greyhounds What I strongly object to is turning the railroad's market development and market knowledge over to the partner truck line. BTW, I also worked with the Reebie freight flow data. I think a lot of truckers and railroads did. It was all that was available at the time. My opinion, it was better than nothing. That's about it. Today, better data is available from other vendors. The railroads should use this available data, as BNSF has recently begun doing, to chart their course.
What I strongly object to is turning the railroad's market development and market knowledge over to the partner truck line.
BTW, I also worked with the Reebie freight flow data. I think a lot of truckers and railroads did. It was all that was available at the time. My opinion, it was better than nothing. That's about it.
Today, better data is available from other vendors. The railroads should use this available data, as BNSF has recently begun doing, to chart their course.
I don't think I went quite so far as to say that railroads should turn all their marketing over to their channel partners. I simply said that they didn't need to buy market data to determine how much volume is in a given lane. However, I can see where my somewhat glib statement could have been interpreted as having a broader meaning.
First, if better marketing data than Reebie is now available, and at a price that won't make a difference to the OR at the end of the year, no harm in buying it, I guess. More importantly, everything Greyhounds has said about the folly of abdicating all your marketing to your channel partners is correct. There are a few differences between intermodal and the auto business - you can't really compare JBH to a local auto dealer, and the fact that the truckers all compete tooth and nail with each other means that they're unlikely to collude in order to hoodwink the railroad. Maintaining a rich, ongoing dialogue with all your retailers, and comparing what they each tell you, is a vital part of a railroad marketing department's job. But again, Greyhounds is right that you can't just stop there.
One of the things that made Santa Fe so successful in the 90's was that, even though they weren't retailing intermodal (except for a couple of niche exceptions), they went out and established relationships with the Walmarts, Proctor and Gambles, and other big shippers anyway. Santa Fe wanted to know what these big shippers were planning, how they perceived intermodal, how well they understood Santa Fe's underlying service offering (which included multiple transit time/price options for the retailers to choose from) and, perhaps most importantly, what the shippers thought of the various retailers.
I've been out of the game for quite awhile now, so I don't know if BNSF or any of the other rails still do this. If not, I'll add my voice to those of you who are tsk-tsking the railroads for a poor marketing effort. But I will say this: Say you've got market data that shows there's enough volume for a Minneapolis-Atlanta train, but you've asked every one of your retailers and none show any interest. What do you do? Try to force it through the channel somehow anyway, because you believe you're right and they're wrong? There's a Ford analogy for that too: it's called the Merkur.
greyhounds schlimm I wonder what greyhounds' answer would be? Greyhounds is perplexed. How did this discussion get to where it is? First, let met clearly state that CNSF knows what he is talking about. I disagree with him on the role of the railroads' marketing departments, but that's it. An example is the Union Pacific. They had a terrible day Oct 20 when they announced their 3rd quarter earnings. Everything is down, including their stock price after they made the announcement. The UP's management isn't stupid. But they seem to have a real knowledge gap when it comes to marketing. They don't have a clue as to what to do to get available business. And they don't have a 911 system to call.
schlimm I wonder what greyhounds' answer would be?
Greyhounds is perplexed. How did this discussion get to where it is? First, let met clearly state that CNSF knows what he is talking about. I disagree with him on the role of the railroads' marketing departments, but that's it.
An example is the Union Pacific. They had a terrible day Oct 20 when they announced their 3rd quarter earnings. Everything is down, including their stock price after they made the announcement. The UP's management isn't stupid. But they seem to have a real knowledge gap when it comes to marketing. They don't have a clue as to what to do to get available business. And they don't have a 911 system to call.
Greyhounds: I knew you could take this excellent discussion beyond the obvious. Thanks!
C&NW, CA&E, MILW, CGW and IC fan
Good analysis. Thanks
schlimmI wonder what greyhounds' answer would be?
Greyhounds is perplexed. How did this discussion get to where it is?
First, let met clearly state that CNSF knows what he is talking about. I disagree with him on the role of the railroads' marketing departments, but that's it. I do not believe the railroads should widely retail intermodal services. There are certainly special situations where a direct sale is the best answer, but those are exceptions.
JB Hunt is the best in the world. It would take decades of dedication, hard work, and lots of $$$$ to even get in the same league. The JB Hunt/BNSF and JB Hunt/NS partnerships provide the benefits of door-to-door intermodal pricing and service. (The rail revenue portion of the rate is adjusted as required, it's not a fixed terminal to terminal component. That's critical.) A railroad could do the same with retail service (see CN in Canada), but there's no significant reason to go through the effort and expense of building a retail operation when the same benefits can be largely achieved through partnering with a class outfit such as JB Hunt.
