We have posted Fred W. Frailey's August 2009 feature story on CSX CEO E. Hunter Harrison online for better historic context of this year's railroad newsmaker:
http://trn.trains.com/bonus/huntersway
Brian Schmidt, Editor, Classic Trains magazine
Good article.. I'm always surprise to see that CN's automotive related freight is only 6% of the total. all one sees around here is autoracks..
Creel almost seems to be admitting that Harrison's approach was/is too harsh. A genuine attempt at reconcilliation or is he just perfuming the pig for PR reasons?
http://www.railwayage.com/index.php/freight/class-i/precision-railroading-with-a-humane-face.html?channel=50
And something else unrelated to EHH to take away from traffic makeup chart in Frailey's article is that traditional unit train bulk freight (grain, minerals and coal) made up just over 1/3 of CN's traffic base, notably coal stood at only 6% of total traffic.
Greetings from Alberta
-an Articulate Malcontent
Sidebar. --- Here on CSX's A&WP subdivision the past week all of the general freights have been up graded to at least 3 locos from the normal 2. All three are observed to be under power and not dead in tow. Wife seems to think they are running faster ?
blue streak 1Wife seems to think they are running faster ?
Unless they were so underpowered that they couldn't maintain track speed, I'd imagine they're running at the same speed. Then, again, I don't know the profile there. Maybe they were underpowered...
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...
Absolute tripe!
Brian Schmidt We have posted Fred W. Frailey's August 2009 feature story on CSX CEO E. Hunter Harrison online for better historic context of this year's railroad newsmaker: http://trn.trains.com/bonus/huntersway
Thanks for putting this article up.
I think the most telling quote is “We were going in Hunter’s direction, actually,” says Jim Foote, CN’s executive vice president, sales and marketing. “But Hunter wanted us to move twice as fast.”
Every RR now has a implemented a version of scheduled railroading. It's why the room for improvement at CSX is much smaller than it was at IC, CN and CP.
Every RR schedules cars and trains and makes sure the plan balances power and crews. Every RR makes sure the plan does not cause congestion at terminals or on the mainline. No RR is dispatching merchandise trains by tonnage anymore.
The comments about SmartYard were interesting. About it giving you an optimized hump order for making connections. A good idea! However, if you have a hump yard that chronically has 3 trains in the receiving yard waiting to be humped, you have a sizable number of cars that won't make their scheduled outbound connection. You simple cannot get a car through hump yard in 10 hours if you are spending 3 hours in the receiving yard. The key to making connections is keeping the receiving yard current and knowing when to pull the class tracks to build the outbound train.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
oltmannd Every RR now has a implemented a version of scheduled railroading. It's why the room for improvement at CSX is much smaller than it was at IC, CN and CP.
Which could be a problem. Trying to achieve the same level of results as he has before when many of those results have already been achieved before his arrival might mean some pretty drastic actions, never mind detrimental effects on the railroad and its personnel.
tree68 oltmannd Every RR now has a implemented a version of scheduled railroading. It's why the room for improvement at CSX is much smaller than it was at IC, CN and CP. Which could be a problem. Trying to achieve the same level of results as he has before when many of those results have already been achieved before his arrival might mean some pretty drastic actions, never mind detrimental effects on the railroad and its personnel.
Another quote "But the biggest difference between CN and the rest of the pack is a simple idea: balance. Perfect asset utilization requires perfect balance — not just in train movements by direction, but also by day of the week. “We build our railroad around it,” Creel remarks. “That’s unique to us.” Imagine the possibilities. Your physical assets are always working. You always have just enough crews, just enough locomotives. Adds Creel: “It’s a huge challenge, the balancing act. You’re always on the edge of your seat.”
This can be a problem. If you tune everything up and run right at capacity, that's great...until something happens. A highway running right at capacity of 1900-2000 vehicles per hour per lane flows just fine and is maximizing asset utilizaton. Then a squirrel runs across the road. Someone steps on the brakes. A jam ensues. Capacity is now much less than 1900-2000 vehicle per hour per lane - and it doesn't recover until volume is reduced. Highways and airlines have natural "reset" slack period every day. Railroads do not.
NS tried running a really tight crew supply in 2014, and it worked. The RR ran fast and efficiently. Then traffic bumped up and the weather got bad. Parts of the RR became a congested. That made crew supply even tighter and trains were held for power all over the place. Attempts to reroute some volume either caused congestion elsewhere or were slow and hard to develop. Lots of customer ill-will ensued and some contracts on lucrative traffic were lost. Finally, with lots of leased power and temporarily assigned crews, the jam eased and network speed returned to it's historically high level.
