMC to consider different rails and different drayage firms to arrive at the solution the customer was looking for – whether that was speed, ride quality, lower rates, etc.
This method relied on contracted rates between the rail providers and the IMC’s. It may be Freight All Kinds (FAK) rates that are basically the same across all IMCs or Special Pricing Quotes (SPQs) that are put in place for a specific Beneficial Cargo Owner (BCO).
As railroad consolidation began to pick up steam, the rails decided to limit the number of IMCs they would allow. Each IMC that had a contract in place could continue moving freight with the rail on a ramp to ramp basis. This was an advantage for the IMC community, but was a restrictor to the railroads and their efforts to grow.
Going hand in hand with rates is equipment supply, which we will discuss in our next post.
Check in on the 1st and 3rd Wednesday of every month for more information on intermodal and how it can benefit you!