00:00:00
Speaker 1: Thank you. Hi, everyone. This is Lee Klaskow when we're talking transports. Welcome to Bloomberg Intelligence Talking Transports Podcast. I'm your host, Lee Klaskow, Senior Freight Transportation and Logistics Analyst at Bloomberg Intelligence, Bloomberg's in-house research arm. Before we dive in, a quick favor. If you enjoy the podcast, please take a moment to follow, rate, review, and share it with a friend or colleague. Your support helps us continue bringing you conversations with the leaders shaping transportation and logistics. And if you'd like to connect, you can find me on the Bloomberg Terminal, on LinkedIn, or on X at Logistics Lee. One of the biggest growth opportunities for North America Freight Rail is taking more freight off the highways and putting it on trains. The opportunity sounds straightforward, but delivering a competitive intermodal product requires railroad, trucking companies, terminals, equipment providers, 3PLs, and shippers to all work together. Joining us today is Anne Reinke, President and CEO of the Intermodal Association of North or IANA, which represents stakeholders from across the intermodal ecosystem. Today, we'll discuss the outlook for intermodal and what's driving truck-to-rail conversion, the barriers preventing even greater adoption, and what the industry needs to do to win meaningful share from trucking. We'll also talk about infrastructure technology, DRAGE, and where Ann believes the intermodal market is headed over the next several years. Ann, welcome to Talking Transports.
00:01:28
Speaker 2: Lee, it is always wonderful to be with you, even if we're not in the same room.
00:01:32
Speaker 1: I appreciate that. And it's great to see you. And I understand you guys had a huge conference recently. Can you first tell the folks what is IANA all about? And then let's dive into the conference. Sure.
00:01:46
Speaker 2: So as you said, IANA, the Intermodal Association of North America, represents the All of the intermodal stakeholders were the industry authority as it relates to intermodal. And as you noted, there were a lot of stakeholders. We have railroads as members, motor carriers, ocean carriers and marine terminals, 3PLs and IMCs, and then equipment and technology providers. We also have our beneficial cargo owners, the folk who benefit from all of this transportation. So it's about a thousand members. We're at this point, I think, 36 years old. And we educate, we advocate, we provide networking opportunities and facilitate both business intelligence and business tools like your world famous, you know this, Lee, the Uniform Intermodal Interchange Agreement. You know all about that, right?
00:02:44
Speaker 1: Absolutely. It's great reading. That's what I do on the weekends. I know very little about it. So are you going to explain it to me and our listeners?
00:02:52
Speaker 2: Yeah, yeah, sure. Let's not make it the focus of our conversation, but I can talk about it. So the way that.
00:02:59
Speaker 1: We don't want people driving off the road.
00:03:00
Speaker 2: So let's... So the way that equipment is interchanged is pretty sophisticated, right? And there's various different owners and stakeholders. There's chassis, there's containers, you have your equipment providers and you have your motor carriers. And so that universe is complicated. And so we have an agreement that essentially provides the rules of the road for how that equipment is changed between hands, between all the partners that I just mentioned. We've been doing that for longer than the organization was in existence. It used to be, you know, this one other group that we merged with. And thank God for that, because without it, I don't know who would be taking that control, who would actually be providing this sort of third-party neutrality of making sure all the things work together.
00:03:50
Speaker 1: All right, great. For those that are still awake, that are listening.
00:03:53
Speaker 2: I think that was pretty short.
00:03:55
Speaker 1: I don't think that was long. I'm teasing. So, so IANA has its annual conference recently. Can you just talk about some of the major takeaways and maybe just generally speaking, what is the state of the intermodal market right now? I know that's kind of two questions, but I think there's kind of a, there's, they're, they're, they're over, over, over each other.
00:04:15
Speaker 2: Yes, they do.
00:04:16
Speaker 1: Yeah, crossover.
00:04:17
Speaker 2: So the, the, overarching takeaway right now is that we're in an intermodal moment and we will get to all the reasons why later on in this program, I believe. But if we're in an intermodal moment, how do we change that? And I'm going to have to credit Noel Hasegawa with this phrase. How do we change that into intermodal momentum? So cycles have been with us before. Business cycles have been with us before with the intermodal industry. And yet, as soon as costs go down on the over-the-road side on the trucking marketplace, people and customers leave intermodal. So that was certainly one of the huge thematics, of course. You know, there are AI challenges, and we're going to talk about that. You know, how do we embrace the technology without being taken over or overrun or spending needlessly on it? And there's a huge merger that is being applied for. And so that was a focus of our conversations. We had both Katie Farmer from BNSF, who is anti-merger, and Jim Venna from the Union Pacific, who is pro-merger. They spoke one after the other on our main stage. And so you can imagine they have completely different takes on how, in particular, how to grow and sustain growth in intermodal.
00:05:37
Speaker 1: All right. So let's talk about why intermodal is winning share today and what does it have to do to, as you said, you know, to quote Noel, create momentum as opposed to a moment. Yeah.
00:05:51
Speaker 2: So intermodal It's interesting, as you look at the growth of intermodal, this is not demand growth necessarily. It's really because of supply. You know, our American consumer, by and large, is still spending, probably angrily so, because of supply. of high prices, but is still spending. But the capacity has shifted in the trucking marketplace. And why is that? Well, we have a number of regulatory enforcement operations going on. And some of these are not even new rules. They're actually just getting enforced for the first time, like the English language proficiency enforcement. It's always been a rule. But now trucks are being taken out of service, whereas they never used to be before. There are now restrictions on non-domiciled CDLs. There is a restriction on these sort of CDL farms or CDL shops that basically say they provide trading for CDL drivers but don't really have any kind of pedagogy. Pedagogy, that's a nice word. They don't really have an agenda or anything. They're kind of like CDL mills. And then we have ELD enforcement. And then finally, you have, well, I wouldn't say finally, but we also have a very, very high price of diesel fuel and railroads because railroads are a huge piece of the intermodal puzzle, can spread that far more than truck can. The last thing I'd say, and something you spent a lot of time on, is the Montgomery decision from the Supreme Court means that brokers who typically are the ones, you know, getting purchasing capacity from truck are very, very concerned about what capacity they are purchasing. And so I went to a conference last week, Lee, where the conservative number was they believed something like 100,000 motor carriers are now out of the marketplace because of all the things I just mentioned.
00:07:49
Speaker 1: Wow. Okay. Motor carriers, and that's not even drivers. That's just the number of motor carriers.
00:07:54
Speaker 2: Yes.
00:07:54
Speaker 1: Okay. Yep. So, you know, so you're talking tighter trucking markets. So that means the rates are higher, the higher fuel surcharges because diesel is higher. And then it's harder to find capacity because there's less of it out there. That's driving people to intermodal. We're seeing that on the AAR intermodal numbers and growth, low single digits. You know, so that's good. So, what has to happen? Because, you know, a lot of, you know, you mentioned the rail consolidation. A lot of the consolidation, you know, UP's bullish case on it and why they're saying it's good. It's going to take, you know, a lot of loads off the highway. We've kind of heard that before with other mergers. It's kind of hard to actually prove if it happens or if it doesn't happen. So I guess my point is, how do we create momentum here? And this is just not like, oh, when diesel goes back down, when supply maybe is not as tight for one reason or another, shippers don't go back to just doing over the road.
00:08:50
Speaker 2: Yeah, I think they have to be bought in that the intermodal product, first of all, doesn't have to be complicated, meaning you have a partner who in the move who does the stuff for you so you don't have to. And that's usually your intermodal marketing company. That's the guy or gal who is booking the whole transaction from soup to nuts. And yes, there is complexity because there's a lot of handoffs and there are a lot of different stakeholders and partners as we talked about. And yet you don't, as a beneficial cargo owner or shipper, you don't have to know that. You just want to have reliability, you want to have visibility, and you want to have some sort of resiliency, meaning there's a long-term path where if something changes or something goes wrong, that you have someone who's dealing with it for you. Because, you know, we live in the land in transportation, my old boss used to say, we live in the land where... bad stuff happens. I'm using a less colorful term than what he said. And so you've just got to make sure that you have a partner who's going to navigate all that for you so that you don't have to. So as a, as a industry and also as IANA, we have to prove that we can do that. And so what do you prove that with? Well, you want good service from your railroads and your dray partners. obviously with ocean carriers, if you're doing an international move, you want to have visibility, meaning you want to have some understanding and appreciation about where your stuff is, right? And then you want to have optionality, meaning so that, and resiliency, meaning if something changes, you want to make sure that your folks can pivot to whatever is the most beneficial way to go is. And, you know, freight doesn't move, not all freight should move intermodal, what you're typically wanting is a consistent volume, a high volume and a long distance. So over 500 miles, 80.8% to be precisely of the 500 mile plus market is Intermodal's sweet spot. That's where we play.
