Demystifying Hunter Harrison

Hunter Harrison calls his management style “precision scheduled railroading.” But what is precision scheduled railroading, anyway? And is it customer friendly or customer unfriendly? I’m here to explain.

It helps to put aside both “precision” and “scheduled.” The words are almost misleading. The central element of precision scheduled railroading is so simple almost everyone misses it: intensive use of assets. The assets of a railroad are cars, locomotives, and people. Never let them stand still. If you take that idea to its logical end, you get precision scheduled railroading, and along with that, a very low operating ratio (which is the percentage of operating revenues eaten up by operating costs).

Harrison’s mentor at the Frisco was a brilliant, profane Texan named Bill Thompson, who cut his teeth on the Rock Island Lines. Harrison, while a newly minted assistant trainmaster, stood in the tower at Tennessee Yard in Memphis one day when Thompson stretched out his arm at the ocean of freight cars and asked, “Young man, what do you see out there?” Chirped Hunter, “A lot of good business, Mr. Thompson.” The older man turned to his protégé: “What? Good business? See, that’s the difference, Hunter. I see a bunch of delayed cars, and you think it’s good business.” Hunter Harrison has never tired of telling that story, because it was his epiphany. A bunch of freight cars standing still means you are failing.

So how do you keep freight cars from standing still? Let’s start with unit trains. PSR says to avoid them unless the entire train loads and unloads immediately. Instead, put blocks of cars on manifest trains as soon as they show up. During Hunter’s time at Canadian National, CN stopped a Halifax-Chicago intermodal train in Belleville, Ont., every day to pick up a handful of aluminum ingots bound for Kentucky. Other railroads might have run a weekly unit train, but that means cars sit still for as long as six days. Wasted assets.

Now apply this to intermodal trains. When he showed up in 2000, CN’s intermodal business was a money-loser. So he took out capacity. CN wouldn’t run extra sections of its container trains when business was brisk, or cancel trains or shorten them on slow days. Instead the same well cars ran back and forth between Point A and Point B every day, and it was the marketing department’s job to fill them, Sunday included, by pricing low on slow days and high on busy days. In this manner, there was never an idle intermodal car.

The trick to what I just described is knowing when to change. When business got good enough that demand caught up with the fixed capacity and discounts ended, Harrison knew it was time to add cars or even entire trains. He was also adept at CN at shifting overflow intermodal blocks onto other trains.

Harrison would routinely scan the inventory of cars in CN yards. Inventories and train velocities are his favorite metrics. To his way of thinking, the only good yard is an empty yard. Why are these 25 grain cars sitting in Saskatoon, Sask., he would ask? Put them on the back of that auto train coming through in an hour and get them on their way. A true story: From his hotel window in Vancouver, B.C., he spots a switch engine that doesn’t move for hours. It drives Harrison crazy! What is going on here, he asks the terminal manager from his room? If it’s going to sit there, maybe we don’t need it.

Applied to over the road operations, precision scheduled railroading means you run trains every day of the week and you run the same number of trains in each direction. That way, you achieve balance, which is the epitome of efficiency; locomotives and crews don’t pile up at one end while freight cars wait for them at the other. No wasted money deadheading people or locomotives, either. Do these things, and you will soon have a huge number of excess cars and locomotives. Canadian Pacific hasn’t ordered a new diesel locomotive since Harrison arrived in 2012, and he said this week that CP would not be back in the market for at least another three years. If you keep just the number of locomotive you need and no more, your maintenance and fuel costs plummet, and so does your operating ratio.

Now to people. Canadian National in Hunter’s time negotiated a contract with its U.S. train and engine people that pays them generously by the hour instead of by the mile. But when the road crews get to the other end in six hours, they will switch cars at their destination for the next four hours. A similar contract (reportedly $48 an hour before overtime) was just ratified by Canadian Pacific’s U.S. T&E people.

So precision scheduled railroading doesn’t mean you cut to the bone. You do cut unproductive assets, such as fishing camps in Florida and maybe even your steam program. But you cannot run a precision scheduled railroad on lousy track. In fact, the concern of railroaders I know is that CN track has deteriorated since Harrison left.

On the face of it, PSR seems customer friendly. Its effect should be to get cars and containers to customers sooner. But there is an unfriendly side. Remember those container wells going back and forth, never more of them, never fewer? Customers want their boxes to ship the day they fill them, at a predictable price. They do not want to be told to ship seven days a week and to hear on Friday that their containers won’t leave until Monday. That was the rub at CN, when precision scheduled railroading met anxious (and therefore outraged) shippers. Harrison’s successor, Claude Mongeau, publicly apologized and altered the PSR model.

Would all this work at Norfolk Southern? A lot of what I just described sounds like the kind of disciplined operation you used to associate with NS. On the other hand, when BNSF and Canadian National railways tried to merge, Harrison contemplated limiting service-sensitive intermodal trains to 50 mph instead of 70 between Chicago and Los Angeles. That way, all trains would run the same speed and operations would be as smooth as peanut butter. But this also would have shoved BNSF’s enormous book of United Parcel Service business right into the hands of Union Pacific. So who knows. Maybe he has learned to be more flexible since that time 15 years ago.

Notice that I haven’t said a word about Hunter Harrison the person, the supposed demon as described by so many of you in your comments to my blogs. That’s because if you understand precision scheduled railroading as he practices it, you will have demystified the man. To quote a former colleague from the executive suite: “I don’t like the man or the good-old-boy way he does things, but Hunter is a great railroader, and he’s all about keeping the rolling stock moving.” On the other hand, some of you may read this and say this is just Railroading 101. True, but very few people know how to do Railroading 101 anymore.—Fred W. Frailey