It is really risky cutting resources that have long lead times (track, crew, power) close to the theoetical minimum. Squirrels can, and do, run across the road from time to time.
oltmannd Highways and airlines have natural "reset" slack period every day. [snip]... trains were held for power all over the place...
Airlines can, and do, have problems when a significant weather event ties up an airport, even a small one. Airplanes aren't where they are supposed to be, so can't cover the schedule.
As you note, there is a natural reset period built into their system, but a prolonged disruption can have nationwide implications.
I don't doubt that EHH can still wring some improvements out of CSX. But if his backers expect the same level of return as he got out of his earlier efforts - and he tries to achieve them no matter what it takes - things will get ugly.
tree68I don't doubt that EHH can still wring some improvements out of CSX. But if his backers expect the same level of return as he got out of his earlier efforts - and he tries to achieve them no matter what it takes - things will get ugly.
Completly agree.
Ugly is exactly what Hunter brings to the the table. He has, can, and will dish out ugly to a degree that the other railroad CEO's just can't stomach, even his protégée Keith Creel. That is his "X Factor". It is also why he is such a polarizing figure.
During his time at CP, Harrison turfed a lot of good people. He did it to cut costs and also through a "rules" policy that was inflexible. In the end, customer service went out the window and CP lost a lot of business that they may never get back. He created more problems than he solved. That will be his CP legacy.
cprtrain During his time at CP, Harrison turfed a lot of good people. He did it to cut costs and also through a "rules" policy that was inflexible. In the end, customer service went out the window and CP lost a lot of business that they may never get back. He created more problems than he solved. That will be his CP legacy.
He trashes business that doesn't fit his 7 day of week, even flow model.
The way I understand PCS to work the EEH way is that you flatten out the flow so that it's steady by day of week and hour of day as much as you can on the service design side. Then you hammer the customers to flatten any remaining peaks and valleys. Then you blow away whatever peaks remain.
Then you trim the plant, locomotive fleet, car fleet and crew base to just fit.
Super efficient. No margin for error. No specialized service.
I wonder if he has any idea how "lumpy" intermodal traffic is in the NJ- Chicago lane. Lets see what he comes up with to solve this one...
"PCR" = "PreCision Railroading" ?
Not all business is worth keeping. I don't know if the customers who left CP were encouraged to leave or if they left inspite of CP's best efforts to keep them. Probably some of both. Saying goodbye to a customer isn't necessarily a bad thing.. it frees the organization up to focus more on the A level customers that everyone wants.. send the C and D level accounts into your competitor like a virus. If you've got nothing but good A and maybe B level accounts while your competitors are choking on the level C and Ds.. who has the edge?
UlrichNot all business is worth keeping. I don't know if the customers who left CP were encouraged to leave or if they left inspite of CP's best efforts to keep them. Probably some of both. Saying goodbye to a customer isn't necessarily a bad thing.. it frees the organization up to focus more on the A level customers that everyone wants.. send the C and D level accounts into your competitor like a virus. If you've got nothing but good A and maybe B level accounts while your competitors are choking on the level C and Ds.. who has the edge?
Spoken as if CSX has never encouraged customers to seek other forms of transport for their products. With the passage of Staggers, many customers were 'encouraged' to seek other alternatives. The terminal where I spent a large part of my career once listed well over 1600 different customers - today that number is well under 200.
A industrial area that once had yard jobs around the clock, 5 days a week and handled upwars of 100 cars inbound and outbound daily now gets service from another yard twice a week of 2 or 3 cars per trip.
Run off the customers CSX has today and you are not running down costs, you are running away bottom line revenue.
Never too old to have a happy childhood!
That's I'm saying: they've already cut out the chaff in order that they can focus on serving their better accounts.
Ulrich That's I'm saying: they've already cut out the chaff in order that they can focus on serving their better accounts.
That also happened in a very similar way to at least one major department store in Canada. They kept eliminating more and more departments with lower sales/sq.foot. The end result was fewer customers found it worthwhile to visit and the remaining "higher sales" were not enough to keep the empire in the black. An iconic national chain disappeared into bankruptcy after around 100 years.
Providing good rail service is a skill set that is equally applicable to the small customer as the big one. Accepting sloppiness with one will probably spill over into the general mindset. The cost of maintaining main track is huge and essentially fixed, so any additional traffic will lower the cost per carload, whether it be in a unit train or a mixed manifest made up of the small guys. That lower cost means more profit for the railroad.
John
Paul_D_North_Jr "PCR" = "PreCision Railroading" ?
