Railway Man wrote: Demarket unprofitable or underprofitable shippers
Demarket unprofitable or underprofitable shippers
I laughed out loud at that one!
True corporate-speak for not answering the telephone when they call, scheduling the switching movement for sometime next month and such. I'll bet there are a whole lot of interesting demarketing tactics out there!
For those that want to know, take a look either in printed form or on web based at the annual reports and other information about the railroads. These can be accessed by calling the hq and asking for investor relations or by poking around on the website.
Either source will have a breakdown on the categories of traffic. These breakdowns will usually have 4-6 categories which will list the number of shipments (car or container loads) for the year (and previous year) and the revenue per unit.
BNSF sent out a investor pack last year which included breakdown in the costs, similar to those used by the old ICC reports.
By looking at these numbers and the average length of haul one can sort of get an idea of revenue per unit mile...but profitability per unit is not disclosed. That would be extremely sensitive information.
It would not be that difficult to assemble the costs involved for all types of traffic and then determine the profitability...that is what cost accountants are for.
ed
An apparently little-known booklet - which I don't recall having seen mentioned or referenced on here before - on the cost accounting aspects of this subject in railroad applications is Profit Management Systems: Key to Stronger Railroads by E. C. Christ, Simmons-Boardman Publishing Corp., 1976 (about 80 pgs. or so, paperbound). For a little more info on this book, see the Transportation Research Board's National Transportation Library "TRIS Online" bibliographic database at: http://ntlsearch.bts.gov/tris/record/tris/00147700.html It was written in the context of the prevalent mainframe-type computers at the time, and clearly contemplated mining the database as you mention. I tried to purchase a copy a few years ago, but found that it was out-of-print, and basically unavailable from any of the used RR bookstores, E-Bay or Amazon, etc. However, I was able to borrow a copy for a couple weeks - from Northwestern University's (Chicago) Transportation Library through an inter-library loan ["ILL" - a truly wonderful tool for this and many other research quests, by the way - not everything valuable is on the Internet (yet).] Before I returned it, let's just say that it paused briefly at a copying machine . . .
Also, retrieve any of John G. Kneiling's multi-part articles on this subject, as published in Trains in the 1960's and 1970's. The one I remember best was entitled "The Rolling Stock Riddle", if I recall correctly, but I'm sure there are sveral others as well as some of his monthly columns that touched on this subject, too.
Finally, I recall seeing statistics someplace one time a few (maybe quite a few) years ago that indicated that empty car mileage was 56 % of total car mileage. That surprised me - you'd think that in a supposedly "managed" system, it would never go higher than 50 % - even just sending the empty car back to exactly where it started from as a load would result in no more than 50 % empty miles. How do you manage to do significantly "worse" than even that ? Of course, now I'm wiser in the ways of systems and their dysfunctions and anomalies, and can see where that happens to balance or reposition equipment for pending asymmetric loading patterns, etc., etc.
- Paul North.
"Profit" and "profitability" are not the same, and often represent different scenarios entirely.
And the answer for either question depends on which train and which commodity/product represents the captive shipper, not on the generic product class.
Railway Man wrote: Ah!The easiest way is simply get rid of cars. This may sound appalling, but it's exactly what any supplier does to control costs: eliminate services that don't earn their keep. That does mean that shippers may not have as many empties to load as they like, so this incentives the shipper to provide his own cars or pay a higher rate to get assigned cars. This also has a point at which returns become negative. Certain shippers of certain commodities never have enough empties. Case in point is westbound empty 40' containers, which are being allocated to bulk shippers. The bulk shipper can always pay a "manufactured good" rate for the container and by so doing get access to all the containers he deigns to fill, but then his delivered cost to the chicken feed supplier in Vietnam or wherever is too high. RWM
Ah!
The easiest way is simply get rid of cars. This may sound appalling, but it's exactly what any supplier does to control costs: eliminate services that don't earn their keep.
That does mean that shippers may not have as many empties to load as they like, so this incentives the shipper to provide his own cars or pay a higher rate to get assigned cars. This also has a point at which returns become negative. Certain shippers of certain commodities never have enough empties. Case in point is westbound empty 40' containers, which are being allocated to bulk shippers. The bulk shipper can always pay a "manufactured good" rate for the container and by so doing get access to all the containers he deigns to fill, but then his delivered cost to the chicken feed supplier in Vietnam or wherever is too high.
RWM
Thanks to Chris / CopCarSS for my avatar.
The big RR corps. probably make money off all modes of freight traffic, excepting perhaps manifests that seem to be carrying little or nothing.
