Parcel Giant Switching to Containers on Flatcars

By Dan Calabrese, Special to Transport Topics

This story appears in the August 13 print edition of Transport Topics

UPS Inc., in order to reduce costs and improve its scheduling, is switching to sending containers on flatcars by rail and moving away from shipping trailers on flatcars.

The company made the transition earlier this year on the Union Pacific line running from Los Angeles to Miami and said it plans to do so with other rail routes.

“We see this as a trend we would like to see the entire industry accept,” said Norman Black, national media relations manager for UPS, Atlanta. “It does seem to be a win-win, but we are still in the early stages.”

Containers on flatcars, UPS believes, add capacity and make the logistics of the process much simpler, said Kelley Anderson, UPS general manager of enterprise rail for corporate transportation.

“As you look at terminal capacity, trains come in and you don’t necessarily have to stop, cut and couple that train into another track,” Anderson said. “The process is actually accelerated.”

Anderson said the company’s three objectives in making the transition are avoiding schedule compromise, maintaining optimal train performance and reducing costs.

The key to the move is the ability to double-stack the containers.“The railroads have double-stacked for years and years,” Anderson said. This has always appealed to UPS but has never before been offered in conjunction with workable schedules, which is why UPS did not make the switch earlier, he said.

“So, as they [railroads] offered up a transition plan that makes sense, now that the design and economies are there, this became the direction we wanted to go,” Anderson said.

One of the first issues to be tackled is that of whose containers will be used.

“Some railroads are feeling they want to provide the containers. “Some railroads don’t want to provide the containers,” Anderson said. “The whole notion of ownership of containers is a big issue right now.”

As an alternative to railroad-supplied containers, UPS is talking to contemporaries in the industry about the possibility of pooling resources and developing a stockpile of containers that can be shared.

“In our peak season, if their volume drops down and we can utilize those assets, we’re looking to do that,” Anderson said.

Chris Sosha, export manager for third-party-logistics provider Supply Chain Solutions, Grand Rapids, Mich., said many steamship companies and railroads are moving away from providing containers, making that a greater burden for trucking companies.

If the industry faces any transition issues, Sosha said, he expects them to revolve around chassis equipment: “They’ll take ownership of that, and the responsibility of the maintenance of that equipment will be theirs, too.”

UPS does have enough intermodal equipment to meet its needs, Black said.

According to Anderson, UPS’ early tests of moving containers by rail have gone surprisingly well. The company began with Union Pacific’s Sunset Route, which runs from Los Angeles through Tempe, Ariz., Dallas and Jacksonville, Fla., to Miami. In tests on Florida East Coast Railway, UPS found the new process often faster than the old, Anderson said.
UPS now will look to initiate the conversion in its routes with various other railways, including two Anderson mentioned specifically — Florida East Coast and Norfolk Southern Railway.

UPS does not intend to rush the process and considers it now to be in an “embryonic” state. “We’ve heard numbers like a 10-year or five-year transition time frame,” Anderson said. “We’ve got a ways to go.”

Sosha said he believes that the railway industry is well-prepared for the shift toward containers on flatcars.

“I was down at Norfolk Southern just outside of Atlanta last year, and they’re already going to the stacking system down there,” Sosha said. “When you see the efficiencies at the ramps and their ability to do this, it’s absolutely amazing now. And in rail, for the most part, except for a few hiccups, the rail systems are moving effectively and efficiently. There’s always that proverbial bump in the road that slows things down, but for the most part it’s very smooth.”

Sosha believes the growth of international shipping also may be influencing the change. “If you’re just talking cross-country, it doesn’t make a whole lot of sense” to use 40-foot containers, he said. With international shipping, some shippers desire to use trailers on flatcars, but “you can’t stack the doggone trailers and you can stack the cans. That’s probably the biggest thing right now.”

Anderson said he believes UPS is a sufficiently pivotal player to set in motion a major industry change.