Traditionally, you run off low margin business. It usually is low volume and expensive to serve (think at the end of a long branch line). EHH has a different approach. You are basically building a conveyor belt and can't have dead spots of stuff that spills off. You essentially run off customer who can't feed the belt smoothly.
He has a point. If you offer discount rates for larger block sizes from a large industrial producer (which has been known to happen - until operations gets a hold of marketing...), he might give you 20 cars, three times a week instead of 10 cars 6 days a week. While this saves you three switches a week, it runs some pretty substanial "lumps" into your interior train network resulting in the need to run extras - and all the power and crew problems that come with.
cx500 Ulrich That's I'm saying: they've already cut out the chaff in order that they can focus on serving their better accounts. That also happened in a very similar way to at least one major department store in Canada. They kept eliminating more and more departments with lower sales/sq.foot. The end result was fewer customers found it worthwhile to visit and the remaining "higher sales" were not enough to keep the empire in the black. An iconic national chain disappeared into bankruptcy after around 100 years. Providing good rail service is a skill set that is equally applicable to the small customer as the big one. Accepting sloppiness with one will probably spill over into the general mindset. The cost of maintaining main track is huge and essentially fixed, so any additional traffic will lower the cost per carload, whether it be in a unit train or a mixed manifest made up of the small guys. That lower cost means more profit for the railroad. John
The Sears story isn't quite the same. In essence they've proven that when everyone is your customer then no one is your customer. They have no focus, and back in the day that was ok until niche competitors came in and ate away at their market share. Sears should have focussed its marketing more instead of trying to sell everything from socks to lawnmowers.. Usually when you try to do everything you don't do anything well, and you become a sitting duck for competitors who are experts in clothes, tools, garden accessories etc.
Going back to rail, it doesn't make any sense to attempt to serve every customer equally well. Some customers are worth more than others, and limited resources need to be applied to those customers and not dispersed among a plethera of small customers or customers who are high maintenance. Every business has limited resources that need to be deployed in the most effective and intelligent manner possible.. in most cases (at least in transportation) that means a focus on large organized customers who ship large volumes consistently. Small shippers are generally a pain in the ass.. I'd rather serve three fortune 500s than 400 little shippers, many of them being hard to deal with and slow payers.
Agree 110%.
Ulrich cx500 Ulrich That's I'm saying: they've already cut out the chaff in order that they can focus on serving their better accounts. That also happened in a very similar way to at least one major department store in Canada. They kept eliminating more and more departments with lower sales/sq.foot. The end result was fewer customers found it worthwhile to visit and the remaining "higher sales" were not enough to keep the empire in the black. An iconic national chain disappeared into bankruptcy after around 100 years. Providing good rail service is a skill set that is equally applicable to the small customer as the big one. Accepting sloppiness with one will probably spill over into the general mindset. The cost of maintaining main track is huge and essentially fixed, so any additional traffic will lower the cost per carload, whether it be in a unit train or a mixed manifest made up of the small guys. That lower cost means more profit for the railroad. John The Sears story isn't quite the same. In essence they've proven that when everyone is your customer then no one is your customer. They have no focus, and back in the day that was ok until niche competitors came in and ate away at their market share. Sears should have focussed its marketing more instead of trying to sell everything from socks to lawnmowers.. Usually when you try to do everything you don't do anything well, and you become a sitting duck for competitors who are experts in clothes, tools, garden accessories etc. Going back to rail, it doesn't make any sense to attempt to serve every customer equally well. Some customers are worth more than others, and limited resources need to be applied to those customers and not dispersed among a plethera of small customers or customers who are high maintenance. Every business has limited resources that need to be deployed in the most effective and intelligent manner possible.. in most cases (at least in transportation) that means a focus on large organized customers who ship large volumes consistently. Small shippers are generally a pain in the ass.. I'd rather serve three fortune 500s than 400 little shippers, many of them being hard to deal with and slow payers.
I respectfully beg to differ. I worked in Customer Service for CPRS for nearly 10 years and had to work with both big and small shippers in my jobs and the smaller shippers have just as important needs as the biggers ones. Running off business is just a sorry excuse for a railroad that doesn't know how to be creative in serving both kinds of customers.
UlrichThe Sears story isn't quite the same. In essence they've proven that when everyone is your customer then no one is your customer. They have no focus, and back in the day that was ok until niche competitors came in and ate away at their market share. Sears should have focussed its marketing more instead of trying to sell everything from socks to lawnmowers.. Usually when you try to do everything you don't do anything well, and you become a sitting duck for competitors who are experts in clothes, tools, garden accessories etc.
