As part of the bigger economic picture, we see railroad traffic slowing down. Less coal and oil moved equals less total traffic- makes sense. In the meantime, the railroads in recent years have worked a lot on adding capacity. In theory, the railroads should be in a good position to get out there and sell some service. What do you see as the biggest roadblocks towards railroads making those gains in their piece of the transportation pie? In my part of the world, the road block would be a finite amount of outgoing traffic. There's only so much grain, fertilizer, ethanol and pink rocks to be shipped.
Thanks to Chris / CopCarSS for my avatar.
Murphy,
The most important roadblocks are between the ears of top railroad executives, marketing and operating guys.
The top managements have cut HQ marketing staffs back so far that the few left must concentrate on keeping the big fish. They do not have the time to go looking for new traffic. Due to lack of field forces, the carriers have almost no one out on the ground looking for traffic, that is they have no marketing inteligence.
New traffic will often disrupt the operation, and operating guys are evaluated on their cost control, so they tend to resist disruption. You would think the marketing guys could "buy" what they needed from operations, but I know of no institutional mechanism to do so.
For a real world example consider perisahbles out of eastern Washington State. The BNSF has no clue of the long haul traffic they are running past at Wenatchee, Quincy, and Pasco. They gave away much of the margin by allowing a third party to market the anemic service they operated out of Quincy. They could, and should, offer their own service, with their own equipment and control the whole thing door to door. Get all the available revenue! Top management is unwilling to make the admittedly substantial investment in refrigerated containers. When the operational going got tough a couple of years ago, they gave up on the very idea of expedited service of any kind between the PNW and Chicago.
Problems: no knowledge, no champions, no tollerance for risk, no perishable traffic. Same issues apply to even larger market for perishables from California.
Greyhounds sees same issues for meat out of the beef belt that extends to the south and west from your area all the way down to Amarillo.
Mac McCulloch
Grew up in the self proclamed, but truly, Apple Capitol of the World, Wenatchee WA.
Murphy Siding As part of the bigger economic picture, we see railroad traffic slowing down. Less coal and oil moved equals less total traffic- makes sense. In the meantime, the railroads in recent years have worked a lot on adding capacity. In theory, the railroads should be in a good position to get out there and sell some service. What do you see as the biggest roadblocks towards railroads making those gains in their piece of the transportation pie? In my part of the world, the road block would be a finite amount of outgoing traffic. There's only so much grain, fertilizer, ethanol and pink rocks to be shipped.
Railroads thinking that if it isn't 100 cars at a time and/or moving at least 500 miles (750+ might be closer to it) it isn't worth bothering about. Also having to actually switch cars, either in/out of a customer or at classification yards to get business is a downer.
They've been wholesalers of transportation for so long, I think they don't know how to be retailers again.
Jeff
jeffhergert Railroads thinking that if it isn't 100 cars at a time and/or moving at least 500 miles (750+ might be closer to it) it isn't worth bothering about. Also having to actually switch cars, either in/out of a customer or at classification yards to get business is a downer. They've been wholesalers of transportation for so long, I think they don't know how to be retailers again. Jeff
Nor do they really want to become retailers again. Retail loose car transportation would increase costs in switching and the manpower to do the switching.
Never too old to have a happy childhood!
The simple fact that the railroads do not want carload traffic, but only unit trains.
Shortlines and regionals are better situated, in class 1 minds, to the "smaller" single car loads.
Until the bigger class 1 guys and gals, those higher ups that control things, realize just how much more they could be making on the smaller, single to multi-car shipments that they are bypassing currently, the class 1's will continue to bypass them.
Ricky W.
HO scale Proto-freelancer.
My Railroad rules:
1: It's my railroad, my rules.
2: It's for having fun and enjoyment.
3: Any objections, consult above rules.
A speculation: Going after the small fish revenue would increase total revenue. The costs would be closer to the revenue but not exceed revenue. The RR higher ups may be worried about their operating ratio ( OR ) becoming a higher number ? That even though their total profits would be higher ?
BaltACD jeffhergert Railroads thinking that if it isn't 100 cars at a time and/or moving at least 500 miles (750+ might be closer to it) it isn't worth bothering about. Also having to actually switch cars, either in/out of a customer or at classification yards to get business is a downer. They've been wholesalers of transportation for so long, I think they don't know how to be retailers again. Jeff Nor do they really want to become retailers again. Retail loose car transportation would increase costs in switching and the manpower to do the switching.