I for one can't gauge which modes of freight bring the most. Is there perhaps an eighty/twenty rule that so many American businesses have acknowledged: twenty percent of the customers bring eighty percent of the revenues???
My guess would be intermodal but I really don't know. With fuel escalators and all, I would think the bigs aren't doing all that badly. Even in these recessionist times. - a. s.
al-in-chgo wrote: Is there perhaps an eighty/twenty rule that so many American businesses have acknowledged: twenty percent of the customers bring eighty percent of the revenues???
Is there perhaps an eighty/twenty rule that so many American businesses have acknowledged: twenty percent of the customers bring eighty percent of the revenues???
I would estimate the BNSF, CN, CPR, CSXT, NS and UP each have about 3,000 regular customers. I suspect 250-300 customers bring in about 80% of the revenue.
That strikes me as a good ballpark number, Bob. In round numbers each of the four majors has:
Adds up to ... 200-300 big customers.
trainfan1221 wrote:I have always heard that bulk quantities in unit trains,(coal, wheat etc..) make a good deal of money for the railroads. Surprisingly, and I have a Trains tape that says this, intermodal is not a big money maker. I don't know for sure how true this is but it supposedly has to do with how much weight the actual cars are as opposed to the trailers and the fact that they are not aerodynamic in any way. Please correct me if I am at fault.
Historically intermodal was indeed a very marginal business. Beginning about 1985 that began to change, and the profit and revenue growth has been dramatic in the last ten years. But the conventional wisdom outside the industry has been slow to change.
The lack of profitability had nothing to do with tare weight of the equipment or aerodynamic qualities (or lack thereof), but with low rates and high costs. The low rates stemmed from stiff truck competition and the high costs due to low volumes and the resulting inefficiency. Costs have declined dramatically as volume growth created efficiency, along with a lot of streamlining of the business and elimination of boutique services and unprofitable lanes. Rates have held firm or have been able to increase because truck rates have had to rise to cover fuel, labor, toll, tax, and equipment cost increases, all of which have much more effect on the truck than on the train.
Railway Man wrote:The automakers are very big gorillas and use their market power to extract highly favorable rates from the Class Is in competitive bidding, and tend to award all-or-nothing contracts to ensure they get low rates even in high-demand lanes.
Insofar as the BN is concerned, the revenue received (2007) per ton-mile for automotive is by far the highest of any general category of freight, at $79.23 per thousand ton-miles. This compares to $31.15 per thousand ton-miles for international intermodal and $11.44 for coal.
Railway Man wrote: 4-5 major forwarders10-15 major LTL and TL shippersRWM
Murphy Siding wrote: Railway Man wrote: 4-5 major forwarders10-15 major LTL and TL shippersRWMWhat is a forwarder? Can you explain what you mean by LTL and TL shippers? Thanks
Thanks, Murph. I was wondering that myself. - al
LTL = Less Than Trailerload. These are trucking companies that consolidate many small shipments into trailers, using a network of city trucks to gather the freight from the shipper and bring it to a freight house, the freight house to sort shipments for like destinations and consolidate them into trailers, and line-haul trucks (often double or triple pups) to move the consolidated freight to freight houses in other cities, where it is broken down and distributed to city trucks for delivery to consignees. LTL truckers include Yellow, FedEx Ground, and UPS. Cost of entry is very high and cost of operation is very high, meaning there are very few players with the cash and market position to be in this business.
TL = Trailerload. Trucking companies that carry trailers loaded with one shipper's goods only from dock to dock. Often these are regular, contract services for large shippers such as Proctor & Gamble. TL truckers include J.B. Hunt, Schneider International, Werner, and many many more. Cost of entry is very low and there are many small firms with a few dozen trucks.
Forwarder -- a company who arranges dock-to-dock shipments for the shipper, in effect acting as the shipper's transportation manager. The forwarder arranges for the truck, the container, the dray, the paperwork, the insurance, the train, the export-import documents, the taxes, the fees, and so forth, using whatever combination of modes and transportation companies necessary to meet the price and service requirement of the shipper. Forwarders usually provide their own trailers or containers if they are engaging in intermodal service. Examples of forwarders include Hub Group and Pacer.