00:11:01
Speaker 1: And do you know how much of that market you already have or is that hard to measure?
00:11:05
Speaker 2: Uh, let's, I think what we have is I'm going to, I'm going to look at my, we have an economist that we hired who is so smart and he provides me data and I appreciate him because he makes me sound smart. So my understanding is we have 14% share of that.
00:11:23
Speaker 1: Okay.
00:11:24
Speaker 2: So what that means to me and what means to you is that we have more capacity to And that's something that we have to push. Overall, if you looked at the little pie chart of the freight marketplace, railroads writ large, railroads plus intermodals, a little over 10%. About half of that is intermodal. So there's absolutely more that we could do to take share. And in 2018, intermodal market share was something like 8%. It's gone down because of all the things we just talked about in reverse, meaning there was so much capacity in the trucking marketplace after the pandemic, and the rates could not be cheaper, and it just was like, why wouldn't I use a truck, right? It's just like pushing the easy button. So what we're trying to do, and I think this is the challenge, is to keep those customers, sustain them with us so they don't just come when prices are low, but they stay with us because we're providing them a product that has value.
00:12:28
Speaker 1: And, you know, you mentioned tighter trucking market, and obviously trucking is a very important component of intermodal. Has the drayage market been impacted as much as the regular over-the-road trucking market is because of these regulatory enforcements, or are they getting hit more so than your typical over-the-road trucking market?
00:12:52
Speaker 2: Yeah, I wouldn't say more so, but they absolutely are being hit in particular cities, too. There's some cities that seem to be worse than others that have had trouble sustaining the driver base, meaning these drivers have left either because they've been forced to leave or because they can't afford to drive it anymore. So there's absolutely a challenge there. And part of it is the dray driver, too, is somewhat beholden not to its own destiny, right? So the dray driver has to work with the port or intermodal facility. And if it's a port, they all have different appointment systems. They, as a driver, don't necessarily have the data to tell you where the container is that they need to pick it up. or when the container was unloaded, all of that stuff is not necessarily known by the driver. And in many cases, the drain driver, I think 80% of our drain drivers are owner operators. So it's not like they have a whole lot of CapEx to spend on visibility tools, right? So we try to help facilitate that to the extent we can. We have a mobile app that we just unveiled about three weeks ago, right before COVID. our expo where the driver can go on and see sort of where he needs to go pick up. But it doesn't yet have all the kind of bells and whistles that we need, but we will build on it over time. So we understand that there's a gap there that we want to fill. But yeah, it's absolutely a challenged marketplace for all the reasons we just talked about.
00:14:26
Speaker 1: And so, you know, I would gather that, you know, service is the most important thing when it comes to shippers taking a good look at intermodal. Obviously, some things are out of, you know, the control of the operator, your weather, or you maybe have an accident that really impacts service. So, I guess, what can railroads do or what have they been doing to improve service? Because right now, I think most people would characterize rail service as pretty good, right? Obviously, some could say it could be better and some probably would say that it's actually it has been worse in the past. So can you just talk a little bit about service and the railroads?
00:15:04
Speaker 2: Yeah. So when the pandemic hit, the railroads were caught, I think, a little. What's the opposite of fleet footed?
00:15:14
Speaker 1: Flat footed.
00:15:15
Speaker 2: Flat footed. Lee, you get extra bonus points today.
00:15:18
Speaker 1: Thank you.
00:15:19
Speaker 2: They were caught a little flat footed. because they had had flat feet because they had not planned for the sort of Easter Sunday on steroids that became the freight marketplace. And they just can't grow as quickly as the trucking marketplace can. There's just the barriers to entry are real.
00:15:43
Speaker 1: And Anne, if I can just interject. So what happened is during the pandemic, all the rails furloughed all their people, a lot of people, and then demand snapped back. And Some people were like, I don't want to go back to work. And some people were just like slow to get back to work. And so they just didn't have the resources to meet the demand that Anne was mentioning. So sorry, go ahead.
00:16:02
Speaker 2: No, Lee, you're exactly right. You're saying it so I don't have to.
00:16:05
Speaker 1: Okay.
00:16:09
Speaker 2: But I think that they have learned their lesson. At least I hope they have.
00:16:12
Speaker 1: Yeah, I think so.
00:16:13
Speaker 2: Going back to Katie and Jim, both of them know that growth is critical for railroad success. And there hasn't always been this focus on growth, right? It's sort of like, you know, they take the customers they've always taken and that's kind of it. And in fact, in the past, Intermodal wasn't even valued because it's a low margin business. It takes a heck of a lot of capacity. And there's certainly, you know, it's handled, there's more handling for it and all this stuff that if you're an operator, you're not interested in, in the slightest. But every railroad CEO recognizes that it's a bright spot for their earnings.
00:16:54
Speaker 1: You know this.
00:16:55
Speaker 2: And so they are leaning into what that growth means. And so part of that is one hopes that they're going to invest in their physical plant, but also in their people to make sure that service levels stay high. Mm-hmm.
00:17:08
Speaker 1: And does IANA have a position on rail consolidation or are you guys Switzerland here?
00:17:14
Speaker 2: Yeah, we're Switzerland. And we have all the delicious cocoa and raclette to prove it. No, we are Switzerland. I would say this, what's beneficial about the conversation about mergers is whether it's pro or anti, both of those sides are focusing on growth. And we haven't, as a railroad industry certainly has not focused on that. If I can recall it, they have not focused on it. So they focus on intermodal growth. You know, one party thinks that the way to grow intermodal and get conversion from over the road is through consolidation because you have less handoffs, fewer handoffs. And one party thinks you do it through collaboration because you can have fewer handoffs, but you can also work together rather than having potentially deleterious after effects of a merger, which typically happen.
00:18:05
Speaker 1: Right. And I don't think we mentioned, just for those that don't know, Union Pacific has a proposed merger out there with Norfolk Southern. So that probably gets a decision will be made by the regulators, the STB, probably late next year in 2027. So there's a lot of time they have to prove that it is in the public's best interest and it will enhance competition. Those are very high regulatory hurdles that it must must pass. I don't know if you're comfortable in saying this, and if you're not, we can just move on. But was there a consensus, you know, in terms of the people that were attending the conference about what they thought about rail consolidation that are involved in the intermodal ecosystem?
00:18:45
Speaker 2: Yeah, you'll be pleased to know that I can say something.
00:18:48
Speaker 1: Okay.
00:18:49
Speaker 2: And further pleased to say that it was a split decision. And I'm pleased to say that, too. Now, everyone I talked to after the fact noted that it's very contrasting styles, right? Very contrasting approaches. So everyone noticed that. That's an obvious. But it was interesting to me. Some people said, gosh, I found Vena's message compelling. And others really said, you know, I found Katie Farmer's concerns interesting. legitimate. So it really was kind of a split. And I think that's what makes the STB's job even harder because it's not a gimme. Now, the regulatory sort of bar that you have to meet is pretty high, enhanced competition. How you perceive it, if it's rail to rail or, you know, rail to truck, obviously it's ultimately their decision how they're going to view it.
00:19:37
Speaker 1: Right. And, you know, I guess let's move on from consolidation. You mentioned things over 500 miles is kind of a sweet spot for intermodal. Is there a geographic region in the country or cross border where there's the most growth opportunities for intermodal?
00:19:56
Speaker 2: Yeah. So our market that has been the biggest boomer over the last, what are we in September now? The last eight months.
00:20:05
Speaker 1: Oh, God. Time flies. We started the conversation in September, but now it's October.
00:20:12
Speaker 2: Because I had to explain the U-I-I-A.
00:20:14
Speaker 1: Yeah, yeah. We all fell asleep for a little bit.
