Intermodal reefer startup has gradually gained business, despite tough conditions.
It’s not the easiest time to be a new entrant in the temperature-controlled intermodal and rail market. Perishable goods require speedy delivery, but railroad service levels have significantly deteriorated during the past year due to weather, ongoing track maintenance and heavy demand to move other commodities. Last summer, an existing intermodal service provider that specializes in agricultural goods went out of business.
But the situation hasn’t deterred Tiger Cool Express, an Overland Park, Kan.-startup, or its investor. In fact, officials say, the company is on target for its growth plan.
Volume is increasing and the company is acquiring more assets.
“Despite the difficulties with rail service this year, our customers have been quite patient. If I was going to do this again, I wouldn’t start it in the worst winter in 50 years, that’s for sure,” Chief Executive Officer Thomas Finkbiner said in a phone interview.
The polar vortex’s extremely cold temperatures and unusually high snowfall across wide stretches of the country last winter crippled train operations and railroads spent months trying to recover from the cargo backlogs and resulting equipment and personnel shortages.
“Temperature-controlled shipments are the canary in the coal mine with regard to intermodal service quality,” because they are more sensitive to delays than other products, Larry Gross, a senior intermodal and rail consultant at FTR Associates, said.
Tiger Cool Express, which is backed by mid-market private equity firm Tiger Infrastructure Partners, shipped its first load in early February 2014 and is now moving about 125 loads a week, split between fresh produce and processed/frozen foods. Through October it was on track for $25 million in annualized revenue.
In December, Tiger Cool announced it is acquiring 35 domestic 53-foot containers, bringing its fleet to 235 units.
“By the end of 2016 we expect to have 1,000 boxes and annualized revenue of $130 million,” Finkbiner, the former head of tank truck carrier Quality Distribution and an executive at Norfolk Southern railroad and Pacer Stacktrain, said.
The insulated containers—built by Hyundai and outfitted with Carrier refrigeration units and iBright telematics—are able to hold temperatures to minus 20 degrees Fahrenheit.
The intermodal logistics provider is leasing the new containers. It purchased 30 percent of its original fleet and leased the rest.
The web-based iBright system allows customers to remotely monitor and control conditions in the units using wireless communication and GPS technology. Internal sensors measure the temperature and the refrigeration units can be turned on or off, or have temperatures adjusted. Additional sensors monitor doors opening and closing, location, speed and direction. Geo-fencing capability alerts the company and customer if the equipment is out of route. Accelerometers measure vertical and horizontal impacts, as well as the time and location of those impacts. Additional sensors measure the quantity of fuel in the 120-gallon diesel tanks that power the reefer unit.
Over the past dozen years, shippers, attracted by lower freight rates and railroads’ newfound ability to deliver faster, more efficient service, have increasingly flocked to intermodal to move their goods long distances. Intermodal has become the largest revenue producer for Class I railroads, exceeding traditional business such as coal and grain. Railroads, especially in the eastern half of the country, are investing more in new or expanded inland intermodal terminals, near or on-dock terminals at ports, and raising clearances along rail routes to accommodate the additional height required for double-stacked containers. The increase in truck-rail transfer points has made short-haul intermodal moves more viable, too.
The popularity of intermodal has recently increased as highway congestion worsens and the motor carrier industry faces capacity constraints due to a shortage of qualified drivers. Independent truckers, in particular, are being squeezed by tougher environmental and safety regulations, inadequate compensation, and higher equipment and operating costs. Many have given up and stopped driving because of the perceived hassle. It is doubtful that shippers will migrate back to truck as the price of diesel fuel gets cheaper because such change has been modest compared to oil prices and the truckload sector is constrained by the driver supply, experts say.
New technology for better controlling temperature also allows more growers, food distributors and supermarkets to take advantage of intermodal without compromising product quality.
The business model at Tiger Cool is different than others in the refrigerated rail sector. It uses containers instead of box cars and its philosophy is to follow the harvest. It focuses resources on northern and southern California in the spring and summer, and now has repositioned more equipment to serve the Florida and Washington state markets.
On backhaul moves Tiger Cool containers carry goods such as chocolate, saline solution, wine, beer and packaged meat.