“It has a bearing on everyone who’s in a TOFC [trailers on flat- cars] world, because UPS has been the anchor of the TOFC network, and as it balances out, one of the impacts is to look at how the network looks in terms of one of the major players making this shift,” Anderson said.

The shift by UPS toward containers on flatcars is not the only innovation making a difference.

Schneider National last year initiated the development of a new intermodal container model with a different stacking frame — allowing it to provide for 100½ inches of interior space, while still fitting into the 102-inch limit, including the stacking frame.

Three manufacturers — Wabash Manufacturing, Lafayette, Ind.; Stoughton Trailers, Stoughton, Wis.; and Hyundai Manufacturing’s facility in Tijuana, Mexico — are producing the aluminum containers for Schneider National.

“Schneider National has a lot of customers that require pinwheeling of their product,” said Dave Howland, Schneider National’s vice president of rail management, intermodal division. “You turn one pallet so it’s longer lengthwise and the other so it’s longer widthwise. The interior dimension it covers is about 100 inches, and about 35% of our customer base requires a pinwheel unit, which means they couldn’t load domestic containers.”

Earlier this year, Schneider National began working with a fourth manufacturer, based in China, which is making the containers out of steel instead of aluminum. Howland said the use of steel saves Schneider National approximately 15% compared to aluminum.
Schneider National now has 7,500 of the new 100½-inch units in its fleet, Howland said.
Others in the industry are taking a cautious approach to such changes.
Stephen Cosgrove, executive vice president of intermodal operations for Hub Group, Downers Grove, Ill., said his company is not willing to risk a loss of container strength that might result from a wider intermodal container.
“You’re always looking at it and saying, ‘Should we make them bigger?’ ” Cosgrove said. “It comes down to an engineering compromise, because you’d have to make the corrugation thinner, and for us, we didn’t want to compromise the strength. When you lift the container from the top, it’s going to bow.”
Cosgrove said a company with a large number of customers want-ing to pinwheel pallets would have more of an interest in wider containers but that the change does not make sense for Hub Group.
Dave Berry, vice president of Swift Transportation, Phoenix, said Swift recently bought a sizeable number of new containers of un-specified width — but narrower than Schneider’s new container — and would not comment on the possibility of any new specifications in the future.
The willingness of Schneider National to invest so heavily in the new containers hinged largely on successful tests with its customers.
“We tested it with about 50 customers,” Howland said. “These were 50 customers who have to pinwheel and could not load the standard domestic container, but they could load this one. We did not have a single customer that could not load the box. So it opens up a much broader market for the intermodal double-stack market.”
Just as UPS indicates its conversion has been smooth, Howland said Schneider National is finding the conversion to its new containers to be working well because they are compatible with existing processes.
“The whole plan was to use them interchangeably with those customers that have to load an over-the-road trailer,” Howland said. “They don’t have to change their load configuration. It’s the exact same load pattern in the dock.”
Howland said he believes the new 100½-inch interior-width containers will signal the end of the line for the more traditional 99-inch alternative.
“I don’t think you’re going to see a lot of downside in this as these things come on board, except that, ultimately, it will probably go a long ways toward making the standard domestic container obsolete over time,” Howland said. “It’s just like anything else — everybody wants bigger, bigger, bigger. Once you gain that 100½-inch interior width, you reach a point where ultimately what you have is not that effective. It becomes a second-class citizen.”
Sosha said that, while greater capacity is ultimately the goal driving container innovations, he believes 40-foot-long containers have remained more in favor in the industry than the newer 53-foot-long versions, even though flatcars are sized to accommodate the 53-footers. The reason is stacking ability, and he believes it is primarily responsible for driving the industry away from trailers on flatcars.
“To me, the optimum thing is the ability to double-stack. You look around on the rails, and you see a lot more of them double-stacked,” he said.
Even with the massive industry shift UPS is both expecting and seeking to lead, Anderson said he believes trailers on flatcars will continue to play an important, if modified, role.
“We think there will be some TOFCs, as it makes sense for railroads and makes sense for us,” Anderson said. “We don’t see it as an all-or-nothing thing.”