Cheaper, Faster, Better – How short haul rail surprises the supply chain

There has been a flurry of activity around inland ports recently. Real estate companies and consultants are touting their benefits, ports and railroads are investing in them, and shippers are scratching their heads trying to figure out what all the fuss is about.

South Carolina Ports Authority's first inland port in the Greenville-Spartanburg market greatly surpassed our highest expectations, and we hear the same questions on a regular basis: Why are inland ports the new rage? What benefits are derived for shippers? What opportunities do inland ports offer developers and communities around these unique facilities?

I'd like to say we knew the answers to these questions before Inland Port Greer opened, but in truth, they were learned from the customers that use it - big brands, including adidas, BMW and Michelin. Here are the four important lessons we’ve discovered along the way.

Inland ports deliver cost savings

“Having Inland Port Greer helps us to be more efficient inside the plant. We don't have to manage several hundred sea containers; the Port does this now. They deal with the complexity of getting them unstacked and trucked over to us. That's their business – it's what they do best. We use our space onsite now for expansion, not for storing sea containers.” - Knudt Flor, President and CEO, BMW Manufacturing Co.

Inland Port Greer is 212 miles inland from the Port of Charleston. The Norfolk Southern Railway intermodal infrastructure offers a direct connection between the Inland Port and the Port of Charleston on the Atlantic. This distance is important because rail economics create cost reductions in multiple ways - not the least of which is the fact that cargo is generally more cost-effective to move by rail than truck. But less obvious factors play a role as well.

There are cost savings associated with getting product to densely-populated consumer markets in the most economical way. For example, Inland Port Greer is within a one-day drive of 94 million people. It's on the I-85 corridor, just 1-1/2 hours to Charlotte, North Carolina and 2 hours to Atlanta. Because inland ports tend to be more centrally located than end-of-the-line marine port facilities, delivery costs to an entire region are generally lower.

Additional savings are found in mitigation of accessorial charges, which are the fees incurred by shippers when their containers sit on marine and rail terminals beyond the allotted free days and/or when they sit on a chassis at a warehouse or truck yard. Typically, inland ports run on separate free time allowances than the seaports they serve. So, shippers enjoy more free time without negotiating for it.

Many shippers move containers off terminals to avoid punitive demurrage only to pay chassis and detention charges while those same containers sit at their warehouse or truck yard. An inland port can mitigate these accessorial charges as well. With a fluid inland port, a company in close proximity can order containers the day they need them and quickly return boxes without incurring chassis and detention costs. In fact, Inland Port Greer has one customer that requests containers just 45 minutes prior to needing them. A 24/7 operation in a less congested inland market certainly helps as well.

Supply chain resiliency

“Intermodal rail, anchored by key regional inland ports, has become a crucial pressure release for an increasingly constrained supply chain. These locations allow shippers to quickly and cheaply move containers away from seaports and into the supply chain. The relationship between the Port of Charleston and Inland Port Greer is perhaps the best example of how strong tie between the seaport and inland port can provide growth for both the local port markets and the wider regional economy.” - David Egan, Global Head of Industrial & Logistics Research, CBRE

Resiliency has become a requirement in the modern supply chain. Rail-served inland ports can offer continuity that adds value to the integrity of a supply chain. Train schedules aren't sacred, but this mode of transportation tends to provide less daily variability and more assured capacity. With recently increased truck regulation on drivers' hours of service, this advantage will become more evident.

Supply chain flexibility

“The adidas Group has realized a more consistent flow of containers, flexibility with last minute priorities, and efficiencies in both cost and visibility. We have created a more eco-friendly supply chain in the process.” – Paul Bartalini, Director of US Transportation Ocean/Air, Adidas Group

Further efficiency can be found in the ability to speed up or slow down an inland port-centered supply chain. Inland Port Greer has one customer that receives 150 containers each week but doesn't have the warehouse capacity to process all the containers in one day. In response to this operational need, SC Ports delivers the most critical containers overnight, essentially speeding up the supply chain; we then meter the remaining containers over the course of a week, slowing down the supply chain to conserve storage space. This simple practice ensures the customer has the necessary product when needed without the risk of an overloaded warehouse.

In addition, a 24/7 inland port operation improves utilization of labor and truck capacity at the receiving facility. For example, companies pick up and drop off containers through the night so that their morning shift arrives with all truck docks ready to be worked. This benefit mitigates lag time associated with warehouse workers waiting on morning deliveries.

Inland ports offer solutions to modern industry challenges

Another challenge is quickly making the inland port model even more necessary - the use of ELDs (electronic logging devices), a trucking industry regulation went into effect for drivers on April 1, 2018. This regulation requires drivers to electronically record the hours they work to ensure they get enough rest to operate their trucks safely. Given the driver shortage in which we find ourselves today, ELDs may further reduce capacity from the trucking market resulting in higher rates and more competition for finite truck and driver capacity.

As a result, it may soon be a necessity for companies to find a transportation infrastructure that provides optimal supply chain performance and reliability. As we have learned, they will find this at an inland port.

Micah Mallace is the director of strategic projects at the South Carolina Ports Authority.

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