The railroads’ recent reliability problems pose a major challenge for a firm that counts on speed to deliver goods with a limited shelf-life. Tiger Cool benefits from the fact that it primarily rides on Union Pacific intermodal express trains that are booked at premium rates by UPS and truckload carriers such as J.B. Hunt. The express trains receive priority treatment from UP, which has had less bottlenecks and congestion than the other big western railroad, the BNSF Railway.
Finkbiner said rail on-time service is about 50 percent within a four-hour window, compared to expectations of 80 to 85 percent.
“We measure that because if they can get it within four hours of their schedule we can make up time and get it to the customer,” he said.
The intermodal forwarder has taken steps to work around the rail problems and meet customers’ delivery expectations.
In Chicago, Tiger Cool uses trucks instead of rail to transfer shipments crosstown between western and eastern railroads, saving a day or two in transit time, said Thomas Shurstad, who recently shifted to vice chairman from chief commercial officer to focus on strategic plans.
“As trains move into destination, we watch that carefully and have trucks there at the rail terminal waiting when containers are grounded,” so they can be quickly taken to the customer, he added, even though that approach is more expensive than dispatching draymen after arrival.
And the logistics provider even purchases trucks in some locations for an entire day—a mini-version of dedicated transport—instead of the normal practice of paying carriers by the move, to make sure it has power to deliver a load at a time of tight capacity, Shurstad said.
The company tries to utilize the truck for at least two or three moves while under its control.
Tiger Cool also has core carriers in each market with which it has negotiated delivery rates.
“It’s kind of stealing a page from the shippers’ book: In return for guarantee of certain amount of volume, truckers will guarantee some capacity. In each of our dray markets, we try and have a core carrier where we guarantee a majority of our business in return for supplying us capacity,” Finkbiner said.
Tiger Cool uses Norfolk Southern and CSX to move its containers in the eastern half of the United States.
Cold Train Melts. In August, the Cold Train express intermodal service between Quincy, Wash., and Chicago became a victim of BNSF’s service meltdown in the Pacific Northwest. Private investment group Federated Capital, which bought agricultural shipper Rail Logistics L.C. last March, shut down its Cold Train service after BNSF said it could no longer guarantee three-day delivery to Chicago because of high unit-train usage for bulk commodities and operational constraints.
Cold Train had become a popular shipping option for Washington shippers of apples, cherries, pears, potatoes and other produce. Transit from Washington usually took four to five days to the Midwest and six to seven days to the East Coast, when interchanges and truck transport were counted for. BNSF’s delays caused transit times to nearly double and on-time performance dropped from 90 percent to 5 percent, resulting in a doubling of costs, according to a Cold Train news release.
“It got to the point where we could not meet their transportation needs across that northern tier. It started with weather in winter and spring. Then we got into heavy construction and maintenance, and [supporting] other users across that network,” Patrick Kinne, BNSF’s general director for international marketing, said during question time at a supply chain conference panel discussion in San Antonio last September.
“There’s a lot of demand up there—coal, grain, oil, and other intermodal products. It was just a transportation package we couldn’t fulfill anymore,” he said.
Cold Train, which launched in 2010, departed six days a week from the Quincy inland port. As part of the door-to-door service the company picked up and delivered product with 53-foot containers. In 2013, the company added a service with the same frequency between Portland, Ore., and Chicago. Combined, the company shipped about 750 containers per month from Washington to 20 states and Ontario, Canada, up from 100 a month when the service started, according to the company.
Many Cold Train customers have shifted to long-haul truck service to reach Midwest and eastern markets.
Cold Train did most of its business out of one terminal. Tiger Cool is more diversified in its origin locations and not captive to one market.
About a third of Tiger Cool’s capacity is on the Pacific Northwest-to-Chicago route.
Cold Train “had the misfortune of being on a lane that is particularly hard hit by the service problems” and has large sections of single track, Gross said.
BNSF Executive Chairman Matt Rose acknowledged BNSF had shortcomings last winter, but told American Shipper during a brief encounter while on business in Washington that Cold Train had other issues that contributed to its demise.
This article was published in the February 2015 issue of American Shipper.