Transloading, the process of transferring product from one mode of transport to another, is affected by many factors. All elements of shipping a product must be considered by a company before determining the best course of action. The main benefits of transloading include improving supply chain effectiveness and service to the transload user’s customers, creating competitive market advantages that result in business growth, lowering supply chain costs, and increasing flexibility and speed to react to changing market conditions. However, the ability to achieve these benefits can be affected by a number of key factors or considerations that are important to the user of transload services.
Cost - Different methods of transportation have different mixes of economics that affect the cost of that mode and ultimately its price to customers. Rail is a cheaper option for long-haul shipments due to the volume of product it can move in one shipment when compared to trucking. Rail is also a preferred method of transportation when accounting for fuel costs. Financially, choosing to ship by rail is a superior economical choice for companies moving large quantities of product longer distances. Trucking requires more fuel, moves smaller shipments, and has a higher labor component due to the cost of drivers. All things being equal, rail will almost always prove to be a lower cost-per-ton-mile option.
Service Delivery - Direct rail shipments can only be made if both the origin and destination are served by rail, while trucks can deliver a shipment basically anywhere there is a road. Plus, truck transit times will always be less than rail delivery. Trucks move across ever-expanding infrastructure and can access delivery points not accessible to rail. For example, a produce shipper might move frozen foods long-haul by refrigerated boxcar to a cold storage warehouse. This product is clearly not meant to remain at an unloading facility forever, so the final delivery will be made by truck to a grocery store or other food service location that is not rail-served.
Product Degradation - The type of product being moved is of huge consequence to shippers when the products are perishable to some degree. Also, time is money, particularly for products with limited shelf lives, and carrying costs can become a concern.
Routes - Due to the sheer size of railcars and the finite quantity of tracks, rail is unable access final destinations unless products are destined to remain at an unloading facility. This poses a problem for most shippers, as companies generally do not want their products to remain at a railcar facility indefinitely. For this reason, transloading the product into a truck becomes the solution. Overcrowded congested routes or routes that chronically experience delays can be harmful to direct shipments, either rail or truck. These slowdowns, whether or not they are expected, increase transit time. Efficiency is one of the primary motivations for transloading, so these interruptions are counterproductive. Also, equipment that is tied up in delays is unavailable to complete more trips, which will represent in reduced asset utilization and a loss of potential profits. In these cases, transloading can offer a multi-modal transportation option that bypasses congested rail or highway routes and improves supply chain effectiveness.
Economy and Trade - The general health of the economy affects the transportation industry in many ways. One major influence is the cost of fuel. As previously mentioned, transloading allows shippers to use a combination of more fuel-efficient rail and more delivery-flexible trucking to move the product to market. Another way in which the economy influences transloading is employment and access to labor. Currently in the trucking industry, there is always some degree of shortage of truck drivers. Combined with regulations limiting the number of hours each driver can drive, the trucking industry has been forced to evolve. An insufficient workforce drives up costs and prices. Transloading allows shippers to expand the market reach for their products, both domestically and globally. The North American rail network is extensive, and rail is a prime way of transporting most bulk products throughout the continent. Transloading also provides the option of moving product overseas.
Environment - Concerns over the impact of transportation on the environment has become even more heightened in recent years. Eco-conscious companies are always looking for ways to reduce their carbon footprint in their search for solutions to improve the effectiveness of their supply chains. It has become increasingly important to customers that their service providers take positive actions towards reducing environmental impacts. Steps have been taken to minimize accidental product spillage during transfer, or pollution caused by equipment. Going forward, the impact of eco-awareness is expected to become increasingly more evident, and transloading offers supply chain operations new options that lower potential impacts on the environment.
While all these factors alter how transloading takes place, this list is not all-inclusive. The impact of safety and regulations on transloading will be among the topics discussed in an upcoming Transloading 101 Lesson.
