It is more like the death of 1000 cuts with EHH. The cuts of revenue from the smaller customers may not seem like much at first however over time they add up to massive amounts of money that the railroad ran off and could have used to improve itself and now it must try and recover from and it can not as it is bleeding from all over the place and it has run out of band aids to apply to stop the bleeding.
Just look at Sears they failed to see what the future was in retail and now have resorted to selling of sections of the company to keep their heads above water.
Losing just 1 small building is one thing. Having it turn into a spreading conflagration and losing an entire apartment building, block, or even a whole town or city (Great Chicago Fire) is another. As such, this analogy may pertain to CP and CSX, and the difference between losing 1 small customer vs. many more.
- PDN.
cprtrainYou lose thousands of carloads that collectively made you money.
This is my thought, as well - all those cars have to come from somewhere. It's not all bulk trains. As was pointed out earlier (or maybe it's a different thread), there will always be a bottom 20%. Get rid of the bottom 20% and there's a new bottom 20%.
We say in the fire service that all fires go out, eventually. It may be because the building has burned to the ground and there's nothing left to burn...
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...
Any cost accountant can distort data to justify a point. You must realize that when you force carload customers to leave, it becomes almost impossible to win them back. This adds up because it is not just one customer....it is hundreds. You lose thousands of carloads that collectively made you money. Harrison closed humpyards on CP. Agincourt in Toronto is a ghost town. When I lived next to it in 1980, they were humping from 7am to 11pm daily. CP had a lot of business. With cut backs, they have lost over 50% of their business and are losing more every week. NOT A GOOD WAY TO RUN A RAILROAD. Harrison screwed up big time.
Norm48327 Slotracer, I don't think two cars a day means squat to Harrison. He would likely consider that a costly inconvenience rather than something profitable, and he may be right in saying so. OTOH, small customers do count. They may not offer the volume that the big corporations do but are willing to pay the price. Alienating a few of them may be of no consequence but showing all of them the door can and will affect the bottom line. Yep, I can see a lot of them going to trucking if there are no meeting of the minds. I can only use the aviation industry as a comparison. We had owners who said "Fix my airplane and send me the bill" and those who questioned every cent. Guess which we chose to do business with. Even those who were tight with a buck were accomodated but got slightly less service than those who paid on time. We strived to accomodate both but had to bend and give a little at times. It's just the nature of doing business. What one has to do to keep business alive and well is dependent on management, employees and customers. All have to agree to terms or someone suffers.
Slotracer,
I don't think two cars a day means squat to Harrison. He would likely consider that a costly inconvenience rather than something profitable, and he may be right in saying so.
OTOH, small customers do count. They may not offer the volume that the big corporations do but are willing to pay the price. Alienating a few of them may be of no consequence but showing all of them the door can and will affect the bottom line. Yep, I can see a lot of them going to trucking if there are no meeting of the minds.
I can only use the aviation industry as a comparison. We had owners who said "Fix my airplane and send me the bill" and those who questioned every cent. Guess which we chose to do business with. Even those who were tight with a buck were accomodated but got slightly less service than those who paid on time. We strived to accomodate both but had to bend and give a little at times. It's just the nature of doing business. What one has to do to keep business alive and well is dependent on management, employees and customers. All have to agree to terms or someone suffers.
UlrichInterstates were built for longhaul as well as local traffic right from the get go.
If you've ever driven in an urban area during rush hour, you may know that if you want to get there faster, just stay on the surface streets. Everyone thinks they'll get there faster on the Interstate, so they give up using perfectly good surface streets for the linear parking lots the Interstates become.
I was in Alexandria, VA for a couple weeks of classes for work some years ago. After sitting on I395 for the two or three exits necessary to get from the hotel to the school on the first morning, I did a little checking on the map. Stayed on the surface streets and got there in record time every day after that.
Interstates were built for longhaul as well as local traffic right from the get go.
The present situation (with respect to railroads) has come about for a number of reasons.. the two most important being technological change as well as the removal of of burdensome economic regulations over the past 40 years. Trucking eliminated the need of having branchlines and spurs to every industry and village, and fewer regulations allowed the railroads to focus on business that makes more sense to them. Thus we have the much more profitable conveyor belt type rail system of today verses the money losing consolidation/distribution networks we had 40 years ago.
