Drayage evolving as new business models emerge

Port drayage is evolving fast, and a new business model is emerging.

Of all the varied sectors that constitute US trucking, drayage — the trucking of goods from a seaport to their destination — is arguably the least understood, and the most complex niche in the trucking industry. The drayage business of moving marine containers doesn’t have the glamour of the tractor trailers pulling their 53-foot vans down the nation’s highways emblazoned with big names like Wal-Mart, Target or Amazon.

It’s the ho-hum business of moving marine containers, set on specialized chassis, through jammed highways and congested streets, in and out of container terminals around the country. And the word itself is an anachronism derived from the word “draft” or “dray” which referred to the large sturdy horses that carried heavy loads — for modern reference consider the “Budweiser Clydesdales”. They are “draft” horses.

The Resiliency Factor

However, despite an anachronistic appellation, drayage is a cutting-edge business sector in logistics. Without the drayage few of the 11 million containers annually moving through US ports would reach their final destinations. Simply put the dray is essential to the nation’s commerce. And despite being a low-profile business, today drayage is a hot-commodity — take the recent announcement from IMC as an example.

IMC Logistics is one of the largest drayage providers in the US. On November 14th the company announced that it was entering into a strategic partnership with one of its longtime customers, the Swiss mega-logistics provider Kuehne+Nagel Group, who will acquire 51% of the company, when the deal is finalized, likely in the first quarter of 2025.

Stefan Paul, CEO of Kuehne+Nagel International AG, in explaining the logic behind buying a controlling interest in IMC said, “International Sea Logistics is a highly complex business with many interfaces and stakeholders, in which US trade flows are of central importance. IMC’s range of capabilities significantly expands our service offering and allows us to develop and offer even more attractive solutions for the value chains of our ocean freight customers.”

What might be classified as an “attractive solution” is the resilience that adding an in-house drayage company brings to K+N’s US supply chain. IMC’s fleet of trucks and chassis along with 49 terminals, depots and transloading facilities, provides access to virtually all the nation’s majors ports, railways and road networks. A quick look at the facilities’ map shows a heavy concentration in the Southeast Gulf, Midwest and East Coast, along with eight strategic facilities in California. And having this country-wide reach is important to supply chain resilience as was evidenced in 2024 by the May collapse of the Francis Scott Key Bridge following the allision with the containership MV Dali, September hurricanes of Helene and Milton, and the abbreviated International Longshoremen’s Association (ILA) strike in October. With an ILA strike possible (and many would say likely) with expiration of the current agreement on January 15th, 2025, the resiliency of the US supply chain could soon be tested again.

And there are other factors impacting the supply chain, such as the urgency of retailers pulling ahead inventories to not only get the goods into the warehouses for the upcoming holiday season but to get ahead of the annual manufacturing slow down for the Chinese Lunar holiday [Tuesday Jan. 28 through Tuesday Feb.4th 2025]. Through October, there was a shift to West Coast ports as the big container ports of Los Angeles, Long Beach and Oakland all posted strong inbound numbers. However, overall, US TEU throughput was in line with expectations but that may not be the case going forward. US importers are now trying to beat potential new tariffs that the incoming Trump administration might levy.

Finally, while the Panama Canal water level issue has abated for the moment, should the Houthis cease attacking ships in the Red Sea, a flood of freight traveling through the Suez Canal, will join freight already on its way around Africa to Europe resulting in a colossal jam-up at European ports. And this port congestion in Europe will ripple across to US ports in the form of liner service disruptions and delays. [Although this scenario increasingly looks unlikely now with Russia accused of using their satellites to pass on to the Houthis targeting information on ship movements in the Red Sea. Making it far more likely that more ocean carriers will divert their rotations around Africa.]

For drayage companies, the flood of inbound freight means the so-called “freight recession” could quickly be over and replaced by terminal congestion and slower truck turn times, putting a premium on equipment — especially chassis.

The Evolution of Drayage to 3PL

Of course, in a copycat industry where one move by a company most assuredly leads to another company making a similar move, will K+N’s purchase lead to other similarly placed logistics providers doing the same — particularly since drayage has morphed into third-party-logistics (3PLS) providers.

There are a number of both domestic and international logistics companies competing in the same space. International 3PLS like DHL, DSV (which acquired DB Shenker earlier this year), CEVA, Nippon Express, DP World Logistics, GEODIS and Hellmann Worldwide all have reasons to follow suit. And there are a number of well positioned domestic players like CH Robinson, Expeditors, Penske or Ryder that could take a run at the drayage business. The prevailing 3PL business model favors being asset-light on the transportation side and asset-heavy on the transactional portion. Beyond the 3PLs other supply chain providers have dipped their oars into the drayage business. Take for example, MEDLOG USA. MEDLOG USA is the domestic arm of MEDLOG which is part of the Geneva, Switzerland-based MSC Group (Mediterranean Shipping Company), which notably includes MSC Shipping, the world’s largest containership operator. MEDLOG operates independently and is a specialist in intermodal transportation solutions. That logistics package includes among other services door-to-door solutions, off the dock storage and intermodal transportation that incorporates drayage. MEDLOG USA illustrates just how competition in the drayage sector is evolving as more players within the supply chain work to increase their service reach.

RoadOne and Transloading

Perhaps an even better example of how drayage has evolved into a 3PL is RoadOne IntermodaLogistics. RoadOne, as founder Ken Kellaway explained at the South Carolina International Trade Conference (SCITC) in October, has grown both “organically and through acquisition” and now has around 75 million sq/ft of warehousing space, 95 locations and around 2,500 trucks and 5 million sq/ft of transload space. In recent years RoadOne has added around fourteen acquisitions and the company’s footprint has expanded across the nation. In tandem with the company’s footprint expansion, so did the service offerings. RoadOne has invested heavily in expanding new distribution facilities in the South Atlantic region. In February the company agreed to leasing a warehouse of over 400,000 sq/ft at 1000 Imeson Park Boulevard in North Jacksonville. Kellaway noted the agreement expanded its Jacksonville footprint to three facilities and more than 800,000 sq/ft of warehouse and transload space. RoadOne also added a transload facility in Norfolk and recently broke ground on a state-of-the-art facility Summerville, South Carolina near to the Port of Charleston. The two phases of the Summerville construction will add 384,800 sq/ft and 279,720 sq/ft of distribution space and due to be completed in January 2025 and January 2027. Like the other RoadOne warehouse projects, transloading is a key feature. The addition of transloading — moving freight from a container to a rail car or freight from a rail car to container — usually cuts out the drayage trucker. But by incorporating the transload feature into the supply chain mix, especially with on-site warehouse facilities the service scale expands. As Kellaway says of RoadOne’s service, they deliver Single Source Solution or S3.

However, the merging of services like transload, shows how port drayage has evolved into something else altogether, whether that is a 3PL or yet to be named logistics acronym.