Walmart Exits Intermodal Transportation With J.B. Hunt Deal
Walmart is offloading its intermodal assets to logistics and transportation services provider J.B. Hunt, as part of the companies’ new multiyear service agreement.
With the deal, J.B. Hunt will acquire Walmart’s operational intermodal container and chassis fleets. Neither company disclosed the financial terms of the deal.
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For Walmart, this means the retail giant is exiting the domestic intermodal transportation business, deferring to one of its longtime logistics partners to take the burden of moving goods from seaports to inland distribution centers.
The exit would come just six years after the company first piloted its own intermodal service in Southern California in an effort to control more of its supply chain, leverage more of its private fleet of truck drivers and use more rail in its freight mix, before further expanding the service throughout the U.S.
At the time, the acceleration of the intermodal expansion was furthered by the adoption of precision scheduled railroading (PSR) strategies by Class I railroads. But while PSR is designed to provide faster, more reliable on-time service, it also reduces the number of intermodal routes available, which can take away some flexibility in terms of where the retailer could provide loads to rail carriers.
“Walmart (and Amazon) pushed to break the U.S. intermodal barrier to establish direct relationships with the railroads. One of the drivers was the perception that eliminating the ‘middleman’ intermodal retailer would reduce cost,” said Larry Gross, president of Gross Transportation Consulting, in a post on LinkedIn. “Now it seems that Walmart has concluded that the difficulties of managing an intermodal container fleet, including chassis and drayage, resulted in higher costs than they will achieve by letting an expert provider with scale do the job.”
The new agreement on intermodal transportation, in which shipments are moved in combined truck and rail operations, will increase the amount of volume and capacity commitments between the Arkansas-based partners.
“Finding new ways to serve our customers and members and exceed their expectations is important to us,” said Fernando Cortes, senior vice president of transportation at Walmart. “Walmart’s long history of working with J.B. Hunt has many milestones of innovation and growth. This agreement will strengthen our commitment to delivering goods at an every day low cost to our customers and members.”
The new agreement comes after a stellar quarter for Walmart both on the retail and fulfillment ends of the spectrum. While Walmart might not have been as successful curtailing costs within its intermodal ambitions, the retail giant found ways to cut supply chain costs elsewhere.
America’s largest retailer lowered store-to-home delivery costs by about 20 percent over the past year, and has sprawled this last-mile delivery network so effectively that it now offers same-day delivery from roughly 90 percent of its more than 4,600 U.S. stores.
For J.B. Hunt, the Walmart deal helps the transportation company with its own intermodal expansion. The nearly $22 billion logistics giant said in 2022 that it wanted to expand its fleet of intermodal containers to 150,000 boxes by 2027. In the fourth quarter of 2023, J.B. Hunt counted 118,171 containers.
Walmart had 14,100 53-foot containers in its fleet as of last April. Gross noted in his post that Walmart’s domestic containers are of standard design and not compatible with J.B. Hunt containers or chassis, so J.B. Hunt “will be in effect managing two independent fleets.”
Intermodal is J.B. Hunt’s largest business segment, generating $6.2 billion in revenue in fiscal 2023 and operating income of $569.4 million.
Last September, J.B. Hunt announced a new agreement called Quantum with longtime railroad partner BNSF Railway, designed to convert more highway freight to intermodal. J.B. Hunt says the conversion from over-the-road to intermodal reduces a shipment’s carbon footprint by an average of 60 percent.
In line with the recent nearshoring push south of the border, J.B. Hunt and BNSF also created a new service option to support cross-border freight movement to and from Mexico with coast-to-coast access in the U.S.
“Mr. Hunt always said ‘Good partners attract good partners,’” said Spencer Frazier, executive vice president of sales and marketing at J.B. Hunt, in a statement. “Our customers trust us to develop solutions that scale and drive efficiencies across their ever-changing supply chains. Today’s announcement is a testament to the mutual trust and shared vision our companies have developed over time, and innovative arrangements like this one demonstrate J.B. Hunt’s disciplined approach to strategically allocating capital to advance our mission of driving long-term value for our people, customers and shareholders.”