What I strongly object to is turning the railroad's market development and market knowledge over to the partner truck line. As CNSF said, it's very common to have a product/service delivery chanel that involves different manufacturers/wholesalers/retailers, etc. The chanels are set up this way because it's the most efficient, low cost, way to deliver the product/service to the end user.
But.
There is always conflict in the chanel. Each entity has its own differing goals. As long as this conflict doesn't get out of hand, it's good. It keeps everyone on their toes. Each entity in the chanel has power. You don't want to cede power to your partners as they will often seek to optimize the chanel for their own benefit. Just as you will seek to optimize the chanel for your own benefit.
Information is power. If a railroad simply cedes its information gathering to its chanel partners it will find the chanel configured to maximize the benefits to those partners. That's just a natural outcome.
Think about it like this. Ford doesn't retail automobiles or trucks. They sell through dealers. But Ford knows a whole bunch about what makes a buyer select a particular vehicle, at a particular price. Ford certainly listens to its dealers but it collects its own market information. Otherwise they'd cede their future to their dealers wishes, and the dealers have different goals than Ford Motor Company.
The railroads do well working a service delivery chanel with partner truck lines. But they should still be very knowledgeable about their markets and opportunities. And they should try to use that knowledge to direct the chanels as best they can without destroying the partnerships.
I do not think railroad management is stupid. (But, as noted, there are always some people around who don't belong where they are.) However, there are knowledge gaps that vary in intensity from railroad to railroad. Not knowing something is not the same as being stupid. I don't know CPR. If somebody had a heart attack I could dial 911. That's about it.
SD70M-2Dude CNSF [some] railroad managers are the dumbest, stupidest, laziest morons who ever walked the earth. There, fixed it. But c'mon man you've been on the inside, ya gotta admit there's at least a few guys we work with/for who fit that bill.
CNSF [some] railroad managers are the dumbest, stupidest, laziest morons who ever walked the earth.
[some] railroad managers are the dumbest, stupidest, laziest morons who ever walked the earth.
There, fixed it. But c'mon man you've been on the inside, ya gotta admit there's at least a few guys we work with/for who fit that bill.
You got me there, Dude, I can't argue with that! I find though, that you rarely see all the possible bad traits packed into one person. I've seen dumb but genuinely kind and decent, lazy but cunning, hyper-intelligent yet without a shred of common sense, brilliant but insufferably arrogant and/or psychopathic, and so on. And I will also point out that the two railways I worked for were, at the time I happened to be working there, considered to be possibly the best managed in the industry. Haverty, Krebs, Tellier - I did luck out, getting to work under those guys.
Schlimm:
I beg to differ...return on assets is critical. That ROW, or containers, or locomotives, or whatever is an item which must be a part of the system for it to operate. Without the ROW, there is no railroad, unless it is a leased situation. My point was to show the enormous amount of assets which are required by the rail industry in order to turn a dollar of revenue....2.5 to 1 for CN and similar for others.
Regarding the comparison to home delivery, yes I did take it to an extreme and intentionally so. Compare the home delivery to arranging and picking up a truckload of windows from Northern Minnesota and delivery to Atlanta. Similar concept, different scales.
I didnt really complete my thoughts due to capitalistic demands, but JBH and Hub do a very good job of finding movements of freight and then leveraging their relationship with the railroads. That is work that rails just do not find meaningful. Why? Because of the Chicago to Newark, NJ moves that fit into the intermodal system there are many Chicago to Olney, Il. moves. Shippers today want logistics companies to solve their problems and one of those problems is to manage their diverse lanes. The rails just cannot do it.
I suggest you watch an intermodal train and study the containers and trailers being handled. You really do not even need to leave the comfort of your home. Check out the Chesterton, In. railstream and watch teh NS parade from 6am to 8am or the eastbound moves from 1pm to 4pm. These trains have different destinations and functions based on the needs of their customers - JBH, Hub, Swift, CR England, UPS, FedX, Alliance, Clipper, and many more. I havent even discussed the international movements.