00:20:18
Speaker 2: Gosh, you butter up your guests. It's really nice. Do I get a parting gift?
00:20:23
Speaker 1: Sure. Get you a hat.
00:20:26
Speaker 2: I would appreciate it. Our biggest region or biggest land, I should say, of volume growth has been southwest to midwest. But it is remarkable the growth in the cross-border traffic from Mexico. It's up 14 percent. There are people who have benefited absolutely from nearshoring. There are some people who are benefiting from Goods coming from China, but going to Mexico instead of into the United States and then going up the north through there. It is fabulous. You know, it's a tale of two countries because Canada is precisely the inverse. It's down 5%. So there were some really enormous opportunities cross-border in Mexico. We had Luis Hernandez from Ante and Ferromex at our conference and just amazing. talking about what the growth opportunities are. He's really excited about it. And I think it's something we're going to lean into. Again, you know, we can't control the geopolitical situation. It's just interesting to see how Mexico has handled it on one hand and how Canada is handling it on another. Neither one is faulty. Neither one is to blame. It's just interesting how each country has chosen to respond. And so Mexico right now is sort of reaping the benefits.
00:21:41
Speaker 1: Gotcha. And You know, obviously, assuming that there's a trade deal that that's between the U.S. and Canada, I guess most operators are expecting those volumes to come back.
00:21:54
Speaker 2: That's a big question. So Bruce Rogers was also he's from the Canadian Freight Forwarders Association. He was he and I and Louise were on a podcast together. And what he would tell you is that Canada is diversifying its marketplace in terms of who it exports to.
00:22:11
Speaker 1: Right.
00:22:13
Speaker 2: Right now, and you know this, you're in the weeds on these issues every day. And so who's, is it going to ever come back the way it has been? I don't, I don't know. You know, right now it's, it's challenging. And I'm sure there are people in Canada who are saying, just give us two more years and we'll be back to normal. And there are others who are like, forget the United States. This is, this is going to be our new normal as we're going to find other partners bigger than the United States to trade with.
00:22:39
Speaker 1: So let's talk about chassis. Every once in a while, I know, every once in a while you hear rumblings that there's not enough chassis, there's too many chassis, it's hard to find chassis. A, if you can explain to our listeners, what is a chassis and kind of how is the chassis market right now as it relates to, you know, your members' access to them?
00:23:01
Speaker 2: Yeah, there are no chassis shortages that I've heard of. A chassis is The platform upon which you put a container and then you attach to a truck that can make the container move on the truck from whatever, first mile, last mile, is a critical component. And various ports have various chassis pools that help the port, help the motor carrier. It's an ecosystem that's confusing to some, but it's like one of those things you never knew existed until... You appreciated the fact that there was a shortage and that we did see that during the pandemic. And it wasn't necessarily that there was a shortage of chassis, that they were buried in a lot of yards under containers. And it's like no one could move anything. Those were the dark old days. We are not dealing with that right now, mainly because international volumes are pretty flat. They're not down, but they're just flat. They're not growing exponentially. There have been moments to avoid tariffs where they were, but not right now. So we're not seeing a chassis shortage. Chassis business seems to be going well, as far as I can tell. And I was with some chassis folks just yesterday who were saying that business was good. It's just a critical part of when we talk about the jury driver and the challenges to his line of work. Chassis availabilities makes his job work. And chassis location is something that's important, something that we track and we provide that information to the motor carrier. But also, you know, again, appointment systems that are not necessarily uniform. You know, you could have a landlord port where there are different marine terminals that are owned by different entities that have their own different appointment systems. And so that can be extremely challenging as a motor carrier or a dray driver because you have different rules of the road. They're governed by different systems and how you you can get in is also something that's challenging. So there are a lot of those kinds of challenges that make the sort of dray move already either slower or unpredictable. One of the things that I, so I was just at this event in New York, which I'm bragging about how many events I go to, Lee, but I think you go to more. Anyway, I was just at this event in New York And my good friend Noel Hasegaba, now I'm quoting him twice, was there. And he's just talking about the future of the Port of Long Beach.
00:25:33
Speaker 1: Who is this? Who is this Noel gentleman? What does he do?
00:25:36
Speaker 2: You don't know him?
00:25:36
Speaker 1: I don't think so. Should I?
00:25:39
Speaker 2: I feel like everybody knows him. He's the CEO of the Port of Long Beach.
00:25:43
Speaker 1: Oh, yes. Yes. Okay. Yeah.
00:25:46
Speaker 2: So he's talking about the future of the port. And one of the things they want to do is provide visibility, which we talked about. It's important for a motor carrier to understand where things are, where the containers are, where the chassis are, etc., And he also wants to have a universal appointment system because they are a landlord port and they have different marine terminals owned by different people, just what I said. And so he thinks having this uniform universal appointment system will allow greater predictability, which obviously means commerce flows better. When you have greater predictability, that means a truck driver is not sitting there for three hours in line waiting to pick up the container. They know exactly when to come and that better predictability. When they come, the container and the chassis are there.
00:26:27
Speaker 1: Yeah, I think that the chassis providers are kind of like the unsung heroes of the intermodal supply chain. I don't know if you'd agree with that. They kind of, there's an important part. And I guess a lot of people that, especially investors, really don't think about it. They think about the railroads, like the, you know, the Canadian Nationals and Union Pacifics of the world and the J.B. Hunts and the hub groups of the world for the IMCs. And, you know, anyway. When we're talking about, you know, you were talking about visibility, how important that is. Can you talk about, you know, where the biggest gaps are on shippers having visibility of their freight?
00:27:03
Speaker 2: Yeah. Well, first and foremost, it's at these handoff points. So when you're changing from an ocean carrier to a terminal or a terminal to a drayage provider, a drayage provider to a railroad, railroad to railroad, rail terminal to the final drayage. there are frequently gaps. And why is that? Well, I just mentioned like six different stakeholders. And so they're going to have varying capabilities. And are they all integrated with one another? What we're aiming for is, yes, they will be. They will be integrated. They will be able to collaborate across all those channels. But right now, that doesn't necessarily exist. And so if you are, again, if you're a rail shipper or an intermodal customer, You may get the best data possible from certain parts of that, probably from the railroad, but maybe don't have any visibility into the dray. And so does that satisfy you? So as I mentioned, the IMC, who's putting this whole package together, is going to be pushing on all his and her customers to really see, like, how can we make sure that this seems like a seamless single booking, that it seems like a truck-like product? And we're not there yet. But I think everyone in that ecosystem that I just mentioned is aware that that should be the goal. What I think is happening is there's greater collaboration, partly because the tools are becoming cheaper because of AI and things like that, but partly because there are folks who either because of cargo thefts and security concerns or because of just-in-time delivery and not getting burned again, They understand that there needs to be greater visibility and greater, I don't know, willingness to work with the shipper and all the collaborators, all the stakeholders to make sure that the product actually moves the way it should.
00:28:54
Speaker 1: And, you know, you mentioned cargo theft. So outside of visibility, is there anything else the industry could be doing? Because, I mean, you hear stories every once in a while of, you know, trains getting stopped and people like opening up the containers and finding good stuff and going home with them.
00:29:08
Speaker 2: There's a lot of things you can do on the physical side in addition to the technology side. So on the physical side, there are ever more sophisticated locks and, you know, seals that are used by the ocean carriers and by the shippers, if it's their container, to make sure that thieves can't just easily break in. If you're a thief, and I'm not one, so I'm just assuming... you probably want to take the path of least resistance. You want a high-value target for sure, but you also don't want to mess around trying to break into a container if it's too hard or if there's too many people, if it's a populated area. So there's ever greater technology on that. I mean, ever greater sort of hardening of the container on that. But there's also, you know, railroads will, for example, put a high-value container in the bottom well of the well car. just so that they can protect it and make it shielded from, you know, those thieves who, if you are in the middle of nowhere, the thieves who come in, and this happens, as you know, when they come and try to strip the container, they can't get to the one in the lower well. You can also, of course, have protection, lighting, drones. All of these things are being used. And in fact, I was with BNSF earlier this week, and they're using pepper clouds. They see... If they see a, like if their locomotive engineer sees something out of place, or if the drone that may be following a high-value container sees something out of place, it is well within their rights for the cop who may be tailing or in the area to use a kind of pepper bomb, so to speak, at that car so that it basically immobilizes the car and they can't get in. It's all based on, you know, intelligence operations working with the sort of folks on the state bureaus of investigation and that kind of thing. You have to have a good line of intelligence. But since there is a police force, railroad police force, they also have their own intelligence mechanism.