Murphy SidingThen, what? Try to find more big, wholesale transportation business? Where would you look that hasn't been looked at seriously before?
She who has no signature! cinscocom-tmw
For perishables, I would add decrease car dwell time and increase average car speed.
"No soup for you!" - Yev Kassem (from Seinfeld)
In our business- lumber & building materials- we deal with a lot of ups and downs of the market. Like most businesses, we're always trying to get a bigger piece of the pie. When business is slowing down, we have to work harder to get, and retain customers and sales. How do railroads deal with this type of situation?
Murphy SidingHow do railroads deal with this type of situation?
Furloughs and storage?
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
tree68 Murphy Siding How do railroads deal with this type of situation? Furloughs and storage?
Murphy Siding How do railroads deal with this type of situation?
ricktrains4824 The simple fact that the railroads do not want carload traffic, but only unit trains. Shortlines and regionals are better situated, in class 1 minds, to the "smaller" single car loads. Until the bigger class 1 guys and gals, those higher ups that control things, realize just how much more they could be making on the smaller, single to multi-car shipments that they are bypassing currently, the class 1's will continue to bypass them.
Some have been saying that for some time. Sure, loose-car, time-demand railroading costs more than unit trains, but when the coal and oil businesses dry up, the revenue stream does as well. Then watch your operating ratio climb!
The big 4 or 7 have gotten so used to the easy business, it is possible they no longer have the infrastructure or personnel with the expertise necessary.
For roadblocks, look at the Super C thread. Railroad marketing/sales departments probably would not know how to get the business, even if the operating folks could adapt. The rails' answer? Furlough and storage, i.e., cost-cutting, which is the short-term, no-vision response expected.
C&NW, CA&E, MILW, CGW and IC fan
Most definitely.
tree68tree68 wrote the following post 7 hours ago: Murphy Siding How do railroads deal with this type of situation? Furloughs and storage?
Well, of course. That way those at the top can keep getting big salary's and bonuses. The cost stay down and the stock stays up and stock holders are happy. At least until and if the down turn last too long.
Ken G Price My N-Scale Layout
Digitrax Super Empire Builder Radio System. South Valley Texas Railroad. SVTRR
N-Scale out west. 1996-1998 or so! UP, SP, Missouri Pacific, C&NW.
So, is the marketing plan to just sit and wait, because we know know the market always comes back....eventually?
Murphy Siding So, is the marketing plan to just sit and wait, because we know know the market always comes back....eventually?
I guess if you can't beat 'em, join 'em: Given the downturn in railroad traffic, what do you think Hunter Harrison will do to bolster traffic and increase his bottom line at Canadian Pacific in order to take another run at Norfolk Southern? What will NS do to bolster traffic and increase their bottom line to keep from being taken over by CP?
EuclidHe is known for challenging the status quo by cost cutting and improving service.
When Harrison was at CN the service got so bad a couple of GM plants near me began trucking their vehicles to a place they were loaded on CSX. Would you call that improving?
Norm
Norm48327 Euclid He is known for challenging the status quo by cost cutting and improving service. When Harrison was at CN the service got so bad a couple of GM plants near me began trucking their vehicles to a place they were loaded on CSX. Would you call that improving?
Euclid He is known for challenging the status quo by cost cutting and improving service.
I was only referring to his general reputation, and not claiming that he has improved all service. My point is that what is really needed to battle the recession is improved marketing, sales, and innovation to find new service product. That is different than, and probably more difficult than just cost cutting and improving existing service.
Just my thoughts:
Business succeeds by pleasing the customer. The customer was traditionally the person who bought the products or services. Lately, the customer is more and more the person who buys the stock.
_____________
"A stranger's just a friend you ain't met yet." --- Dave Gardner
Paul of CovingtonJust my thoughts: Business succeeds by pleasing the customer. The customer was traditionally the person who bought the products or services. Lately, the customer is more and more the person who buys the stock.
I recently read an article in a railroad magazine that opined that railroading was once based on customer service. It has changed to being totally profit driven. As I recall, that change occured right around the advent of Conrail (or was it PC?)
