The shipping industry is a business. Get used to it. That pretty much sums up the message of Michael Uremovich, chairman and CEO of Pacer International, in an address to the TPM forum in Long Beach. The former APL executive acknowledged that intermodal service quality is severely lacking, when it comes to supporting the trans-Pacific container trade. Intermodal, he said, has attracted a lot of longhaul freight from the highways, although "service hasn't always been consistent." On the contrary, it has been plagued by severe delays during peak volume periods. Lack of adequate infrastructure is one reason, but it isn't the whole story, he said. The bigger problem lies with inefficient hand-offs between carriers and modes. "We don't do a very good job of that," Uremovich said. What's needed is a significant amount of new investment by the railroads and its partners. And that means higher shipping prices. He dismissed complaints that carriers are taking unfair advantage of shippers, as demand for infrastructure continues to outpace capacity. "This is not gouging," he said. "This is simply good business. Shippers do the same thing." Companies need to raise prices to reflect current market trends, according to Uremovich. In the process, carriers are likely to move away from longer-term service contracts with shippers. "It doesn't make sense to lock yourself into a contract when market conditions change." Even with more capital and greater efficiencies, periodic disruptions are likely. Uremovich advised shippers "to be flexible, and be prepared." Drayage capacity will remain tight, thanks to a persistent, nationwide shortage of drivers, and security concerns will contribute to delays as well. What's more, carriers will be eliminating direct service to destinations that aren't profitable. "That's what the brutal realities of the economics dictate," Uremovich said.
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