Ed
MP173 I find all of this discussion and data presentation fascinating. Have the rails dropped the ball in wholesaling their intermodal? I do not think so. How far into the retail operation should the rails go? Compete vs JBH? Compete against UPS and FedX? Should I arrange for NS to deliver my wife's holiday purchases? I spent the last hour looking at four companies...JBHunt, Marten Transport (temperature control trucking), Hub Group, and Canadian National. All four provide transportation services with some overlap...but not very much. Here is what Morningstar had to say about JBH..."Hunt is an attractive source of cargo because of its ability to aggregate fragmented demand across an immense pool of customres looking to capitalize on multimodal capabilities." Wow. That is a great description. Are the rails capable of providing that? I do not think so. Hence the wholesale application. Lets take a quick look at a few numbers: JBH generated $6.188B in revenue in 2015 on $3.637B in assets and pulled $427M down to net income(6.9%) . ROE was 34.1% and ROA was 12.15%. Pretty efficient. Their fleet consists of 80,000 containers and 5000 tractors. Marten Transport is a refrigerated carrier and their trailers are often seen on TOFC trains. They generated $665m in revenue on $632m in assets with a net income of $35.7m (5.4% of gross). ROE is 8.97% and ROA is 5.9%. Not nearly as efficient as JBH. Hub Group is the second largest competitor of intermodal services to JBH. Their 2015 revenue was $3.53B on assets of $1.30 with a net income of $70.9m (2%). Canadian National railroad generated revenue of $12.6B on $31792B of assets (HUGE amount of assets tied up in ROW) with a net of $3.54B (28% profit margin). ROE at 24.9 and ROA at 10.4%. Obviously JBH is very good at what they do, in fact all four of these companies are very good. Note the different levels of assets required to generate a dollar of revenue. Also note the differences in net profit margin - ranging from 2% for Marten to 5.4% and 6.9% for Hub and JBH and over 28% for CNI. Hunt has a huge ratio of containers to tractors - 16 to 1 obviously due to the long haul being handled by rail. Also note how efficient they and Hub are in generating revenue dollars vs assets. Marten needs $1 of assets to generate $1 of revenue and CNI needs over $2.5 of assets for $1 of revenue. So...how do the rails tap into the growing intermodal market? Unless they are willing to provide door to door service from sea to shining sea and work that market hard for years to come (and invest in containers, tractors, and drivers) they will simply stay with the proven model. Sorry for the long dissertation with all these numbers, but by drilling down, you start to see the picture a little clearer. Ed
I find all of this discussion and data presentation fascinating. Have the rails dropped the ball in wholesaling their intermodal? I do not think so. How far into the retail operation should the rails go? Compete vs JBH? Compete against UPS and FedX? Should I arrange for NS to deliver my wife's holiday purchases?
I spent the last hour looking at four companies...JBHunt, Marten Transport (temperature control trucking), Hub Group, and Canadian National. All four provide transportation services with some overlap...but not very much.
Here is what Morningstar had to say about JBH..."Hunt is an attractive source of cargo because of its ability to aggregate fragmented demand across an immense pool of customres looking to capitalize on multimodal capabilities." Wow. That is a great description. Are the rails capable of providing that? I do not think so. Hence the wholesale application.
Lets take a quick look at a few numbers:
JBH generated $6.188B in revenue in 2015 on $3.637B in assets and pulled $427M down to net income(6.9%) . ROE was 34.1% and ROA was 12.15%. Pretty efficient. Their fleet consists of 80,000 containers and 5000 tractors.
Marten Transport is a refrigerated carrier and their trailers are often seen on TOFC trains. They generated $665m in revenue on $632m in assets with a net income of $35.7m (5.4% of gross). ROE is 8.97% and ROA is 5.9%. Not nearly as efficient as JBH.
Hub Group is the second largest competitor of intermodal services to JBH. Their 2015 revenue was $3.53B on assets of $1.30 with a net income of $70.9m (2%).
Canadian National railroad generated revenue of $12.6B on $31792B of assets (HUGE amount of assets tied up in ROW) with a net of $3.54B (28% profit margin). ROE at 24.9 and ROA at 10.4%.
Obviously JBH is very good at what they do, in fact all four of these companies are very good. Note the different levels of assets required to generate a dollar of revenue.
Also note the differences in net profit margin - ranging from 2% for Marten to 5.4% and 6.9% for Hub and JBH and over 28% for CNI.
Hunt has a huge ratio of containers to tractors - 16 to 1 obviously due to the long haul being handled by rail. Also note how efficient they and Hub are in generating revenue dollars vs assets. Marten needs $1 of assets to generate $1 of revenue and CNI needs over $2.5 of assets for $1 of revenue.
