The reason railroads idle humps is probably not what you think

E. Hunter Harrison famously closed hump yards while bringing his Precision Scheduled Railroading operating model to Canadian National, Canadian Pacific, and CSX Transportation.

The conventional wisdom says this signature move of PSR is simply part of cutting costs to the bone. But the conventional wisdom is wrong. The idling of humps is a byproduct of operational changes that render them superfluous.

It’s easy to see why the cost-cutting misperception persists. After all, Hunter himself helped create it. Harrison was a man in a hurry when he arrived at CSX in March 2017. He put the cart before the horse, saying CSX probably only needed three or four of its dozen hump yards even before he had figured out which humps would stay and which would be converted to flat-switching facilities or closed outright.

And then new CEO Jim Foote ordered the hump bulldozed at Tilford Yard in Atlanta, putting an exclamation point on the fact that CSX had just four active humps at the time of the railroad’s March 2018 investor day.

A pair of covered hoppers roll down one of the humps at Union Pacific's Bailey Yard in North Platte, Neb.

So naturally last fall when Union Pacific and Norfolk Southern said they would adopt PSR-based operating plans, one of the first questions everyone had was: How many hump yards will they shut down?

“Wait a minute, you’ve got it all wrong,” is essentially what Jim Vena, a CN veteran and Harrison protege who is UP’s new operations chief, told an investor conference last month.

Yes, idling humps saves money. But PSR railroads don’t close humps as some slash-and-burn exercise in rooting out costs. Rather, humps become unnecessary as operational changes shift their classification work elsewhere or eliminate it altogether. In a nutshell, PSR starves some hump yards of the volume they need to survive.

Vena puts it this way: “Did we shut down and curtail operations at two hump yards? Absolutely. Is there probably more that we’re going to do? Absolutely. But at the end of it what it comes down to is: What can you do to move a railcar faster?”

A key aim of all railroads is to move freight cars across the system faster and more efficiently by reducing the number of times they are handled. The way PSR reduces car handling is by pre-blocking at origin – either at the customer’s facility or in a local serving yard – and avoiding switching en route. The goal is to block swap where you can, and switch only where you must.

With a focus on doing more pre-blocking work at local yards and customer facilities, which in turn enables you to bypass intermediate switching points, it’s not hard to imagine a Class I being able to siphon as many as 10,000 cars per day out of its hump network.

The math says that’s roughly the volume that five hump yards might process in a day. So the obvious question at headquarters becomes: Do we really have the volume to support humps X, Y, and Z? If the answer is no, the hump gets mothballed.

Which gets back to Vena’s point: Closing a hump yard is a byproduct of operational changes, not a goal in and of itself. “I don’t wake up in the morning and say ‘I am going to shut down another hump yard,’ ” he says.

Vena’s counterparts at NS think the same way. They don’t plan on rationalizing any yards until next year. That will give NS time to ensure that traffic volumes shift as predicted after the July cutover to the new TOP21 operating plan. It’s a safe bet that both UP and NS will wind up shutting down some humps. In fact, the surprise would be if they didn’t idle any.

Hump yards are great machines designed for one thing: Efficiently classifying large volumes of traffic. But they aren’t very flexible, which is one reason why the Class I’s are putting more emphasis on regional and local serving yards as they shift to PSR.

These smaller flat-switching yards – which collectively might comprise 80% of a railroad’s total switching capacity – are like a Swiss Army knife. They can classify traffic, serve as block-swapping facilities, hold safety stock of empty cars, and handle longer-term car storage. And, unlike hump yards, you simply can’t do without them because they serve local customers.

As railroad operating plans evolve, the bottom line is this: Hump yards will continue to play an important role in moving rail traffic when they’re at the right places and can handle enough volume. Otherwise, they’re toast.

You can reach Bill Stephens at bybillstephens@gmail.com and follow him on Twitter @bybillstephens