To a certain extent we are talking about which came first, the chicken or the egg. Today the big railroads' physical plant is, as you say "best suited for certain work, in their case large accounts, longhauls, and bulky materials". That was not always the case, but the cutbacks in service to the smaller shippers and quick removal of plant has led to the present situation. The process was likely initiated by over-regulation back in the days of the ICC, leading to a philosophy in management appropriate to that environment and which discouraged entrepeneurship.
Perhaps the same philosophy could be applied to the Interstates through urban centers. Ban the local commuter traffic and they will become free-flowing for the long haul traffic for which they were intended!
It should be possible nowadays for any shipper wishing to use rail to log on to a railroad website, identify a freight service with capacity to spare (railroad IT systems should be able to identify trains with spare capacity), book x cars and pay there and then by company credit card (or whatever). This takes care of most of the "80/20" problem, as the management time devoted to small accounts is essentially automated away and the 'slow payer' problem disappears.
The information flowing from this should be able to flag up regular users who might be interested in a contract for regular shipments. It should also be possible to spot routes and services where demand exceeds existing capacity or is likely to do so in the future.
I'm sure your boss and his father do exactly what I'm saying here.. they cherry pick the work that suits them best. That's all I'm saying. It would be stupid to attempt to serve all customers regardless of size and needs and ability to pay. and so it is with the railroads...like the rest of us their physical plant and assets are best suited for certain work, in their case large accounts, longhauls, and bulky materials. Thus, that's the business they should be focussing on.. not the stuff that truckers or the air freight people are best at.
Ulrich in your eyes my boss is a small customer then for the BNSF at close to 1000 cars a year moved between empties and loads in and out. However those 1000 cars combined support over 100 direct jobs in our mixing and shipping operation along with provide thousands of plastic manufactors the custom blended resins they need for their own product lines.
If all companies acted like how you would want guess what almost all Small Businesses in this nation would collaspe. That would take close to 60% of all the jobs in this nation away and destroy the economy. It is not compaines listed on the DJIA that drive the economic engine of the USA it is people like my boss and his father that thru blood sweat and tears and years of hard work create a company that first identifed a need for a service 2nd services that need and last expands on that service allowing its customers to grow. Between my boss and his father they directly employ over 500 people just in my area they are the 3rd largest employeer around me. Yes my boss is a small customer for the railroads less than 20 cars a week combined between the NS and BNSF however around here what he does for the community more.
Just because someone is a small shipper does not mean they need to be throw aside. Sometimes that small shipper can be a cog in a larger wheel. Well if EHH wants to throw them away and drive them away let him. Why because they will not be coming back when he leaves.
One carrier's small customer is another's large customer. Two loads a week works well for some people...i.e. the vast majority of carriers who employ ten or fewer people. Those same carriers would likely not be interested in customers who ship 300 loads a day as they can't provide any meaningful capacity levels to service those accounts. Thus to some extent we all look at things from the vantage point of our own capabilities.
Ulrich . . . [1] The first can be managed by one person working part time.. the second needs a full time staff of dispatchers and customer service people, and even then important and costly details are usually missed. One could argue that smaller accounts pay more.. I haven't seen that in my 30 years in the biz. . . . [2] Rates are governed by supply/demand and not by customer size, small LTL being the one exception where volume discounting is a factor.
[2] I'll comment on this later.
Ulrich...Personally I'd prefer 100 identical loads from one shipper going to the same place over 100 loads that are completely different, each with its own unique set of parameters. The first can be managed by one person working part time.. the second needs a full time staff of dispatchers and customer service people,...
And without those 100 individual loads, we can run one less train, meaning we need less crews and a couple fewer locomotives and that much less wear and tear on the railroad. Win-win!
Hope your shipment doesn't have to go through Atlanta on the highway!