So...how do the rails tap into the growing intermodal market? Unless they are willing to provide door to door service from sea to shining sea and work that market hard for years to come (and invest in containers, tractors, and drivers) they will simply stay with the proven model.
Sorry for the long dissertation with all these numbers, but by drilling down, you start to see the picture a little clearer.
Return on assets is pretty meaningless since the costs of RoW are long since sunk and almost impossible to liquidate to any meaningful degree. And in your long comparison, you are mostly comparing apples and oranges or making a strawman argument. Consolidating a trainload of containers and trailers is not analogous to home delivery.
Triple Crown operated "single line" service in the Minneapolis to Atlanta market. I just can't imagine there's all that much volume in that lane. There just isn't that much truck traffic on I-65/24/75 compared to I-81 and I-85.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
466lexCNSF, your comprehensive post (Wednesday, October 19, 2016 9:05 PM) is outstanding. I agree with your conclusions unreservedly. As is my wont, I offer related data: First, my calculated Intermodal Operating Ratios, using 2015 “R-1” STB data, without assigning any “G&A” expenses (which would have included Marketing & Sales, among other overhead): BNSF: 0.56 CSX: 0.97 NS: 0.88 UP: 0.77 To (not incidentally) address BaltADC’s most recent post, CSX’s IM performance is very poor for a number of very clear reasons. Fundamentally, NS completely out-negotiated them in the Conrail split: 1. CSX has no domestic double-stack capability on the East Coast, and 2. NS has a distinctly superior Chicago-New York route. (Ironically, Jim McClellan, the NYC alum, looked with an analytical eye at Albany vs. Altoona, and chose wisely for NS.) 3. CSX, because of its East Coast clearance problems, and its poorly conceived North Baltimore facility, runs a surprisingly high percentage of its IM traffic single-stacked in double-stack well cars. The inefficiencies are self-evident.
I understand the 1st double stack capable Virginia Avenue Tunnel bore is supposed to be operational in January 2017. With that CSX will be able to handle double stacks from Southern Mid-Atlantic ports to the West.
Baltimore's Howard Street Tunnel is the hold up in being able to handle double stacks on the I-95 corridor. There is some talk of being able make this double stack able in a few years - for that we will have to wait and see.
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CNSFCNSF wrote the following post 2 hours ago: schlimm So BNSF really doesn't have a marketing department. By becoming a contracted supplier of services to the aforementioned firms, they've cut themselves out of a large profit center in exchange for lower internal expenses for marketing. Okay, maybe I shouldn't have used the shorthand term "basic marketing 101" and assumed everyone here knows what I'm talking about.
I wonder what greyhounds' answer would be? I think many of us in other fields do understand the difference between retail and wholesale, though my terminology was clear enough. The rails appear to many to have ceded large and profitable sectors to others in favor of cost-cutting to haul bulk and trainloads. Given some fairly serious changes outside the rails' control, they are faced with fewer carloads and unused capacity. Those are the underlying issues behond the OP's thread, IMO.
BaltACD CSX Intermodal is trying to operate a national network How well they are doing will be for someone else to comment on.
CSX Intermodal is trying to operate a national network
How well they are doing will be for someone else to comment on.
Thanks for pointing that out. I knew they had been trying years ago but haven't paid close enough attention to realize they're still at it. I hope it's working for them.
CNSFThat's why the US situation has evolved differently. No US railroad has ever been able to offer a truly effective national retail solution, and it's not because they're stupid or timid. Most shippers I know don't want to mess with "picky" carriers, who'll accept loads going to A but not B or C. Even though they might not give all their business to one carrier, they prefer to work with carriers who can accept any load they might tender to them on a given day. This isn't to say it couldn't be done. If Hunt can manage a national service using multiple railroads, in theory BNSF could also. The question is why do it? It would require a massive investment, and what would they gain? It's worth noting that even CN doesn't rely entirely on its retail prowess. The retail program is maybe only half their domestic business (which itself is maybe only half their intermodal franchise, the other half being overseas import/export retailed by the global shipping companies). CN also acts as a wholesaler to many of Canada's other largest trucking companies. That's how they fill up the train. CN's retail arm used to want to be all things to all people - and the truckers used to view CN as the devil incarnate, their most hated competitor (well, okay, CP was bad too). For a few years, my job there was to help sort out a multi-channel marketing strategy that not only got CN Retail and the truckers to grudgingly live and let live, they even learned to start collaborating on certain projects where each party brought a unique strength. My takeaway from this, from a railroad's perspective: retail's nice to have if you can pull it off, but you absolutely have to wholesale.