00:31:13
Speaker 1: Interesting. So on the technology side, going back to that, you know, we all talk about AI and, you know, I think that it's a technology that seems to be trying to live up to the hype. I think there's a lot of good things that can come of it. How is the intermodal industry kind of leveraging AI to provide a better product?
00:31:39
Speaker 2: Well, because there's so many stakeholders in the intermodal ecosystem and because there are a lot of handoffs, you can imagine that the intermodal transaction generates enormous amounts of operational data. So AI provides an opportunity for us to turn that data into faster and better decisions. So that could be, for example, predicting congestion or identifying shipment exceptions earlier, improving equipment positioning or improving drayage dispatch and productivity, improving shipment visibility. The opportunity is trying to connect the AI capabilities across the full shipment journey, which obviously, as I just mentioned, can be challenging depending on their level of technological know-how. We have a, what's called the IANA's Intelligent Container Journey, which you can get, I'll send to you, Lee, which basically reflects this broader vision of how we can connect the data and the stakeholders throughout the movement of the container.
00:32:36
Speaker 1: Okay. So autonomous trucking, you know, while we don't think it's here tomorrow, it's obviously, you know, could be coming over time. Could you just give us, you know, your thoughts about, is it good for intermodal or is it bad for intermodal? Does it really not matter?
00:32:52
Speaker 2: I don't think it's bad for intermodal. I don't think it's in prime time yet. And I think there's a lot of labor objections. So I don't know when it comes to prime time. But we even had several folks exhibit at our expo that have automated if it's it could be a trailer. or drayage, there's a road to rail technology going on there. Automation, I think, provides reliability and optionality, which again, we say the shipper really wants in yard operations and drayage and short haul movements. I think the piece that will be challenging is adoption and labor acceptance. That's always the issue. If it has the commensurate safety benefits that a typical drayage operator or yard operator would have, then I think we should be open to that technology. That being said, we are taking a look at, all right, what would that safety framework look like? Because that is most important. It's a safety-critical industry. How do we assure those safety outcomes are the same, if not better?
00:34:09
Speaker 1: Got you. You mentioned earlier that intermodal becomes more attractive the more expensive diesel is. That is because railroads are more fuel efficient. I hear less and less about the sustainability argument for intermodal recently. I don't know if that's just because the current administration is not a priority for them and therefore it's not talked about as much. Is that still an important factor when shippers are deciding whether or not intermodal is for them? the sustainability aspect of it.
00:34:42
Speaker 2: Yeah, the sustainability case has not changed. It's still much more sustainable than over-the-road trucking. That being said, there are companies that still have ESG goals, right? Environmental social goals. And there are companies that have sort of disbanded that sector, that silo in their corporation. It just sort of depends on whether or not you consistently have a ESG goal that you seek to make. If you do, I think that intermodal makes you smelling like a rose. So if they have emissions and sustainability goals, then absolutely they're going to look at intermodal. But sustainability alone does not compensate or cannot compensate for poor service or reliability. The strongest intermodal proposition is one that combines the competitive economics, right? So the diesel fuel are cheaper than the diesel fuel, but reliable service and lower emissions. If you have those three, plus this sort of optionality, performance, reliability, visibility, that's when intermodal becomes really a strong proposition. And again, it's not gonna fit every freight. It's going to be perhaps a segment of your shipping mix, that you should look at so that you're not stuck in the fluctuations of the truckload marketplace, either because of fuel, in this case, fuel prices right now, or because we haven't invested sufficiently in our highways in 20 years. And so congestion obviously is a huge cost.
00:36:19
Speaker 1: And so when shippers are looking at intermodal, what do you think the biggest misconception is still today about intermodal from a shipper's perspective?
00:36:29
Speaker 2: That's complicated. Yeah. And so we have to demystify it. But again, we demystify it not by saying, here's all the things that happens in an intermodal transaction. You don't have to worry. We worry so you don't have to. It can be a seamless product and provide you that flex that you need at a lower price. Again, we're not playing in the spot market here. This is something that's got to be consistent and well-planned and all that stuff. but we can service that for you and you're going to be happy, but just know that I've got it. I got it. If you're the IMC, you have to make that promise, but then you also have to make sure your partners can live up to that as well.
00:37:14
Speaker 1: So looking ahead into 2027, do you have any predictions about what the intermodal market's going to look like relative to what it looks like today?
00:37:24
Speaker 2: I think the intermodal marketplace for the time being is going to be still booming and still benefiting. The only thing that could deter that is the consumer demand, I guess, could go down. But I don't see diesel fuel prices going back down anytime soon. Even with a diesel fuel tax holiday or a diesel fuel export ban or any of those things, diesel fuel prices are going to continue to be elevated for a while, that's going to benefit Intermodal. Now, if somehow the congestion that has befallen the railroads in the past comes again, that would be something to obviously be a red flag.
00:38:10
Speaker 1: Gotcha. And so, you know, before you were with Diana, you were with TIA, the Transportation Intermediary Association, which is pretty much freight brokers, right? What's the biggest difference between those two you know, groups within the supply chain?
00:38:27
Speaker 2: Free brokers at TIA, 80% of those folks were truck facing. They were either using LTL or over the road truck. They weren't playing in the intermodal marketplace. So that's the biggest distinction. So we have some crossover members, members who are members of both associations and It's interesting to me, though, now that there are firms that had been solely 3PL, not focused on intermodal, but now have actually hired people in the intermodal space to get into it to benefit from their expertise because they want to have that flex. that to me is such a positive sign. But that's really the biggest distinction. I mean, we could talk about scaled versus unscaled. Obviously, the members of the TIA are usually younger companies. They're not 180 years old. They're younger companies. They may not be scaled. They may have only been in business for a short period of time. They may only have two people working there, all that sort of stuff. That's another distinction. But the biggest is, of course, the truck-facing component.
00:39:31
Speaker 1: All right. And before I let you go, Anne, I always like to ask our guests if they have a favorite book about transportation or business or leadership that resonates with you today that you've read in the past.
00:39:43
Speaker 2: I read this book called Humble. I read The Box, which is all about the birth of the environmental industry, but I wouldn't I listened to it, I should say.
00:39:51
Speaker 1: It counts. It counts.
00:39:54
Speaker 2: The guy who is the narrator was an AI-generated narrator. So that left me a little cold. That being said, I read this book about leadership years ago called Humble Leadership, which has stuck with me. And the premise, of course, is that you can't do it all, nor should you. Not every idea or solution emanates from you, the leader. You have a team that you should rely upon to help you. You have to have the humility in order to accept that help. I think it's enormously helpful. And as a leader, it means you don't have to do everything yourself. So even if you're like a lazy leader, being humble is also a good thing.
00:40:39
Speaker 1: We'll have to take a look at that one. Well, Anne, I really want to thank you for joining us today and sharing your perspectives on the intermodal market and the opportunity to convert more freight from highway to rail and what the industry needs to do to unlock its next phase of growth. Really appreciate your time and your insights today. So thank you.
00:40:55
Speaker 2: Thank you, Lee.
00:40:56
Speaker 1: And thank you to everyone listening. If you enjoyed today's conversation, please take a moment to follow, rate, review, and share the podcast with a friend or colleague. Your support helps us continue bringing you conversations with the leaders shaping transportation and logistics. We've got a great lineup of guests coming up, so please be sure to check back for more conversations with CEOs, founders, shippers, regulators, investors, and other decision makers within the freight markets. Also, if you'd like to learn more about the freight transportation and logistics markets, you can find our research on the Bloomberg Terminal at BIGo, and you can connect with me on LinkedIn or follow me on X at Logistics Lee. I'd also like to thank our outstanding producers, Mariam Traor and Aditya Simane, for helping bringing Talking Transports to life each week. This is Lee Klausgau signing off. Thanks for Talking Transports with me. We'll see you next time.
00:41:51
Speaker 2: Thank you.