Railway Man wrote: LTL = Less Than Trailerload. These are trucking companies that consolidate many small shipments into trailers, using a network of city trucks to gather the freight from the shipper and bring it to a freight house, the freight house to sort shipments for like destinations and consolidate them into trailers, and line-haul trucks (often double or triple pups) to move the consolidated freight to freight houses in other cities, where it is broken down and distributed to city trucks for delivery to consignees. LTL truckers include Yellow, FedEx Ground, and UPS. Cost of entry is very high and cost of operation is very high, meaning there are very few players with the cash and market position to be in this business.TL = Trailerload. Trucking companies that carry trailers loaded with one shipper's goods only from dock to dock. Often these are regular, contract services for large shippers such as Proctor & Gamble. TL truckers include J.B. Hunt, Schneider International, Werner, and many many more. Cost of entry is very low and there are many small firms with a few dozen trucks.Forwarder -- a company who arranges dock-to-dock shipments for the shipper, in effect acting as the shipper's transportation manager. The forwarder arranges for the truck, the container, the dray, the paperwork, the insurance, the train, the export-import documents, the taxes, the fees, and so forth, using whatever combination of modes and transportation companies necessary to meet the price and service requirement of the shipper. Forwarders usually provide their own trailers or containers if they are engaging in intermodal service. Examples of forwarders include Hub Group and Pacer.RWM
Thanks!
Couple of notes:
ADM has over 15000 cars which they either own or lease. They have their own railcar repair shop in Decatur, Il.
Only a guess, but BNSF's high revenue per tonmile for automotive is probably based on the light density nature of automotive. Low weight per carload will move those numbers to the high side. What is the tonnage for a autorack compared to grain or coal?
One more thing...and we have discussed this previously. Are most interchanged movements moving on joint line rates or proportional rates these days? Is there a movement to the joint line (revenue sharing) rates?
Ed,
I can answer your question about CSX unit grain trains. Most of the unit trains are 65 cars due to the limitations of the elevators. Track space and loading time are issues. I work the Great Lakes Division and Grain is HUGE! There are a few elevators that pay a little more for what we call an express loader. These trains are usually spotted, loaded, and then pulled within 24 hours. The power also stays with the train at the customer site.
Lately, there have been upgrades to some of the elevators and they have the capacity to handle larger grain trains. The ADM plant in Beech Grove, IN lately had a lot of upgrades and we have been running huge BNSF wheat trains into there. I've seen 112 loads go in before.
MP173 wrote: One more thing...and we have discussed this previously. Are most interchanged movements moving on joint line rates or proportional rates these days? Is there a movement to the joint line (revenue sharing) rates?ed
Most interchanged cars Class I to Class I are moving on through rates. Most interchanged cars with a short line as part of the route are moving on a handling-charge basis on the short line. There are no mileage-based rates or proportional rates per se.
Most short lines are handling carriers and get a flat fee from the Class I carrier based on the commodity and car type. These are negotiated and contained in a contract between the Class I and the short line. The Class I quotes whatever it wants to the shipper for a contract rate, or the shipper accepts the public tariff rate, and when the car moves, it moves on a single waybill, the shipper pays the Class I, and the Class I pays the short line the agreed-upon handling charge.
Cars moving between Class Is may move either on a through rate that is negotiated between the Class Is, or two local rates, or two public tariffs. If it's a through rate usually one of the Class Is takes the lead in negotiating with the shipper, and the shipper just sees the total charge on a single waybill. The shipper pays one of the Class Is and that Class I settles with the other Class I. It the car is moving on two local rates or two public tariffs, then the shipper sees two waybills and settles with each Class I individually.
For example, if the car originates on a short line, moves over two Class Is, and terminates on another short line, the car most likely is moving on a through rate negotiated between the two Class Is, and each short line collects a handling charge fee which is a separate negotiation between each of the short lines and the Class I it interchanges with.
Railroads are pushing more and more toward public tariff rates for small customers. Large customers are still able to negotiate contract rates but the contracts are for shorter and shorter terms, and have escalation clauses built in. The right of the railroad to tack on fuel surcharges is usually included in the contract. Fuel surcharges of 35% are being seen now.
MP173 wrote: Only a guess, but BNSF's high revenue per tonmile for automotive is probably based on the light density nature of automotive. Low weight per carload will move those numbers to the high side. What is the tonnage for a autorack compared to grain or coal?
?
Maximum net load on a trilevel autorack is 79,000 lbs. For 1000 ton-miles, the average rate per carload, BN, would be $3,130. To ship the same net tonnage as a 120 ton car, it would cost $4,740.
For grain ("Ag"), a 120 ton hopper travels 1000 miles at $2,620 (unless you ship from Montana and then it will cost you about $3,500). For International intermodal, the max loaded container weight is 67,200 lbs. A container travels at $1,041 to cover 1,000 miles. For coal, a 120 ton carload at 1000 miles travels at an average rate of $1,373.