This isn't to say it couldn't be done. If Hunt can manage a national service using multiple railroads, in theory BNSF could also. The question is why do it? It would require a massive investment, and what would they gain? It's worth noting that even CN doesn't rely entirely on its retail prowess. The retail program is maybe only half their domestic business (which itself is maybe only half their intermodal franchise, the other half being overseas import/export retailed by the global shipping companies). CN also acts as a wholesaler to many of Canada's other largest trucking companies. That's how they fill up the train. CN's retail arm used to want to be all things to all people - and the truckers used to view CN as the devil incarnate, their most hated competitor (well, okay, CP was bad too). For a few years, my job there was to help sort out a multi-channel marketing strategy that not only got CN Retail and the truckers to grudgingly live and let live, they even learned to start collaborating on certain projects where each party brought a unique strength. My takeaway from this, from a railroad's perspective: retail's nice to have if you can pull it off, but you absolutely have to wholesale.
schlimm So BNSF really doesn't have a marketing department. By becoming a contracted supplier of services to the aforementioned firms, they've cut themselves out of a large profit center in exchange for lower internal expenses for marketing.
So BNSF really doesn't have a marketing department. By becoming a contracted supplier of services to the aforementioned firms, they've cut themselves out of a large profit center in exchange for lower internal expenses for marketing.
Okay, maybe I shouldn't have used the shorthand term "basic marketing 101" and assumed everyone here knows what I'm talking about. My apologies. First of all, there's nothing foolish, shameful, or unprofitable in choosing to be a wholesaler. The separation of wholesale from retail is widely established practice common in many, many industries, including services. Your insurance, for example - do you buy that direct from the policy underwriter, or through some sort of broker or other third party? Or check your local bank or credit union - do you think their check clearing or electronic funds transfer services are designed, built, and staffed entirely in-house? In general, wholesale/retail marketing structures emerge naturally, when market conditions favour specialization around each activity. Everything the railroads "gave away" when they decided to go wholesale, the truckers also "gave away" when they chose to become specialized retailers. JB Hunt and UPS may have enjoyed complete control of their destiny at one time, but they are now hugely dependent on the railroads, with massive investments in intermodal. Back in the '90's, both sides made a calculated bet on cooperation. It resulted in a massive shift of traffic from highway to rail, improved the profitability of intermodal for the railroads, and drove truckers that couldn't make the shift out of business, making the successful truckers even bigger and more successful.
Now, as to your point about the railroads losing a large profit center by giving up retail. What they really lost was a large revenue AND cost center. Profits... well, maybe so, maybe not. Look whose name is on all those containers - you think there's no cost to owning and managing those fleets? How about the tractors used for drayage? The drivers? The dispatch centre that books loads and handles customer service, and the specialized software they use? Retailing intermodal service involves a lot more than just hiring a few extra marketing and sales people.
I've had the rather unique pleasure of working on the inside at both Santa Fe and CN (hence my moniker). CN is proof that a railroad can be an effective intermodal retailer. But to do it, they not only have to field a fleet of thousands of containers, they had to become one of the largest trucking companies in Canada, with hundreds and hundreds of tractors and drivers deployed throughout the country - in pretty much every significant regional distribution hub, from Halifax to Vancouver. They also have a separate dispatch customer service centre with its own, truck-oriented software system. I can't say for sure how profitable it is, but while I worked there they were gradually getting better at it all the time - and it survived Hunter, so it must not be too bad. It certainly gives them a strategic advantage the US roads lack. But it works mostly because CN has its own rails from coast to coast, and can deliver a national solution. The last I heard, their attempts to extend the retail program to the US, where they only have limited market coverage, didn't go so well.
That's why the US situation has evolved differently. No US railroad has ever been able to offer a truly effective national retail solution, and it's not because they're stupid or timid. Most shippers I know don't want to mess with "picky" carriers, who'll accept loads going to A but not B or C. Even though they might not give all their business to one carrier, they prefer to work with carriers who can accept any load they might tender to them on a given day.
