Four Industry Giants Tout Success of Match-Back Model

Companies are looking for ways to backfill empty capacity. Aivars Lode avantce

Four Industry Giants Tout Success of Match-Back Model

Bill Mongelluzzo, Senior Editor | Oct 23, 2013 2:00PM EDT

It sounds elementary: An exporter in an interior location needs empty containers. Importers in the same region unload containers every day and ship them back empty to a seaport. Why not truck the empty boxes a short distance to the exporter’s facility, load them with freight and ship the containers by rail to a West or East Coast port?

Maersk Line sees import steering, or match-backs, as a golden opportunity to use its costly equipment more efficiently. BNSF Railway believes match-backs are perfect for driving U.S. exports to overseas markets, especially in Asia. Home Depot imports hundreds of container loads of home improvement merchandise to the St. Louis area, and Archer Daniels Midland exports a large volume of agricultural products from the Midwest to Asia.

Attendees at The Journal of Commerce’s Inland Distribution Conference in Kansas City last month learned that when carriers and cargo interests that control as much freight as those companies do are able to coordinate their supply chain needs, every participant is a winner.

“Everyone benefits when waste is taken out of the system,” said Craig Mygatt, Maersk’s senior vice president of inland operations.

Conference attendees also learned, however, that in a continent as vast as North America, where inbound freight moves to cities and outbound freight often is generated in rural areas, arranging match-backs can be a complex and costly endeavor. “The match-back of containers is more difficult in North America than anywhere else in the world,” said Ed Zaninelli, vice president of trans-Pacific westbound at Hong Kong-based ocean carrier OOCL.

One lesson that can be learned from the Maersk-BNSF-Home Depot-ADM model is that countless opportunities for match-backs exist at inland rail hubs across the country, and those opportunities will multiply as U.S. exports increase.

Another lesson to be learned, however, is that bringing all of the players together, coordinating the logistics of the transaction and providing visibility to the process is a complex endeavor requiring a lead company to take the initiative.

In this case, because Maersk owns the containers and has a direct relationship with the cargo interests, it took the initiative and convinced all the participants that match-backs would be a mutually beneficial arrangement. Supply chain collaboration made it work, Mygatt said.

BNSF added that every stakeholder plays a role in the match-back arrangement. “People talk about supply chain collaboration. This is a true example of it,” said Fred Malesa, BNSF’s vice president of international intermodal.

However, a myriad of obstacles can stand in the way of establishing a consistent match-back arrangement, Mygatt said. When agricultural products are involved, weather and crop yields can affect exports from year to year. The Midwest drought reduced exports in 2012, for example. In contrast, 2013 is shaping up as a good crop year that could produce a strong rebound in agricultural exports in the coming fall and winter months.

The seasonality and variability of agricultural production creates a transactional need for equipment, marked by slow months when exports are low, followed by a surge in equipment needs in the fall. Imports of many consumer items, by contrast, tend to generate a steady flow of inbound equipment, Mygatt noted.

Finding the right containers and chassis for exporters can be challenging. Imports generally move in 40-foot containers. Exports, being heavier, sometimes must move in 20-foot containers. The new chassis regime developing as ocean carriers cease to provide chassis also can create equipment availability issues for shippers

Timing is also crucial, Mygatt said. Exporters often face specific cutoff times for delivering their shipments to the railroad, so any delays during the import move or at the distribution warehouse can affect equipment availability for the exporter.

Nevertheless, if stakeholders share information electronically and carriers make use of equipment-tracking technology, Maersk believes opportunities for more match-backs are plentiful. Mygatt said about 40 percent of Maersk’s container moves involve empties, but he believes it’s possible to reduce the “empty miles” to 30 percent of its container moves.

Maersk also attempts to encourage match-back opportunities by steering imports to locations that present consistent export loads. For example, it may offer a more favorable through-rate to an inland destination that is within a short truck haul of an exporter’s facility, Mygatt said.

The match-back is made possible by providing visibility to the transaction so that the exporter sends its trucker to the importer’s facility when the container is ready, in effect triangulating the movement of a box that otherwise would have been moved four times. Eliminating one of the moves saves hundreds of dollars in trucking costs, he noted.

In the Home Depot-ADM case, BNSF works with Maersk and the other partners to coordinate the moves so the operation works smoothly and consistently, Malesa said. For BNSF, the ideal location for match-backs is at its major inland logistics hubs such as Chicago, Dallas and Kansas City. “They drive the most efficient equipment solution,” Malesa said.

BNSF, however, has more than two dozen rail facilities that generate consistent inbound containers and are within a relatively short truck haul from exporters. BNSF therefore looks for a variety of export cargoes, including agricultural products, paper, metals, chemicals, plastics and meat products, Malesa said.

BNSF’s commercial team starts the process by understanding the import flows from Asia, and matches the import moves with the equipment needs of exporters who ship their products to Asia.

Rapid expansion of oil and gas drilling in shale deposits across the country is creating new opportunities for match-backs. Minot, N.D., for example, recently has become an inbound destination for oil field equipment, supplies and materials, and that rural location is also within easy reach of grain exporters in North Dakota.

Railroads also can make smaller rail ramps work for match-backs as long as there is a core importer at the facility. Canadian National Railway carries imports for Menards, a home improvement retailer, and Ashley Furniture, to their distribution facilities in Wisconsin, and CN has established transloading operations to attract grain exports to the rail sites.

Jean-Jacques Ruest, executive vice president and chief marketing officer, said CN sees similar export opportunities at its rail ramps in Indianapolis and Decatur, Ill.

Eastern railroads also are entering the match-back arena with service to inland ports such as Greer, S.C.; Cordele, Ga.; and Front Royal, Va. Although the distances to those locations are much shorter than from the West Coast to Chicago or Kansas City, the eastern railroads are able to make their intermodal services work through density and efficiency.