Speaker 1: Thank you. Hi, everyone. This is Lee Klaskow when we're talking transports. Welcome to Bloomberg Intelligence Talking Transports Podcast. I'm your host, Lee Klaskow, Senior Freight Transportation and Logistics Analyst at Bloomberg Intelligence, Bloomberg's in-house research arm. Before we dive in, a quick favor. If you enjoy the podcast, please take a moment to follow, rate, review, and share it with a friend or colleague. Your support helps us continue bringing you conversations with the leaders shaping transportation and logistics. And if you'd like to connect, you can find me on the Bloomberg Terminal, on LinkedIn, or on X at Logistics Lee. One of the biggest growth opportunities for North America Freight Rail is taking more freight off the highways and putting it on trains. The opportunity sounds straightforward, but delivering a competitive intermodal product requires railroad, trucking companies, terminals, equipment providers, 3PLs, and shippers to all work together. Joining us today is Anne Reinke, President and CEO of the Intermodal Association of North or IANA, which represents stakeholders from across the intermodal ecosystem. Today, we'll discuss the outlook for intermodal and what's driving truck-to-rail conversion, the barriers preventing even greater adoption, and what the industry needs to do to win meaningful share from trucking. We'll also talk about infrastructure technology, DRAGE, and where Ann believes the intermodal market is headed over the next several years. Ann, welcome to Talking Transports.
00:01:28
Speaker 2: Lee, it is always wonderful to be with you, even if we're not in the same room.
00:01:32
Speaker 1: I appreciate that. And it's great to see you. And I understand you guys had a huge conference recently. Can you first tell the folks what is IANA all about? And then let's dive into the conference. Sure.
00:01:46
Speaker 2: So as you said, IANA, the Intermodal Association of North America, represents the All of the intermodal stakeholders were the industry authority as it relates to intermodal. And as you noted, there were a lot of stakeholders. We have railroads as members, motor carriers, ocean carriers and marine terminals, 3PLs and IMCs, and then equipment and technology providers. We also have our beneficial cargo owners, the folk who benefit from all of this transportation. So it's about a thousand members. We're at this point, I think, 36 years old. And we educate, we advocate, we provide networking opportunities and facilitate both business intelligence and business tools like your world famous, you know this, Lee, the Uniform Intermodal Interchange Agreement. You know all about that, right?
00:02:44
Speaker 1: Absolutely. It's great reading. That's what I do on the weekends. I know very little about it. So are you going to explain it to me and our listeners?
00:02:52
Speaker 2: Yeah, yeah, sure. Let's not make it the focus of our conversation, but I can talk about it. So the way that.
00:02:59
Speaker 1: We don't want people driving off the road.
00:03:00
Speaker 2: So let's... So the way that equipment is interchanged is pretty sophisticated, right? And there's various different owners and stakeholders. There's chassis, there's containers, you have your equipment providers and you have your motor carriers. And so that universe is complicated. And so we have an agreement that essentially provides the rules of the road for how that equipment is changed between hands, between all the partners that I just mentioned. We've been doing that for longer than the organization was in existence. It used to be, you know, this one other group that we merged with. And thank God for that, because without it, I don't know who would be taking that control, who would actually be providing this sort of third-party neutrality of making sure all the things work together.
00:03:50
Speaker 1: All right, great. For those that are still awake, that are listening.
00:03:53
Speaker 2: I think that was pretty short.
00:03:55
Speaker 1: I don't think that was long. I'm teasing. So, so IANA has its annual conference recently. Can you just talk about some of the major takeaways and maybe just generally speaking, what is the state of the intermodal market right now? I know that's kind of two questions, but I think there's kind of a, there's, they're, they're, they're over, over, over each other.
00:04:15
Speaker 2: Yes, they do.
00:04:16
Speaker 1: Yeah, crossover.
00:04:17
Speaker 2: So the, the, overarching takeaway right now is that we're in an intermodal moment and we will get to all the reasons why later on in this program, I believe. But if we're in an intermodal moment, how do we change that? And I'm going to have to credit Noel Hasegawa with this phrase. How do we change that into intermodal momentum? So cycles have been with us before. Business cycles have been with us before with the intermodal industry. And yet, as soon as costs go down on the over-the-road side on the trucking marketplace, people and customers leave intermodal. So that was certainly one of the huge thematics, of course. You know, there are AI challenges, and we're going to talk about that. You know, how do we embrace the technology without being taken over or overrun or spending needlessly on it? And there's a huge merger that is being applied for. And so that was a focus of our conversations. We had both Katie Farmer from BNSF, who is anti-merger, and Jim Venna from the Union Pacific, who is pro-merger. They spoke one after the other on our main stage. And so you can imagine they have completely different takes on how, in particular, how to grow and sustain growth in intermodal.
00:05:37
Speaker 1: All right. So let's talk about why intermodal is winning share today and what does it have to do to, as you said, you know, to quote Noel, create momentum as opposed to a moment. Yeah.
00:05:51
Speaker 2: So intermodal It's interesting, as you look at the growth of intermodal, this is not demand growth necessarily. It's really because of supply. You know, our American consumer, by and large, is still spending, probably angrily so, because of supply. of high prices, but is still spending. But the capacity has shifted in the trucking marketplace. And why is that? Well, we have a number of regulatory enforcement operations going on. And some of these are not even new rules. They're actually just getting enforced for the first time, like the English language proficiency enforcement. It's always been a rule. But now trucks are being taken out of service, whereas they never used to be before. There are now restrictions on non-domiciled CDLs. There is a restriction on these sort of CDL farms or CDL shops that basically say they provide trading for CDL drivers but don't really have any kind of pedagogy. Pedagogy, that's a nice word. They don't really have an agenda or anything. They're kind of like CDL mills. And then we have ELD enforcement. And then finally, you have, well, I wouldn't say finally, but we also have a very, very high price of diesel fuel and railroads because railroads are a huge piece of the intermodal puzzle, can spread that far more than truck can. The last thing I'd say, and something you spent a lot of time on, is the Montgomery decision from the Supreme Court means that brokers who typically are the ones, you know, getting purchasing capacity from truck are very, very concerned about what capacity they are purchasing. And so I went to a conference last week, Lee, where the conservative number was they believed something like 100,000 motor carriers are now out of the marketplace because of all the things I just mentioned.
00:07:49
Speaker 1: Wow. Okay. Motor carriers, and that's not even drivers. That's just the number of motor carriers.
00:07:54
Speaker 2: Yes.
00:07:54
Speaker 1: Okay. Yep. So, you know, so you're talking tighter trucking markets. So that means the rates are higher, the higher fuel surcharges because diesel is higher. And then it's harder to find capacity because there's less of it out there. That's driving people to intermodal. We're seeing that on the AAR intermodal numbers and growth, low single digits. You know, so that's good. So, what has to happen? Because, you know, a lot of, you know, you mentioned the rail consolidation. A lot of the consolidation, you know, UP's bullish case on it and why they're saying it's good. It's going to take, you know, a lot of loads off the highway. We've kind of heard that before with other mergers. It's kind of hard to actually prove if it happens or if it doesn't happen. So I guess my point is, how do we create momentum here? And this is just not like, oh, when diesel goes back down, when supply maybe is not as tight for one reason or another, shippers don't go back to just doing over the road.
00:08:50
Speaker 2: Yeah, I think they have to be bought in that the intermodal product, first of all, doesn't have to be complicated, meaning you have a partner who in the move who does the stuff for you so you don't have to. And that's usually your intermodal marketing company. That's the guy or gal who is booking the whole transaction from soup to nuts. And yes, there is complexity because there's a lot of handoffs and there are a lot of different stakeholders and partners as we talked about. And yet you don't, as a beneficial cargo owner or shipper, you don't have to know that. You just want to have reliability, you want to have visibility, and you want to have some sort of resiliency, meaning there's a long-term path where if something changes or something goes wrong, that you have someone who's dealing with it for you. Because, you know, we live in the land in transportation, my old boss used to say, we live in the land where... bad stuff happens. I'm using a less colorful term than what he said. And so you've just got to make sure that you have a partner who's going to navigate all that for you so that you don't have to. So as a, as a industry and also as IANA, we have to prove that we can do that. And so what do you prove that with? Well, you want good service from your railroads and your dray partners. obviously with ocean carriers, if you're doing an international move, you want to have visibility, meaning you want to have some understanding and appreciation about where your stuff is, right? And then you want to have optionality, meaning so that, and resiliency, meaning if something changes, you want to make sure that your folks can pivot to whatever is the most beneficial way to go is. And, you know, freight doesn't move, not all freight should move intermodal, what you're typically wanting is a consistent volume, a high volume and a long distance. So over 500 miles, 80.8% to be precisely of the 500 mile plus market is Intermodal's sweet spot. That's where we play.