The problem with "small" isn't usually the customers themselves. Each customer has his/her own requirements and circumstances that need to be taken into account. They're often minor details that involve big costs if overlooked or ignored. Thus one hundred shippers need to be managed 100 different ways... and that becomes a huge and costly burden to any business. Much better to have 100 loads out of one shipper than one load from each of one hundred shippers... some of whom pay on time while some don't.. some of them requiring appointments while others don't.. some of them who ship between midnight and 6:00 am while others only ship on Tuesdays and Thursdays... etc.. etc. I'm not saying one should ignore small accounts.,. just saying that if possible one should focus on more freight out of fewer places.. Personally I'd prefer 100 identical loads from one shipper going to the same place over 100 loads that are completely different, each with its own unique set of parameters. The first can be managed by one person working part time.. the second needs a full time staff of dispatchers and customer service people, and even then important and costly details are usually missed. One could argue that smaller accounts pay more.. I haven't seen that in my 30 years in the biz. Rates are governed by supply/demand and not by customer size, small LTL being the one exception where volume discounting is a factor.
Norm
We are not waiting around, they have some of our moves in the Southeast a total mess.
Just converted a third of a 700 car a year move to truck, once some logistical matters are addressed the remaining volume should mostly switch to truck late this year.
Have heard rumors for a few weeks next shoe to drop was Toledo Hump (They closed it last week). Already changed a 90 car a year move in the region to NS and looking to change another 250 car a move to NS by early May. Only remaining move to that plant is about 80 cars a year and work with the vendor and NS to take that move from CSX.
Have a 275 car a year move in the southeast now working to convert over to truck. Have a vendor in the southeast on CSX that ships to 2 of my CSX served plants in the Southeast, one is 90 cars a year volume, other is 180 cars a year volume.
After all this we will see other plants/venors/moves and see what else we can do.
Talking to NS, truckers and vendors there are lots of shippers and consignees calling looking for spot emergency trucks or to try and set up deals to divert traffic off CSX long term.
As far as we go, this will be a long term set of diversions off csx, there won't be any discussion later or any open-ness to them attempting to buy back the traffic. We are also holding back payment on their bills to help them share in the pain, finance charges go in the trash. I csannot wait for the day they call me looking for payment, it will be a call they wish they never made. Our sales rep is probably looking elsewhere to work as it has become very bad there. I know of operating personel who have told me they don't know on any day when they come into work if they will be canned and escorted off the property, many are looking elsewhere to work.
We have a plant in the Northeast we are looking to start back up late this year, at least 200-250 cars a year volume, if NS hits our rate targets we won't even bother to ask the CSX to even quote.
EHH and his pals can line their pockets but we are trying to minimize the damage it does to us. Hope the CSX can reccover after he is done. Our plant in Canada is still struggling due to the draconian EHH cuts up there, we pulled as much volume as we could off CP at that plant already.
Paul of CovingtonBut his "customer" is the stockholder.
Respectfully disagree. His "Lord and Master" is the stockholder. Customers who use the railroad for shipping are purely incidental. They only count if they provide profits while knuckling under to Harrison's unilateral decrees. Employees, costs of keeping the railroad running, and corporate infrastructure are merely obstacles to be overcome in his quest to please, and enhance the wealth of those to whom he is loyal.
Now; I am not saying that is all bad. Perhaps there is corporate fat that can be eliminated. Somewhere along the line a meeting of the minds that is beneficial to all must happen for all to survive. If that doesn't happen UP or BNSF will likey becom a truly transcontinental railroad. Harrison is loved by investors and hated by employees. Both have valid reasons for their thinking.
Keith Creel seems to have the right idea in trying to satisfy both sides. I believe he is attempting to reconcile differences between the railroad and employees in attempt to get things rolling while pacifying the investors and not pi**ing off too many employees and lower management folk. I hope he is successful.
Long term results of Harrison's actions have yet to be seen. CN is still trying to win back customers Harrison alienated. CN is also eating CP's lunch north of 49. In the long run CSX stockholders may be the "fall guys" depending on Harrison's results. He and Hilal may walk away with billions like Carl Ichan did in the eighties and leave everyone else holding the bag.
In the mean, I'm sitting back and watching the action.
Paul of Covington BaltACD cprtrain Until Harrision's arrival - CSX's internal catch phrase was "It starts with the Customer" - don't know if that is still being used. But his "customer" is the stockholder.