I'm sorry this got so long - I hope at least some of you find it helpful. I could write an even longer missive on how the railroads have hundreds, if not thousands, of market opportunities - like the one which started this discussion - which they could pursue; and how the real art/science of it is to pick the right ones to bet their limited capital budgets on; and how they do make mistakes and have some problematic cultural issues, but aren't half as dumb as some people like to portray them. But if I've learned one thing about the Trains forum, it's that a significant number of people here desperately want to believe, choose to believe, and are apparently determined to die believing that railroad managers are the dumbest, stupidest, laziest morons who ever walked the earth. And in the face of that sort of belief, this would not be a wise way to spend the rest of my evening.
One problem I see is that many railroads prefer to think in terms of train load quantities. Only 50 containers per day - not worth bothering about because "we" might have to think. They could catch a ride part way on an already existing mixed freight but then "we" would have to run that train reliably and that is too much trouble. "We" might have to think. Let's create a power point presentation instead since we understand that better than railroad operations from our college courses. Looks pretty, impresses everybody in the office, and we don't have to get our boots dirty.
Running a unit train of intermodal between a single origin/destination pair is obviously the most efficient but enough traffic to justify it will not somehow magically switch from its existing transportation providers all at once. Given the rather checkered reputation the railroads have earned for inconsistent service (unfortunately still largely the case), a radical cultural change at the management level would be required to recapture it.
There is lots of traffic out there to be captured but it won't happen easily. Action rather than dreaming in the RR HQ's is the missing ingredient.
John
greyhoundsbut we also have people, such as RME, who find new business "problematic" because it will add phantom trains, trains never proposed but imagined, to a congested network. I'll ask again, who ever proposed adding a "Meat Train" to a congested line?
Ye gods, not me! I was thinking not of Meat Train but of Cold Train, the historical operation that had to shut down because BNSF congestion made pickup of its cars and then delivery too uncertain -- that has nothing whatsoever to do with your work on meat trains other than it was discussed in some of the same threads 'back when'.
I do think that railroads have become far more organized as 'wholesalers' in intermodal because, just as in the mid-1800s with the rise of express lines, they have to support a whole complex infrastructure of sales and service to get more individual-shipper traffic, much as if a railroad wanted to compete with FedEx for a share of the intercity express service that currently goes by land instead of by air to and from the central hub. The additional revenue that can be obtained by getting the contract to ship the goods instead of subcontracting to move them very simply, in bulk slots on often-already-scheduled consists, had better outweigh the complexity and risk so added, and there is always the risk that the railroad's organization won't be able to execute, or will not have the reputation or the advertising budget or whatever, to be seen as a full competitor on the customer's perceived merits.
I have agreed since the first that greyhounds' systems are good, and the necessary railroad organizations to search out and then keep a good amount of meat business in various lanes represents just the kind of specialized knowledge and achievable personal networking/connections within an industry that would succeed over even the most well-heeled general shipping companies.
Having said that, I don't think there would be many places where a pure dedicated 'meat train' consist (comparable in spirit to silk trains, perhaps) would be justified, and if the congestion attendant on oil train and other traffic were to return, care would have to be taken to keep the meat business prioritized rather than see another Cold Train situation develop.
CNSF nailed it. The railroad's intermodal department is now a wholesaler. They leave the retail selling up to JBH, Hub, Alliance, Clipper, etc. Those folks know and understand the markets.
Any amount of purchasing the data will not do much good. The truckers understand their markets, the rails understand theirs. The two have a little overlapping commonality, but not as much as one would image.
Lets go back to the meat train. Who handles that freight now? My guess is Randy Marten's fine outfit handles quite a bit (Marten Transport). Take a look at the NS TOFC trains originating out of Chicago such as 20E, 20K, 22W, and others. Plenty of Marten trailers on those trains.
Perhaps CN should run a meat train to Chicago. Perhaps they will in the future. My guess is they would need a minimum revenue per train to handle such a train. How will that develop? That almost must be a direct negotiation with the truckers rather than the meat people.
CNSFIt's not about cojones at all; it's basic marketing 101. BNSF is now unequivocally a wholesaler, not a retailer.
CNSFyou need to aggregate for a market as small as Minneapolis. Atlanta alone won't cut it, but it might get interesting if the same train also served Memphis and Birmingham. That would seem to be a natural, except for one thing which I don't understand. A glance at BNSF's service map shows that they don't run any intermodal trains down the river line between Galesburg and Memphis. To get into the southeast from Minneapolis on their current intermodal service routes, you have to detour way west through KS and OK. That adds too much circuity (thus time and cost) to be competitive with truck over that length of haul. I don't know why they don't use the river line for intermodal (clearance issues?) but that seems to me to be the whole crux of it. If that line was open for intermodal there would be many possibilities and I suspect we'd see BNSF pursue at least some of them.