00:11:01
Speaker 1: And do you know how much of that market you already have or is that hard to measure?
00:11:05
Speaker 2: Uh, let's, I think what we have is I'm going to, I'm going to look at my, we have an economist that we hired who is so smart and he provides me data and I appreciate him because he makes me sound smart. So my understanding is we have 14% share of that.
00:11:23
Speaker 1: Okay.
00:11:24
Speaker 2: So what that means to me and what means to you is that we have more capacity to And that's something that we have to push. Overall, if you looked at the little pie chart of the freight marketplace, railroads writ large, railroads plus intermodals, a little over 10%. About half of that is intermodal. So there's absolutely more that we could do to take share. And in 2018, intermodal market share was something like 8%. It's gone down because of all the things we just talked about in reverse, meaning there was so much capacity in the trucking marketplace after the pandemic, and the rates could not be cheaper, and it just was like, why wouldn't I use a truck, right? It's just like pushing the easy button. So what we're trying to do, and I think this is the challenge, is to keep those customers, sustain them with us so they don't just come when prices are low, but they stay with us because we're providing them a product that has value.
00:12:28
Speaker 1: And, you know, you mentioned tighter trucking market, and obviously trucking is a very important component of intermodal. Has the drayage market been impacted as much as the regular over-the-road trucking market is because of these regulatory enforcements, or are they getting hit more so than your typical over-the-road trucking market?
00:12:52
Speaker 2: Yeah, I wouldn't say more so, but they absolutely are being hit in particular cities, too. There's some cities that seem to be worse than others that have had trouble sustaining the driver base, meaning these drivers have left either because they've been forced to leave or because they can't afford to drive it anymore. So there's absolutely a challenge there. And part of it is the dray driver, too, is somewhat beholden not to its own destiny, right? So the dray driver has to work with the port or intermodal facility. And if it's a port, they all have different appointment systems. They, as a driver, don't necessarily have the data to tell you where the container is that they need to pick it up. or when the container was unloaded, all of that stuff is not necessarily known by the driver. And in many cases, the drain driver, I think 80% of our drain drivers are owner operators. So it's not like they have a whole lot of CapEx to spend on visibility tools, right? So we try to help facilitate that to the extent we can. We have a mobile app that we just unveiled about three weeks ago, right before COVID. our expo where the driver can go on and see sort of where he needs to go pick up. But it doesn't yet have all the kind of bells and whistles that we need, but we will build on it over time. So we understand that there's a gap there that we want to fill. But yeah, it's absolutely a challenged marketplace for all the reasons we just talked about.
00:14:26
Speaker 1: And so, you know, I would gather that, you know, service is the most important thing when it comes to shippers taking a good look at intermodal. Obviously, some things are out of, you know, the control of the operator, your weather, or you maybe have an accident that really impacts service. So, I guess, what can railroads do or what have they been doing to improve service? Because right now, I think most people would characterize rail service as pretty good, right? Obviously, some could say it could be better and some probably would say that it's actually it has been worse in the past. So can you just talk a little bit about service and the railroads?
00:15:04
Speaker 2: Yeah. So when the pandemic hit, the railroads were caught, I think, a little. What's the opposite of fleet footed?
00:15:14
Speaker 1: Flat footed.
00:15:15
Speaker 2: Flat footed. Lee, you get extra bonus points today.
00:15:18
Speaker 1: Thank you.
00:15:19
Speaker 2: They were caught a little flat footed. because they had had flat feet because they had not planned for the sort of Easter Sunday on steroids that became the freight marketplace. And they just can't grow as quickly as the trucking marketplace can. There's just the barriers to entry are real.
00:15:43
Speaker 1: And Anne, if I can just interject. So what happened is during the pandemic, all the rails furloughed all their people, a lot of people, and then demand snapped back. And Some people were like, I don't want to go back to work. And some people were just like slow to get back to work. And so they just didn't have the resources to meet the demand that Anne was mentioning. So sorry, go ahead.
00:16:02
Speaker 2: No, Lee, you're exactly right. You're saying it so I don't have to.
00:16:05
Speaker 1: Okay.
00:16:09
Speaker 2: But I think that they have learned their lesson. At least I hope they have.
00:16:12
Speaker 1: Yeah, I think so.
00:16:13
Speaker 2: Going back to Katie and Jim, both of them know that growth is critical for railroad success. And there hasn't always been this focus on growth, right? It's sort of like, you know, they take the customers they've always taken and that's kind of it. And in fact, in the past, Intermodal wasn't even valued because it's a low margin business. It takes a heck of a lot of capacity. And there's certainly, you know, it's handled, there's more handling for it and all this stuff that if you're an operator, you're not interested in, in the slightest. But every railroad CEO recognizes that it's a bright spot for their earnings.
00:16:54
Speaker 1: You know this.
00:16:55
Speaker 2: And so they are leaning into what that growth means. And so part of that is one hopes that they're going to invest in their physical plant, but also in their people to make sure that service levels stay high. Mm-hmm.
00:17:08
Speaker 1: And does IANA have a position on rail consolidation or are you guys Switzerland here?
00:17:14
Speaker 2: Yeah, we're Switzerland. And we have all the delicious cocoa and raclette to prove it. No, we are Switzerland. I would say this, what's beneficial about the conversation about mergers is whether it's pro or anti, both of those sides are focusing on growth. And we haven't, as a railroad industry certainly has not focused on that. If I can recall it, they have not focused on it. So they focus on intermodal growth. You know, one party thinks that the way to grow intermodal and get conversion from over the road is through consolidation because you have less handoffs, fewer handoffs. And one party thinks you do it through collaboration because you can have fewer handoffs, but you can also work together rather than having potentially deleterious after effects of a merger, which typically happen.
00:18:05
Speaker 1: Right. And I don't think we mentioned, just for those that don't know, Union Pacific has a proposed merger out there with Norfolk Southern. So that probably gets a decision will be made by the regulators, the STB, probably late next year in 2027. So there's a lot of time they have to prove that it is in the public's best interest and it will enhance competition. Those are very high regulatory hurdles that it must must pass. I don't know if you're comfortable in saying this, and if you're not, we can just move on. But was there a consensus, you know, in terms of the people that were attending the conference about what they thought about rail consolidation that are involved in the intermodal ecosystem?
00:18:45
Speaker 2: Yeah, you'll be pleased to know that I can say something.
00:18:48
Speaker 1: Okay.
00:18:49
Speaker 2: And further pleased to say that it was a split decision. And I'm pleased to say that, too. Now, everyone I talked to after the fact noted that it's very contrasting styles, right? Very contrasting approaches. So everyone noticed that. That's an obvious. But it was interesting to me. Some people said, gosh, I found Vena's message compelling. And others really said, you know, I found Katie Farmer's concerns interesting. legitimate. So it really was kind of a split. And I think that's what makes the STB's job even harder because it's not a gimme. Now, the regulatory sort of bar that you have to meet is pretty high, enhanced competition. How you perceive it, if it's rail to rail or, you know, rail to truck, obviously it's ultimately their decision how they're going to view it.
00:19:37
Speaker 1: Right. And, you know, I guess let's move on from consolidation. You mentioned things over 500 miles is kind of a sweet spot for intermodal. Is there a geographic region in the country or cross border where there's the most growth opportunities for intermodal?
00:19:56
Speaker 2: Yeah. So our market that has been the biggest boomer over the last, what are we in September now? The last eight months.
00:20:05
Speaker 1: Oh, God. Time flies. We started the conversation in September, but now it's October.
00:20:12
Speaker 2: Because I had to explain the U-I-I-A.
00:20:14
Speaker 1: Yeah, yeah. We all fell asleep for a little bit.