BaltACD cprtrain Until Harrision's arrival - CSX's internal catch phrase was "It starts with the Customer" - don't know if that is still being used.
cprtrain
Until Harrision's arrival - CSX's internal catch phrase was
"It starts with the Customer" - don't know if that is still being used.
But his "customer" is the stockholder.
EHH's Stockholder is the one that wants to cash out - NOW and drag all the cash within CSX with them. If the railroad business is able to contiue after they cash out it is not their problem. Blood suckers!
Never too old to have a happy childhood!
BaltACD cprtrain Harrison ran off many a customer at CP and they are not coming back any time soon. Customer service is not one of his strengths. He will be a disaster at CSX. Until Harrision's arrival - CSX's internal catch phrase was "It starts with the Customer" - don't know if that is still being used.
cprtrain Harrison ran off many a customer at CP and they are not coming back any time soon. Customer service is not one of his strengths. He will be a disaster at CSX.
_____________
"A stranger's just a friend you ain't met yet." --- Dave Gardner
Nothing but problems and eventual insolvency.. no customers equals no business. The wrong kind of customers also equals no business (aka a slower more painful death than no customers at all). Only the right customers equals a good viable business.
[quote user="Ulrich"]
Depends on what "it" refers to.. That little word can cover alot of ground.. [/quote]
Without customers - nothing starts!
Depends on what "it" refers to.. That little word can cover alot of ground..
cprtrainHarrison ran off many a customer at CP and they are not coming back any time soon. Customer service is not one of his strengths. He will be a disaster at CSX.
Harrison ran off many a customer at CP and they are not coming back any time soon. Customer service is not one of his strengths. He will be a disaster at CSX.
schlimm tree68 Ulrich So true Schlimm.. its the 80/20 rule applied to business.. 20% of customers are responsible for 80% of problems.. And 20% of the customers are responsible for 80% of the revenues... It's not the same 20%!
tree68 Ulrich So true Schlimm.. its the 80/20 rule applied to business.. 20% of customers are responsible for 80% of problems.. And 20% of the customers are responsible for 80% of the revenues...
Ulrich So true Schlimm.. its the 80/20 rule applied to business.. 20% of customers are responsible for 80% of problems..
So true Schlimm.. its the 80/20 rule applied to business.. 20% of customers are responsible for 80% of problems..
And 20% of the customers are responsible for 80% of the revenues...
It's not the same 20%!
One can only hope that is the case.
Jeff
C&NW, CA&E, MILW, CGW and IC fan
We're jumping the gun a bit.. EHH hasn't run off any customers yet. I'm going to go out on a limb here and say that for the money he's getting paid he probably does understand that serving cusotmers satisfactorily is really the end game and what its all about. Don't worry.. I've got some money in CSX.. not alot.. but some.. and I'm not at all worried.
Harrison's modus operandi was being developed and demonstrated long before CP, CN, or IC.
http://www.railwayage.com/index.php/blogs/bruce-kelly/it-shouldnt-take-a-dol300-million-man.html?channel=00
We've already seen the reductions in manpower and yard capacity at CSX. Whether hundreds of miles of track capacity gets ripped up or hundreds of acres of prime CSX-owned real estate gets liquidated for cash remains to be seen.
Ulrich all the carriers I listed have customers that have dealt with EHH in Canada already. When they hear the same stories over and over from their own customers they start to worry about what is going to happen to them. I hate to tell you this but in logistics there are times customers would use both industries to move their products. My own largest shipper itself uses rail to get raw resin to its plant that I ship over 100 loads a week from. We also haul for SABIC the old GE Plastics divison they are always getting trainloads of plastic resins and shipping some. Heck my drivers have seen the same car numbers at the plants we go to days later.
Here in the USA the OTR carriers use IM shipping to keep our costs down at times and to allow more driver flexibilty. We use it to allow us to have 3 drivers do the work of up to 6 at one time. Yes it is a labor and fuel saving device for us. However the costs are not that much lower for us overall. If EHH causes us problems with his Scheduled Precison Railroading model aka causes us to miss customer service demands well guess what those loads that generate revenue for the railroad will either be moved to NS if possible or if not we will start moving them again ourselves.
We are talking about billions in contracts overall in terms of dollars. EHH is going to have a hard time making his goals if he is running off high revenue customers from his railroad.
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