Yes. And this need to aggregate markets reinforces the need to purchase the available freight movement data. (Information can't hurt you.)
Good marketing people with this information, some vision, and a knowledge of what the railroad can do well can come up with a conceptual plan to deveop the Twin Cities markets. That's markets, as in plural. Twin Cities-Atlanta alone won't do it. But Twin Cities to/from the whole south just might be viable. The purchased data would give the railroad a down and dirty quick answer. (I wonder how many loads of chicken move from North Georgia to Minnesota. Georgia is the number one state for chicken production.)
IF the business is there the route looks promising. BNSF has a pretty straight shot between the Twin Cities and Centrailia, IL. There division map at least shows they have trackage rights over the CN between Centrailia and Memphis. That's a pretty non circuitous route that avoids any St. Louis congestion. (Unless they want St. Louis on the route for origin/termination of loads.)
http://www.bnsf.com/customers/pdf/maps/div_sf.pdf
A preliminary analysis of the potential could be done quickly and cheaply if the data was made available. (and the marketing people had some "cojones".)
RMEBut I don't mind predicting that services like this aren't really catching on, and in some services (I'm thinking particularly of the Meat Train and its problems being dispatched on a congested railroad) the necessary use of a dispatching 'slot' for a shorter and perhaps faster consist might be problematic.
Good Grief! Who ever suggested a "Meat Train" be dipatched on a congested railroad? Certainly not I! (This will eventually get back to the Minneapolis-Atlanta opportunity.)
The OP cited a Trains article about future mergers. Contained in this article are two important quotes:
"It's a network business, and the larger the network the more valuable you are to customers." -- Rob Krebs
"It appears that the industry is in zero-growth mode at brest, so at some point new markets must be created." -- Jim McLellan
So we've got a network business (railroads) in need of traffic growth but we also have people, such as RME, who find new business "problematic" because it will add phamtom trains, trains never proposed but imagined, to a congested network. I'll ask again, who ever proposed adding a "Meat Train" to a congested line? My experience with operating officials is that they would just make stuff up to avoid handling new business. The less there was to haul, the easier their jobs were.
What I have said is:
1) There is a large and growing concentration of red meat production centered at Sioux City, IA. (also in the area are a large turkey plant and significant egg/processed egg product production)
2) This food moves in large steady volumes both eastward and westward.
3) The CN has a greatly underutilized line through Iowa that is well located to handle the eastbound business.
4) The CN has absolutely no interest in developing this business. They'd rather have a greatly underutilized rail line than provide intermodal service to Sioux City. A reason for this disinterest is cited in the subject article, it's only a 500 mile haul for CN and that causes them to dismiss the opportunity. But, in total, it's a 1,200+ mile haul where rail can be fully competitive with trucking.
5) There is no congestion on the CN Iowa line. It's pretty empty. And that's where the only "Meat Train" I've ever talked about would run.
At Chicago (a hub) the containers/trailers would be street transferred to eastern rail carriers and moved on existing intermodal trains to various destinations. None of this would be hard to do. And none of it would add trains to "congested" rail lines. Adding revenue loads to existing trains throws money to the bottom line big time. Adding a train load of revenue to an underutilized line (CN) does the same thing.
Minneapolis is in the same situation as Sioux City. It generates revenue loads but the loads are going to diverse destinations, including Atlanta. Minneapolis and its destinations are "Nodes" on the network. Very few nodes on the network have enough business between themselves (one origin-destination pair) to support dedicated intermodal service. That was one of RoadRailer's big problems.
So the containers/trailers must go through a hub. The hub doesn't have to be Chicago, but you've got to take all eastward/sothward traffic from/to Minneapolis and aggregate it into a train or trains running from/to a hub. At the hub the loads are sorted and placed on trains to destinations.
Markets such as Sioux City and Minneapolis must be developed and used to feed/distribute business to be handled on trunk line trains. The trunk line trains need only to get longer. They do not need to be more frequent and add to congestion.
RMEME wrote the following post 2 hours ago: schlimm If the service were there, 2-3X per week it could grow. The only thing about this is that I think the opportunity cost of the equipment investment factors in, somewhat as it does for the airline industry.
