If supply chains make headlines primarily when they fail, then 2021 marked a particularly challenging year for intermodal transportation. At the recent RailTrends conference, Larry Gross, president of Gross Transportation Consulting, delivered a sobering assessment: after peaking in March, intermodal volumes and efficiency began declining despite surging demand. What lies beneath this industry crisis, and how can it be resolved?
The Deep Freeze: Intermodal's Darkest Hours
Gross observed that North American domestic intermodal markets never fully recovered after February's polar vortex disruption. In international intermodal (IPI), while demand remained strong, volumes for 20-foot, 40-foot, and 45-foot containers have declined for five consecutive months since October. The root cause? An overwhelmed system where excessive freight attempts to pass through narrow bottlenecks, creating congestion and inefficiency. Ports operating at full capacity and rail networks failing to keep pace have exacerbated the situation.
Gross likened the supply chain crisis to "peanut butter" — with responsibility spread across multiple stakeholders including freight railroads, shippers, chassis providers, ocean carriers, and ports. The complexity stems from each company optimizing for individual benefit while collectively creating systemic failure. The pre-Christmas rush to move goods through the choke points of Los Angeles and Long Beach ports only magnified the dysfunction.
From IPI to Transloading: The Strategic Shift
As capacity constraints persist, intermodal's share of import movements continues shrinking. Gross identified a notable trend away from IPI toward transloading, as businesses adapt to inland congestion in hubs like Chicago by rerouting freight strategies.
Traditionally serving as a "safety valve," intermodal found itself supplanted by trucking in 2021 due to capacity shortages. Despite chronic driver shortages, trucking companies managed to increase volumes. Southern California trucking rates reached astronomical levels as freight shifted from intermodal to expedited truck deliveries.
The Data Tells All: Intermodal's Market Share Erosion
IANA and Gross Transportation Consulting data reveal significant market share fluctuations for intermodal in dry van and refrigerated movements over 500 miles since Q2 2020. After initial pandemic recovery gains, intermodal's position steadily deteriorated. "By Q3 this year, domestic intermodal lost about 6.3% market share — dropping to levels not seen since Q4 2009," Gross noted. "We've surrendered all gains made since 2009."
Contrary to assumptions that trucker shortages would drive freight to rail, Gross argues the trucking industry will eventually recruit sufficient drivers. For intermodal to grow, it cannot rely solely on trucking's capacity constraints.
Looking Ahead: Challenges and Opportunities
Gross predicts no seasonal peak for intermodal in 2021's final weeks, anticipating flat performance instead. Market recovery, he suggests, requires reduced import volumes — unlikely before mid-2022. Meanwhile, elevated freight rates will persist as carriers absorb higher driver wages.
"The endless freight wave will break in 2022," Gross projected. "Once fluidity returns, significant capacity will be released. Additionally, thousands of China-sourced domestic containers originally scheduled for 2021 arrival — purchased by private operators — will finally reach U.S. shores next year."
He anticipates truck capacity utilization will ease, making 2022 "considerably more normal" than this year, potentially resembling 2019 conditions. "Fasten your seatbelts," he cautioned. "Recovering from 2021's damage won't be easy, but presents both challenge and opportunity. Operational alignment and avoiding past mistakes can position us for success."
Rebuilding Supply Chains: The New Normal
Gross emphasizes the necessity of structural change, suggesting reevaluation of supply chain fundamentals like just-in-time inventory and globalization. "We'll see slowed offshore movements — job repatriation and decelerated goods flows," he said. "Import TEU growth will align with economic expansion rather than outpacing it. This fundamentally impacts intermodal; domestic market growth becomes imperative."
The path forward, Gross argues, lies in building supply chain resilience. "When systems are optimized for maximum efficiency, disruptions — whether climatic, geopolitical, or medical — become inevitable," he explained. "We must prioritize resilience and additional capacity buffers. When chassis turnaround times double from 4.5 to 9 days, you simply need more chassis to move the same freight."
Operationally, congestion creates self-perpetuating inefficiencies. "Prevention beats reaction — by the time you respond to congestion, it's too late," Gross observed. While pessimistic about near-term recovery without volume reductions, he detects early signs of improvement as supply chain issues become more localized to West Coast ports.
East Coast ports like Savannah and New York/New Jersey handle congestion more effectively than Los Angeles/Long Beach, though challenges remain. Gross warns that prolonged West Coast avoidance could redirect IPI volumes eastward — potentially reducing rail shipments.
"As trucking's share increases, freight flows will shift westward," he concluded. "When the dam breaks, changes will come rapidly — though timing remains uncertain."