One might draw from that the conclusion that it doesn't matter if customers are leaving in droves, as long as the bottom line is increasing. Of course, that trend can only continue so far.
tree68 One might draw from that the conclusion that it doesn't matter if customers are leaving in droves, as long as the bottom line is increasing. Of course, that trend can only continue so far.
Bingo!
I've often said the plan seemed to be to have one customer and charge the heck out of them.
That and do what it takes to keep the stock price up. When the easy to handle business dries up, cut or store assets. Don't try to find new business, especially that which might require spending some money to handle. Even if that new business brings in more than it costs. It probably doesn't make enough of a profit to satisfy the major or activist type investors. Better to buy back stock.
Eventually, as they convince themselves that more and more lines of business don't make their numbers, we'll see a rail network maybe a little larger than Amtrak with about the same frequency of service.
jeffhergertI've often said the plan seemed to be to have one customer and charge the heck out of them. That and do what it takes to keep the stock price up. When the easy to handle business dries up, cut or store assets. Don't try to find new business, especially that which might require spending some money to handle. Even if that new business brings in more than it costs. It probably doesn't make enough of a profit to satisfy the major or activist type investors. Better to buy back stock. Eventually, as they convince themselves that more and more lines of business don't make their numbers, we'll see a rail network maybe a little larger than Amtrak with about the same frequency of service. Jeff
OK, Jeff.
Here's something that was hard for me to learn and remains difficult for me to put in practice. "Never attribute to malice what can be explained by ignorance."
The railroads simply do not know how to identify, quantify, and develop new markets. It's not that they don't want new busines. It's that they do not know how to go about getting new business. They have very little market development knowledge or capability. It's their weak point. A very weak point indeed.
They're fine if someone shows up with a container ship carrying 8,000 containers. They're fine with a new oil field generating unit trains. But when it comes to developing the business potential from the Missouri River meat packers shipping to the west coast (domestic and export), the railroads don't have the ability to put it together.
We can stop, scream and blame. It does no good. It's like a jockey whipping a horse running full out. It might make the jockey feel better, but it doesn't make the poor horse run faster.
The railroads were basically prohibited from doing market development by the government for most of the 20th century. It's no wonder they're no good at it.
It's going to be a slow change.
When railroads were the only game in town, it was easy. No need to develop a market - it was already there. Even coal had a tendency to move in single car lots (ie, different grades of coal to local distributors), at least that which wasn't running in about the only unit trains that existed.
When competition (namely highways) started to show up, the railroads were powerless to form meaningful competition, as noted.
That doesn't mean that railroads didn't have marketing departments. A look through that "Official Guide" I've got from 1957 will find listings for virtually all of the Class 1's of sales departments - some hundreds of miles from the nearest "home road" tracks.
But those marketing departments are long gone. In fact, previous discussions here on the forum have noted that these days if a railroad sales rep found a customer with half a dozen cars a week or less, they'd also be looking for a new line of work.
How many times have we wondered why this industry or that doesn't have rail service?
Greyhounds, I am assuming you are referring to the pre-Staggers era. That was over 35 years ago. Shouldn't they have been able to develop marketing in that amount of time?
greyhoundsThe railroads simply do not know how to identify, quantify, and develop new markets. It's not that they don't want new busines. It's that they do not know how to go about getting new business. They have very little market development knowledge or capability. It's their weak point. A very weak point indeed. The railroads were basically prohibited from doing market development by the government for most of the 20th century. It's no wonder they're no good at it.
I've heard of 4 or 5 opprotunities for new business that my company passed by within the last few years. One or two were being developed by local management, but shot down by higher levels. Most of it could've been handled in existing trains, some of it (shuttle grain trains) would've required operating new trains.
I've heard it was for different reasons, but one common theme seems to come through. Not enough volume per move. It's like all they know is unit type operations. If it isn't 100 cars at a time from point A to point B, they aren't interested.
They've gone from the mentality that, "If it doesn't fit in a box car it doesn't belong on the railroad." to "If it doesn't fit in a unit train it doesn't belong on the railroad." (I include intermodal in unit type train definition, even though they aren't always a true unit train.) They've gotten fat on the low hanging fruit, but that tree is about picked clean.
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