Opportunity cost tends to get used to protect the status quo. I'm talking about a small trial (probably a small loss) with an eye on growth medium term, using existing, maybe underused equipment. If growth does not happen within X months, D/C it. If you want growth, you need to take some risks. Likely there is unused capacity on some routes, given the decline in coal and Bakken oil. Other folks with experience in railroad marketing, like Greyhounds, have had ideas.
After seeing CSX hustling eastbound through Utica with an IM train last week, though, I have to wonder.
One locomotive, one 3-pack, each with one container. Musta been hot...
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...
schlimmIf the service were there, 2-3X per week it could grow.
The only thing about this is that I think the opportunity cost of the equipment investment factors in, somewhat as it does for the airline industry.
If you're devoting a consist to a dedicated route (which may be serving more than one lane, but explicitly doesn't involve switching out the actual intermodal consist itself) "2x to 3x per week" you have to decide what the other use of that consist might be, or if there are better uses for the consist or some of its cars in other, more established, lower long-term risk operations. If the consists are to be used for other purposes, or made up on a kind of ad hoc basis when expected, you'll need appropriate reserve capacity in or near specific locations to maintain expected QoS -- as opposed to trains running in routings or lanes that support more of their full capacity frequently, or that for some reason involve lower cost or higher profit margin than the periodic service.
In passing, I'd say that railroads want to keep trainsets together and operating as much as possible, with as little switching of baretable or loaded consists as possible. And that translates to me into a preference for 'trainload-only' services, with the trainload perhaps adjusted for a given lane's capacity or importance, but quantized at some minimum level for engine power and ruling train or route resistance. It would be nice to be able to run intermodal consists comparable to what Perlman was proposing for the Western Pacific, more likely now with better single-locomotive reliability but still governed by the effective use of the higher nominal horsepower (perhaps also evaluated per dollar capital cost of a more complex) modern locomotive. If we get to reliable one-man-crew operation, it might reduce the requirements for railroad acceptance even further. But I don't mind predicting that services like this aren't really catching on, and in some services (I'm thinking particularly of the Meat Train and its problems being dispatched on a congested railroad) the necessary use of a dispatching 'slot' for a shorter and perhaps faster consist might be problematic.
Several of the available intermodal options might be considered: I think I have already mentioned the British CargoSpeed (with van trailers) and there are methods of gang-shifting containers very rapidly between parallel consists (moving and indexing the trains slightly when needed to fill gaps or to put containers in given sections of the consist to optimize whatever last-mile intermodal transfer is going to be used). In my opinion you will NOT see any version of this that works with RoadRailers (because of the issues with handling the intermediate trucks) or with RailRunners (because of the tare weight if handled as trailers, and the substantial capital outlay for 'inferior' performance if used as blocks for regular intermodal service between specific use as trailers).
The alternative usually involves what independent truckers (or specialty truck lines) would charge to move the commodities, using more normal intermodal service between established intermodal facilities or moving in established lanes. Over a time period long enough to become established as a service option, through whatever changing climate or traffic conditions may prevail, with a guarantee of subsidy to keep the operation running in lean periods, or through unanticipated interruptions, or until a critical mass of actual traffic has built up. I can understand why generally-conservative railroad traffic management prefers to keep its efforts where profitability is already well-established, and leave much of the innovative models to 'someone else to try first'. As with DRAM chip production in the '80s, if one railroad tries it and succeeds, expect to see it used in other places ... and if you don't, look carefully at any special conditions or at the people involved.
There have been a number of posts that I think provided reasonable cost/revenue data for intermodal consist utilization ... or provided enough of the conditions or options involved to rule out any meaningful quantization of cost-benefit for situations without hard or empirical data.
BaltACD If we are talking 50 containers/day - with 5-pack stack cars - that is 5 car loads or approximately 3000 feet of train. My carrier wants to run their intermodal trains with upto 14000 feet of train. People don't understand the recurring volume necessary for a rail line/service to be profitable. If you have between 150-200 truck/containers per day then you are starting to talk about business worth serving and making a profit from.
If we are talking 50 containers/day - with 5-pack stack cars - that is 5 car loads or approximately 3000 feet of train. My carrier wants to run their intermodal trains with upto 14000 feet of train.
People don't understand the recurring volume necessary for a rail line/service to be profitable. If you have between 150-200 truck/containers per day then you are starting to talk about business worth serving and making a profit from.
If the service were there, 2-3X per week it could grow. I wonder what the cost/revenue numbers actually are? It seems like the rails have boxed themselves into a shrinking niche of trainload-only services.
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