Every truckload shipper’s strategy should include intermodal transportation.
In addition to being environmentally friendly, multimodal transportation offers cost savings and consistent pricing.
But how many shippers are aware of what goes into an intermodal rate?
While obtaining an intermodal quote from a reputable intermodal provider is simple (they handle everything), understanding what goes into pricing can make you a more confident and knowledgeable intermodal shipper.
We dissect some of the complexities of this mode to assist you in better integrating intermodal into your entire shipping plan.
The Three Components of an Intermodal Rate
An intermodal rate is made up of three parts: an origin drayage rate (trucking firm), a rail linehaul rate (railroad), and a destination drayage rate (trucking company).
This holds for both asset-based and non-asset-based intermodal operators (IMCs).
The main distinction is that asset providers own the container transported and the origin and/or destination drayage activities (though not always).
The Basics of Drayage Pricing
What Is a Drayage Carrier?
Drayage carriers, often known as draymen, are specialized motor transporters that operate in and out of railroad stations (and depending on location, seaports as well).
Drayage drivers are frequently locals who accomplish loads daily inside their specific metro zone.
Drayage carriers simply provide the truck (i.e., the tractor or power unit) and will pick up and drop off equipment (i.e., the container and chassis) held by the railroad, an asset-based intermodal provider, or an international marine organization (i.e., ocean freight liners).
Drayage Rates
Drayage carriers can offer consistent prices because they start and/or end every load at the same spot (the intermodal train ramp).
Rates are supplied as a fixed fee plus a fuel premium to account for diesel price variations.
Draymen often offer a point-to-point pricing matrix that covers pick-up and delivery prices from every intermodal ramp in the metro region to dozens of towns and cities.
Some carriers can handle drayage up to 300 miles, but 50-100 mile hauls are the most usual.
Drayage rates are substantially less variable than spot market truckload rates. When compared to truckload spot rates, which fluctuate daily to account for current supply and demand, drayage carriers’ rate matrix is frequently updated only once per year (sometimes less).
Drayage carriers negotiate unique pricing for committed freight in exchange for higher-volume, consistent opportunities.
Do I Need Drayage Quotes?
It all depends.
When transporting domestic intermodal freight in a 53′ container, you will rarely (if ever) have to deal with the underlying drayage carriers.
Your intermodal supplier will handle all aspects of your drayage, including pricing, selecting the correct carrier, negotiating rates, and operations.
You may need to arrange your container drayage if you are exporting overseas freight, particularly if it arrives at a port.
The Fundamentals of Intermodal Rail Rates
The train is what most people associate with intermodal transportation.
Depending on where you are shipping, your intermodal freight could go on one of seven Class I railroads in North America:
| Railroad | Primary Area of Operation |
| Union Pacific | Western U.S. |
| Union Pacific | Western U.S. |
| CSX | Eastern U.S. |
| Norfolk Southern | Eastern U.S. |
| Canadian Pacific | Canada & Northern U.S. |
| Canadian National | Canada & Northern U.S. |
| Kansas City Southern | South Central U.S. & Mexico |
The railways supply pricing matrices to intermodal companies.
Each railroad will provide rates from their intermodal ramps to other intermodal ramps, both within their network and for other rail networks beyond their service region.
Rail linehaul fees include a basic fee as well as a fuel surcharge.
Even though North America has a dense network of intermodal coverage, not all intermodal ramps connect to each other (i.e., offer pricing and service), even within the same railroad’s network.
3 Types of Intermodal Rail Rates
Massive volumes of equipment on permanent tracks are used in intermodal rail networks.
Railroads must prioritize network balancing because service will suffer if their containers and trains are not where they need to be when they need to be there.
Railroads utilize a variety of pricing schemes to stimulate traffic flow in various lanes and corridors to maintain balance.
The following are the most prevalent types of intermodal rail rates:
1. Spot Intermodal Rates
These are the most popular and are sometimes referred to as FAK rates (freight of all kinds).