MP173 wrote: Only a guess, but BNSF's high revenue per tonmile for automotive is probably based on the light density nature of automotive. Low weight per carload will move those numbers to the high side. What is the tonnage for a autorack compared to grain or coal?ed
As well as a very high empty return rate, expensive equipment costs born by the railroad, high operating costs to meet service guarantees, volume rebates that are paid even when the volume targets aren't met, high costs for terminals, and high payments for damaged lading.
Railway Man wrote: As well as a very high empty return rate ...
As well as a very high empty return rate ...
Compared to what?
The 50% empty return rate for coal and ag -- much of that unit trains? These constitute nearly 70% of all railroad shipments. What is "very high" compared to that? Intermodal has operated at as high as a 56% empty rate. Between domestic and imports going in opposite directions, the railroad I am most familiar with had about a 28% empty rate on autoracks: utilization was very good, it was very profitable traffic.
Railway Man wrote:As well as ... high payments for damaged lading.
"The damage measurement used by the automotive industry is the ratio of claims to vehicles shipped. Back in the early '90s, that ratio was 3% to 4%. ... Today the ratio of damage claims to vehicles shipped has fallen below one-half of 1% on an industry-wide basis, and on Norfolk Southern ... damage claims ratio with Toyota and General Motors is close to two-tenths of 1%." Railway Age, November, 2006.
In 1994, damage claims for automotive traffic were 19% of all railroad damage claims; today the ratio of damage claims is nearly the same as for all other classes of traffic.
The contribution to cost of operation, of claims, on a $3,130 carload is $6.26, and if it wasn't for that, BN could charge $3,123, instead of $3,130, for a loaded autorack travelling 1,000 miles.
passengerfan wrote: Those boxcars loaded by a freight forwarder don't make the kind of money they used to and are in steady decline.
Those boxcars loaded by a freight forwarder don't make the kind of money they used to and are in steady decline.
This is why FEC refers to anything other than COFC's, TOFC's and rock as "dead loads".
Ted M.
got trains?™
See my photos at: http://tedmarshall.rrpicturearchives.net/
Railway Man wrote: MP173 wrote: Only a guess, but BNSF's high revenue per tonmile for automotive is probably based on the light density nature of automotive. Low weight per carload will move those numbers to the high side. What is the tonnage for a autorack compared to grain or coal?edAs well as a very high empty return rate, expensive equipment costs born by the railroad, high operating costs to meet service guarantees, volume rebates that are paid even when the volume targets aren't met, high costs for terminals, and high payments for damaged lading.RWM
It's my impression the railroads supply the cars for auto shippers where in bulk unit train movements or loose car chemicals the cars are supplied by the shippers. The tri-levels can be very specialized for use by only one shippers autos.
bobwilcox wrote: It's my impression the railroads supply the cars for auto shippers where in bulk unit train movements or loose car chemicals the cars are supplied by the shippers. The tri-levels can be very specialized for use by only one shippers autos.
And that is the single biggest cost associated with the use of tri-level autoracks. At $160,000 a unit (non-aluminum), with the current 16 day cycle time, each carload costs $823 to service the equipment financing charges.
Murphy Siding wrote: bobwilcox wrote: It's my impression the railroads supply the cars for auto shippers where in bulk unit train movements or loose car chemicals the cars are supplied by the shippers. The tri-levels can be very specialized for use by only one shippers autos. If another railroad takes away the auto shipper's business, would the railroad who lost it have some specialized equipment sitting idle? What then? Lease it to the railroad who stole your auto business?
Autoracks are an interesting situation. The racks are owned by the railroads but the majority of the flatcars are owned by Trailer Train. I would assume that in the situation described above, the racks would be leased or sold.
CSSHEGEWISCH wrote: Murphy Siding wrote: bobwilcox wrote: It's my impression the railroads supply the cars for auto shippers where in bulk unit train movements or loose car chemicals the cars are supplied by the shippers. The tri-levels can be very specialized for use by only one shippers autos. If another railroad takes away the auto shipper's business, would the railroad who lost it have some specialized equipment sitting idle? What then? Lease it to the railroad who stole your auto business?Autoracks are an interesting situation. The racks are owned by the railroads but the majority of the flatcars are owned by Trailer Train. I would assume that in the situation described above, the racks would be leased or sold.
TTX is owned by the railroads, so there's no one to sell or lease the racks to but each other. Murphy, I like your last sentence, but for the word "stole" we could substitute "needed to fill its capacity in the worst way."
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