00:20:18
Speaker 2: Gosh, you butter up your guests. It's really nice. Do I get a parting gift?
00:20:23
Speaker 1: Sure. Get you a hat.
00:20:26
Speaker 2: I would appreciate it. Our biggest region or biggest land, I should say, of volume growth has been southwest to midwest. But it is remarkable the growth in the cross-border traffic from Mexico. It's up 14 percent. There are people who have benefited absolutely from nearshoring. There are some people who are benefiting from Goods coming from China, but going to Mexico instead of into the United States and then going up the north through there. It is fabulous. You know, it's a tale of two countries because Canada is precisely the inverse. It's down 5%. So there were some really enormous opportunities cross-border in Mexico. We had Luis Hernandez from Ante and Ferromex at our conference and just amazing. talking about what the growth opportunities are. He's really excited about it. And I think it's something we're going to lean into. Again, you know, we can't control the geopolitical situation. It's just interesting to see how Mexico has handled it on one hand and how Canada is handling it on another. Neither one is faulty. Neither one is to blame. It's just interesting how each country has chosen to respond. And so Mexico right now is sort of reaping the benefits.
00:21:41
Speaker 1: Gotcha. And You know, obviously, assuming that there's a trade deal that that's between the U.S. and Canada, I guess most operators are expecting those volumes to come back.
00:21:54
Speaker 2: That's a big question. So Bruce Rogers was also he's from the Canadian Freight Forwarders Association. He was he and I and Louise were on a podcast together. And what he would tell you is that Canada is diversifying its marketplace in terms of who it exports to.
00:22:11
Speaker 1: Right.
00:22:13
Speaker 2: Right now, and you know this, you're in the weeds on these issues every day. And so who's, is it going to ever come back the way it has been? I don't, I don't know. You know, right now it's, it's challenging. And I'm sure there are people in Canada who are saying, just give us two more years and we'll be back to normal. And there are others who are like, forget the United States. This is, this is going to be our new normal as we're going to find other partners bigger than the United States to trade with.
00:22:39
Speaker 1: So let's talk about chassis. Every once in a while, I know, every once in a while you hear rumblings that there's not enough chassis, there's too many chassis, it's hard to find chassis. A, if you can explain to our listeners, what is a chassis and kind of how is the chassis market right now as it relates to, you know, your members' access to them?
00:23:01
Speaker 2: Yeah, there are no chassis shortages that I've heard of. A chassis is The platform upon which you put a container and then you attach to a truck that can make the container move on the truck from whatever, first mile, last mile, is a critical component. And various ports have various chassis pools that help the port, help the motor carrier. It's an ecosystem that's confusing to some, but it's like one of those things you never knew existed until... You appreciated the fact that there was a shortage and that we did see that during the pandemic. And it wasn't necessarily that there was a shortage of chassis, that they were buried in a lot of yards under containers. And it's like no one could move anything. Those were the dark old days. We are not dealing with that right now, mainly because international volumes are pretty flat. They're not down, but they're just flat. They're not growing exponentially. There have been moments to avoid tariffs where they were, but not right now. So we're not seeing a chassis shortage. Chassis business seems to be going well, as far as I can tell. And I was with some chassis folks just yesterday who were saying that business was good. It's just a critical part of when we talk about the jury driver and the challenges to his line of work. Chassis availabilities makes his job work. And chassis location is something that's important, something that we track and we provide that information to the motor carrier. But also, you know, again, appointment systems that are not necessarily uniform. You know, you could have a landlord port where there are different marine terminals that are owned by different entities that have their own different appointment systems. And so that can be extremely challenging as a motor carrier or a dray driver because you have different rules of the road. They're governed by different systems and how you you can get in is also something that's challenging. So there are a lot of those kinds of challenges that make the sort of dray move already either slower or unpredictable. One of the things that I, so I was just at this event in New York, which I'm bragging about how many events I go to, Lee, but I think you go to more. Anyway, I was just at this event in New York And my good friend Noel Hasegaba, now I'm quoting him twice, was there. And he's just talking about the future of the Port of Long Beach.
00:25:33
Speaker 1: Who is this? Who is this Noel gentleman? What does he do?
00:25:36
Speaker 2: You don't know him?
00:25:36
Speaker 1: I don't think so. Should I?
00:25:39
Speaker 2: I feel like everybody knows him. He's the CEO of the Port of Long Beach.
00:25:43
Speaker 1: Oh, yes. Yes. Okay. Yeah.
00:25:46
Speaker 2: So he's talking about the future of the port. And one of the things they want to do is provide visibility, which we talked about. It's important for a motor carrier to understand where things are, where the containers are, where the chassis are, etc., And he also wants to have a universal appointment system because they are a landlord port and they have different marine terminals owned by different people, just what I said. And so he thinks having this uniform universal appointment system will allow greater predictability, which obviously means commerce flows better. When you have greater predictability, that means a truck driver is not sitting there for three hours in line waiting to pick up the container. They know exactly when to come and that better predictability. When they come, the container and the chassis are there.
00:26:27
Speaker 1: Yeah, I think that the chassis providers are kind of like the unsung heroes of the intermodal supply chain. I don't know if you'd agree with that. They kind of, there's an important part. And I guess a lot of people that, especially investors, really don't think about it. They think about the railroads, like the, you know, the Canadian Nationals and Union Pacifics of the world and the J.B. Hunts and the hub groups of the world for the IMCs. And, you know, anyway. When we're talking about, you know, you were talking about visibility, how important that is. Can you talk about, you know, where the biggest gaps are on shippers having visibility of their freight?
00:27:03
Speaker 2: Yeah. Well, first and foremost, it's at these handoff points. So when you're changing from an ocean carrier to a terminal or a terminal to a drayage provider, a drayage provider to a railroad, railroad to railroad, rail terminal to the final drayage. there are frequently gaps. And why is that? Well, I just mentioned like six different stakeholders. And so they're going to have varying capabilities. And are they all integrated with one another? What we're aiming for is, yes, they will be. They will be integrated. They will be able to collaborate across all those channels. But right now, that doesn't necessarily exist. And so if you are, again, if you're a rail shipper or an intermodal customer, You may get the best data possible from certain parts of that, probably from the railroad, but maybe don't have any visibility into the dray. And so does that satisfy you? So as I mentioned, the IMC, who's putting this whole package together, is going to be pushing on all his and her customers to really see, like, how can we make sure that this seems like a seamless single booking, that it seems like a truck-like product? And we're not there yet. But I think everyone in that ecosystem that I just mentioned is aware that that should be the goal. What I think is happening is there's greater collaboration, partly because the tools are becoming cheaper because of AI and things like that, but partly because there are folks who either because of cargo thefts and security concerns or because of just-in-time delivery and not getting burned again, They understand that there needs to be greater visibility and greater, I don't know, willingness to work with the shipper and all the collaborators, all the stakeholders to make sure that the product actually moves the way it should.
00:28:54
Speaker 1: And, you know, you mentioned cargo theft. So outside of visibility, is there anything else the industry could be doing? Because, I mean, you hear stories every once in a while of, you know, trains getting stopped and people like opening up the containers and finding good stuff and going home with them.
00:29:08
Speaker 2: There's a lot of things you can do on the physical side in addition to the technology side. So on the physical side, there are ever more sophisticated locks and, you know, seals that are used by the ocean carriers and by the shippers, if it's their container, to make sure that thieves can't just easily break in. If you're a thief, and I'm not one, so I'm just assuming... you probably want to take the path of least resistance. You want a high-value target for sure, but you also don't want to mess around trying to break into a container if it's too hard or if there's too many people, if it's a populated area. So there's ever greater technology on that. I mean, ever greater sort of hardening of the container on that. But there's also, you know, railroads will, for example, put a high-value container in the bottom well of the well car. just so that they can protect it and make it shielded from, you know, those thieves who, if you are in the middle of nowhere, the thieves who come in, and this happens, as you know, when they come and try to strip the container, they can't get to the one in the lower well. You can also, of course, have protection, lighting, drones. All of these things are being used. And in fact, I was with BNSF earlier this week, and they're using pepper clouds. They see... If they see a, like if their locomotive engineer sees something out of place, or if the drone that may be following a high-value container sees something out of place, it is well within their rights for the cop who may be tailing or in the area to use a kind of pepper bomb, so to speak, at that car so that it basically immobilizes the car and they can't get in. It's all based on, you know, intelligence operations working with the sort of folks on the state bureaus of investigation and that kind of thing. You have to have a good line of intelligence. But since there is a police force, railroad police force, they also have their own intelligence mechanism.