Because intermodal is a truckload conversion product, railways are aware of what is going on in the truckload market and consider those trends when setting intermodal spot rates.
Though they fluctuate in reaction to market demands, these prices are more stable than truckload pricing and do not alter significantly (if at all) from week to week.
Peak Season Intermodal: An Exception to the Rule
One major exception is the intermodal peak season off the west coast. As imports (mostly from China) arrive at ports in California (and, to a lesser degree, Oregon and Washington), the Union Pacific and BNSF railroads experience a significant increase in outbound demand.
The peak season for intermodal transportation normally begins in September and lasts until December.
Spot fees out of these regions will rise by several hundred dollars per lane as capacity tightens.
Aside from peak season, intermodal spot rates are largely steady, and unless a railroad makes a significant network upgrade, changes are often modest.
2. Rates for Intermodal Contracts
These are shipper-specific prices established by railways during annual bids (RFPs). They are popularly known as SPQs (special price quotes).
The intermodal bid process typically operates as follows:
- The shipper makes their proposal available to intermodal suppliers.
- Independently, the intermodal providers will go to the rail on behalf of the shipper, demonstrate that they were invited to bid, and request preferential rates on the shipper’s network.
- The railroad develops customer-specific pricing for the requested lanes and delivers it to the intermodal providers.
- The intermodal suppliers will include their drayage costs and estimated margins in the bid and their network and provide the overall prices.
- Once the freight is awarded, the intermodal provider(s) will confirm with the railroads and access the special pricing.
Contract rates for intermodal transportation are fixed and will not fluctuate during the year. Shippers can construct consistent transportation budgets thanks to the consistency of annual intermodal pricing.
You don’t always need a lot of volumes to receive a good rate; often just a few loads each month in a lane is enough.
Simply ask your intermodal provider if you have the option.
3. Project Costs
To receive committed pricing from the railroad, you do not need to submit an annual bid.
Railroads are constantly looking for truckload conversion possibilities, and special projects are an excellent way to find them.
Project cross-spot and contract rates, with a set rate assigned for a shorter period.
If you have a chance to move a large number of cargoes over the course of a few weeks or months and want to investigate if intermodal conversion is an option, contact your provider.
Intermodal Accessorials & Pricing
Why Accessorials Are More Common in Intermodal
Accessorials are far more common in intermodal shipment than in full truckload shipping.
Why? Because this mode’s success depends on efficiency, any delay or diversion may be accompanied by additional expenses.
When it comes to contract rates, intermodal pricing is extremely predictable. As a result, pricing is highly competitive, with razor-thin margins.
To maximize savings, intermodal providers provide shippers with the most cost-effective rates, with the understanding that they will be compensated for certain add-ons as they occur.
Speaking Like an Intermodal Pricing Professional
While intermodal pricing is more complicated than full truckload (or even less-than-truckload) pricing, a smart intermodal provider will simplify it.
Though you won’t have to deal with all of these nuances directly, having this foundation will make you much more knowledgeable the next time you convert a highway lane to rail or run an intermodal RFP.
Important Considerations for Intermodal Pricing
- The drayage origin rate, rail linehaul rate, and drayage destination rate comprise intermodal rates.
- Shippers cannot obtain intermodal rates from railroads and must instead deal with a supplier, whether asset-based, non-asset-based, or a hybrid of the two.
- There is seven Class I railroads, each providing price matrices including intermodal ramp rates across their network and others outside their territory.
- The three basic forms of intermodal rates are spot rates, contract rates, and project rates.
- Accessorials are more typical in intermodal to provide the most competitive pricing, although the overall cost savings compared to truckload are significant.
Your Provider Should Make Intermodal Pricing Easy
Your intermodal provider will handle the specifics and make the process straightforward, whether it’s a spot rate, a particular project, or an annual bid.
Do you need assistance incorporating multimodal into your strategy?
If you’re interested in learning more about it with Get Loaded and Rolling, now is the best time to get started. Sign up with Get Loaded and Rolling today.