+1 Right after college I was part of the buying office of the primary Chicago retailer. Department stores have become dinosaurs because of online merchants and specialty stores, but those that survive, such as Nordstrom's, have a clear focus as to who are their primary customers. Sears, JCP and others that are failing now have lacked that focus for years.
C&NW, CA&E, MILW, CGW and IC fan
Of course Walmart, using the theme that "everyone is your customer" finds that a quite successful model. Perhaps they don't quite carry as much as the traditional department stores used to but there is not much missing in terms of routine purchases.
schlimm+1 Right after college I was part of the buying office of the primary Chicago retailer. Department stores have become dinosaurs because of online merchants and specialty stores, but those that survive, such as Nordstrom's, have a clear focus as to who are their primary customers. Sears, JCP and others that are failing now have lacked that focus for years.
You know, once upon a time I was standing in the Sears store in Oak Brook, IL. I remember thinking that all these guys need is a funeral parlor in here and they'd be selling everything needed from birth to eternity. (I don't think they sold groceries there.)
Allstate Insurance was once a Sears operation. So was Discover Card. They got spun off when Sears started to tank. Sears was eating their income.
Something we've heard a lot about in recent years is railroads "running off" customers, whether it be under Harrison or otherwise. Then come the comparisons to Staggers, "Core Pricing Power", etc.
I think what often gets overlooked by railfans is that the railroads of today, by and large, are pushing up against the diminishing return barrier in many traffic lanes. In Econ 101, you learn that each subsequent addition doesn't necessarily add as much as the previous one did. So while railroads have economies of scale, it runs out when you fill up the network.
Maury Klien noted in his analysis of Union Pacific's Service meltdown in the 1990s (in his Union Pacific History Trilogy) that for the first time, in the 1990s, the UP and other railroads began having a problem nobody could remember the railroads having: too much traffic. Customer service people were basically signing contracts with any customer who'd pay more than it took to move a car.
They didn't consider the additional cost, in track time and space, that additional business took up. Therefore, railroads began to see clogged yards and congested mainlines.
This is where railroad's pricing power comes from, by and large. Because now supply and demand has taken over. If a railroad can only throughput so many cars, then obviously you want the cars which pay the most to take up those spaces. So railroads raise(d) their prices accordingly. Maybe that shoves off the five-car-a-year lumber business, but it means the railroad can focus on their high-margin customers and keep the railroad fluid.
Network fluidity today is a challenge because the leap from two mains to three is HUGE. You'd need a LOT of new business to warrant triple-tracking these transcontinental mainlines. UP had that from North Platte to Gibbon with the Powder River Basin. But you also need more power and bigger yards to go along with it, so again, your law of diminshing return comes into play.
And that's by and large why it seems like railroads might be pushing up rates from time to time. They can because they don't really need the lower-margin traffic at best and it clogs up the system with marginally-profitable cars. This is why the freight railroads loathe Amtrak: it doesn't pay for the service it gets, chewing up huge amounts of valuable track time in the process.
What I see going forward is a continuation of the high-margin, rather than high-volume, business models. It takes the best advantage of railroad's economy of scale model without pushing too far into diminishing returns and clogging up the network.
As for Harrison, he's a shrewed businessman and undoubtely operates in this fashion. His railroad is going to give your traffic a rate which pays its way and charges you for the use of his services. That means lower rates at some times and higher at others.
Pricing power is the new way of the railroad world, not every-car-we-can-get of the 1950s-1980s.
That is a good analysis. And let us hope Harrison has the brains and will and charisma to get profitable business. Becuse right now CSX is not choking from too much business and needs more business.
Ulrich cx500 That also happened in a very similar way to at least one major department store in Canada. They kept eliminating more and more departments with lower sales/sq.foot. The end result was fewer customers found it worthwhile to visit and the remaining "higher sales" were not enough to keep the empire in the black. An iconic national chain disappeared into bankruptcy after around 100 years. The Sears story isn't quite the same. In essence they've proven that when everyone is your customer then no one is your customer. They have no focus, and back in the day that was ok until niche competitors came in and ate away at their market share. Sears should have focussed its marketing more instead of trying to sell everything from socks to lawnmowers.. Usually when you try to do everything you don't do anything well, and you become a sitting duck for competitors who are experts in clothes, tools, garden accessories etc.
cx500 That also happened in a very similar way to at least one major department store in Canada. They kept eliminating more and more departments with lower sales/sq.foot. The end result was fewer customers found it worthwhile to visit and the remaining "higher sales" were not enough to keep the empire in the black. An iconic national chain disappeared into bankruptcy after around 100 years.
I think he meant Eaton's, not Sears. Sears only bought the remnants of the company after Eaton's 1999 bankruptcy.
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