00:31:13
Speaker 1: Interesting. So on the technology side, going back to that, you know, we all talk about AI and, you know, I think that it's a technology that seems to be trying to live up to the hype. I think there's a lot of good things that can come of it. How is the intermodal industry kind of leveraging AI to provide a better product?
00:31:39
Speaker 2: Well, because there's so many stakeholders in the intermodal ecosystem and because there are a lot of handoffs, you can imagine that the intermodal transaction generates enormous amounts of operational data. So AI provides an opportunity for us to turn that data into faster and better decisions. So that could be, for example, predicting congestion or identifying shipment exceptions earlier, improving equipment positioning or improving drayage dispatch and productivity, improving shipment visibility. The opportunity is trying to connect the AI capabilities across the full shipment journey, which obviously, as I just mentioned, can be challenging depending on their level of technological know-how. We have a, what's called the IANA's Intelligent Container Journey, which you can get, I'll send to you, Lee, which basically reflects this broader vision of how we can connect the data and the stakeholders throughout the movement of the container.
00:32:36
Speaker 1: Okay. So autonomous trucking, you know, while we don't think it's here tomorrow, it's obviously, you know, could be coming over time. Could you just give us, you know, your thoughts about, is it good for intermodal or is it bad for intermodal? Does it really not matter?
00:32:52
Speaker 2: I don't think it's bad for intermodal. I don't think it's in prime time yet. And I think there's a lot of labor objections. So I don't know when it comes to prime time. But we even had several folks exhibit at our expo that have automated if it's it could be a trailer. or drayage, there's a road to rail technology going on there. Automation, I think, provides reliability and optionality, which again, we say the shipper really wants in yard operations and drayage and short haul movements. I think the piece that will be challenging is adoption and labor acceptance. That's always the issue. If it has the commensurate safety benefits that a typical drayage operator or yard operator would have, then I think we should be open to that technology. That being said, we are taking a look at, all right, what would that safety framework look like? Because that is most important. It's a safety-critical industry. How do we assure those safety outcomes are the same, if not better?
00:34:09
Speaker 1: Got you. You mentioned earlier that intermodal becomes more attractive the more expensive diesel is. That is because railroads are more fuel efficient. I hear less and less about the sustainability argument for intermodal recently. I don't know if that's just because the current administration is not a priority for them and therefore it's not talked about as much. Is that still an important factor when shippers are deciding whether or not intermodal is for them? the sustainability aspect of it.
00:34:42
Speaker 2: Yeah, the sustainability case has not changed. It's still much more sustainable than over-the-road trucking. That being said, there are companies that still have ESG goals, right? Environmental social goals. And there are companies that have sort of disbanded that sector, that silo in their corporation. It just sort of depends on whether or not you consistently have a ESG goal that you seek to make. If you do, I think that intermodal makes you smelling like a rose. So if they have emissions and sustainability goals, then absolutely they're going to look at intermodal. But sustainability alone does not compensate or cannot compensate for poor service or reliability. The strongest intermodal proposition is one that combines the competitive economics, right? So the diesel fuel are cheaper than the diesel fuel, but reliable service and lower emissions. If you have those three, plus this sort of optionality, performance, reliability, visibility, that's when intermodal becomes really a strong proposition. And again, it's not gonna fit every freight. It's going to be perhaps a segment of your shipping mix, that you should look at so that you're not stuck in the fluctuations of the truckload marketplace, either because of fuel, in this case, fuel prices right now, or because we haven't invested sufficiently in our highways in 20 years. And so congestion obviously is a huge cost.
00:36:19
Speaker 1: And so when shippers are looking at intermodal, what do you think the biggest misconception is still today about intermodal from a shipper's perspective?
00:36:29
Speaker 2: That's complicated. Yeah. And so we have to demystify it. But again, we demystify it not by saying, here's all the things that happens in an intermodal transaction. You don't have to worry. We worry so you don't have to. It can be a seamless product and provide you that flex that you need at a lower price. Again, we're not playing in the spot market here. This is something that's got to be consistent and well-planned and all that stuff. but we can service that for you and you're going to be happy, but just know that I've got it. I got it. If you're the IMC, you have to make that promise, but then you also have to make sure your partners can live up to that as well.
00:37:14
Speaker 1: So looking ahead into 2027, do you have any predictions about what the intermodal market's going to look like relative to what it looks like today?
00:37:24
Speaker 2: I think the intermodal marketplace for the time being is going to be still booming and still benefiting. The only thing that could deter that is the consumer demand, I guess, could go down. But I don't see diesel fuel prices going back down anytime soon. Even with a diesel fuel tax holiday or a diesel fuel export ban or any of those things, diesel fuel prices are going to continue to be elevated for a while, that's going to benefit Intermodal. Now, if somehow the congestion that has befallen the railroads in the past comes again, that would be something to obviously be a red flag.
00:38:10
Speaker 1: Gotcha. And so, you know, before you were with Diana, you were with TIA, the Transportation Intermediary Association, which is pretty much freight brokers, right? What's the biggest difference between those two you know, groups within the supply chain?
00:38:27
Speaker 2: Free brokers at TIA, 80% of those folks were truck facing. They were either using LTL or over the road truck. They weren't playing in the intermodal marketplace. So that's the biggest distinction. So we have some crossover members, members who are members of both associations and It's interesting to me, though, now that there are firms that had been solely 3PL, not focused on intermodal, but now have actually hired people in the intermodal space to get into it to benefit from their expertise because they want to have that flex. that to me is such a positive sign. But that's really the biggest distinction. I mean, we could talk about scaled versus unscaled. Obviously, the members of the TIA are usually younger companies. They're not 180 years old. They're younger companies. They may not be scaled. They may have only been in business for a short period of time. They may only have two people working there, all that sort of stuff. That's another distinction. But the biggest is, of course, the truck-facing component.
00:39:31
Speaker 1: All right. And before I let you go, Anne, I always like to ask our guests if they have a favorite book about transportation or business or leadership that resonates with you today that you've read in the past.
00:39:43
Speaker 2: I read this book called Humble. I read The Box, which is all about the birth of the environmental industry, but I wouldn't I listened to it, I should say.
00:39:51
Speaker 1: It counts. It counts.
00:39:54
Speaker 2: The guy who is the narrator was an AI-generated narrator. So that left me a little cold. That being said, I read this book about leadership years ago called Humble Leadership, which has stuck with me. And the premise, of course, is that you can't do it all, nor should you. Not every idea or solution emanates from you, the leader. You have a team that you should rely upon to help you. You have to have the humility in order to accept that help. I think it's enormously helpful. And as a leader, it means you don't have to do everything yourself. So even if you're like a lazy leader, being humble is also a good thing.
00:40:39
Speaker 1: We'll have to take a look at that one. Well, Anne, I really want to thank you for joining us today and sharing your perspectives on the intermodal market and the opportunity to convert more freight from highway to rail and what the industry needs to do to unlock its next phase of growth. Really appreciate your time and your insights today. So thank you.
00:40:55
Speaker 2: Thank you, Lee.
00:40:56
Speaker 1: And thank you to everyone listening. If you enjoyed today's conversation, please take a moment to follow, rate, review, and share the podcast with a friend or colleague. Your support helps us continue bringing you conversations with the leaders shaping transportation and logistics. We've got a great lineup of guests coming up, so please be sure to check back for more conversations with CEOs, founders, shippers, regulators, investors, and other decision makers within the freight markets. Also, if you'd like to learn more about the freight transportation and logistics markets, you can find our research on the Bloomberg Terminal at BIGo, and you can connect with me on LinkedIn or follow me on X at Logistics Lee. I'd also like to thank our outstanding producers, Mariam Traor and Aditya Simane, for helping bringing Talking Transports to life each week. This is Lee Klausgau signing off. Thanks for Talking Transports with me. We'll see you next time.
00:41:51
Speaker 2: Thank you.
