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.
RWM
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.
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.
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.
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.
Thanks to Chris / CopCarSS for my avatar.
"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.
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.
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
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!
An average freight train pays twice as much in net income as an Amtrak train does in gross revenue.
As to what Amtrak would have to pay to get better priority, I'd be guessing about the strategy of the Class Is.
Railway Man wrote: In extremely rough terms, commodities ranked in terms of profit, high to low, are:chemicalsinternational containershigh-value bulk commodities, e.g., fertilizer, concentratesgraincoaldomestic containers and LTLhighly truck-competitive commodities such as lumber and hard perishableslow-value bulk commodities, e.g. scrap metal, cottonseed, waste paper autosAmtrak -- the worst by far.RWM
In extremely rough terms, commodities ranked in terms of profit, high to low, are:
Which has me wondering...how bad is "worst by far"? What kind of numbers is a RR looking at when an Amtrak train is taking up a time slot that would otherwise be used for freight? I know this varies widely (wildly?) with different routes or segments but does anyone have some examples? RWM, where do you think Amtrak would need to be in this pecking order to get better O.T. performance (say, 85-95%) out of its host railroads?
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
Murphy Siding wrote: Which trains make money for the railroad? Which ones are run for the prestiege? Which ones are run to help pay the light bill?
Which trains make money for the railroad? Which ones are run for the prestiege? Which ones are run to help pay the light bill?
Getting back to what I believe is the crux of Murphy Siding's original question, I think he was making inquiry in the context of the casual railfan observer watching a train rolling by. I completely agree with Railway Man's categories by commodity segment, but the rough answer, by train type, may be (in descending order of profitability) as shown below.
1. Loose freight car chemical trains, especially those that carry liquids and compressed gasses. The liability exposure to the railroad is high and for that the shippers pay a premium. Each car delivered without incident really pumps up the bottom line.
2. Manifest traffic or what we call "loose freight car" railroading. Of special mention here might be the soda ash business from southwestern Wyoming to eastern markets. For 500-miles or so (Green River, Wyo. to North Platte, Nebr.) its all unit train economics. For the nearly 800+ miles from North Platte to the Chicago, Saint Louis, and Memphis gateways it's largely loose freight car economics. But I bet the whole movement for each car is priced as something close to loose freight car rates.
3. Higher value unit trains hauling grain.
4. Lower value unit trains hauling coal and rocks.
5. Piggyback and container traffic because it is railroad vs. truck competitive or BNSF vs. UP competitive / CSXT vs. NS competive.
Among categories 3, 4, and 5, I'm not sure where unit auto trains fit in.
Purchasing diesel fuel for $4+/gallon at a truck stop is driving more truck competitive business to the railroads. As a result, I'm sure the industry is capitalizing on this trend by charging something extra these days beyond mere fuel surcharges. If so, the number 5 item appearing on the list above may start to climb higher in the rankings.
In the meantime I'd love to get some idea of the profitability of Triple Crown/Roadrailer type trains and the ZWASKP/ZSKWAP reefer shuttles operating between Wallula, Wash. (UP) and Rotterdam, NY (CSXT).
All of those run into diminishing returns and negative returns at some point, of course. It's pretty hard to zero in on the perfect plan, especially because traffic fluctuates and it's always a moving target.
Railway Man wrote: ........................The cost to move the empty car is captured in the rate charged to the shipper for the loaded move. ................................... For loose-car freight using system cars, the empty costs are not so easy to calculate, as they are never the same for each loaded car, as the empty car is not captive. An average number for empty handling for that car type and lane is built into the rate for the loaded car.RWM
........................The cost to move the empty car is captured in the rate charged to the shipper for the loaded move. ................................... For loose-car freight using system cars, the empty costs are not so easy to calculate, as they are never the same for each loaded car, as the empty car is not captive. An average number for empty handling for that car type and lane is built into the rate for the loaded car.
All I am pointing out is that we can't assume that the destination charge assessed by the auto manufacturer to the auto buyer has 1:1 correspondence with the revenue to the railroad.
...I would imagine much of the costs you cite above {Railway Man}, must apply to other hauled commodities as well.
Quentin
Modelcar wrote: ....I really haven't noted recently just what shipping costs are on the sticker of a new car....but I'd expect it to be somewhere in the range of $600 to $800 or so, and with a full auto carrier I'd certainly think it would be a decent "profit" to carry them to their destination. Kind of surprising to see it as 9th on the list.
....I really haven't noted recently just what shipping costs are on the sticker of a new car....but I'd expect it to be somewhere in the range of $600 to $800 or so, and with a full auto carrier I'd certainly think it would be a decent "profit" to carry them to their destination. Kind of surprising to see it as 9th on the list.
Destination charges are not necessarily what the railroad receives in revenue, much less profit. Assuming an $800 destination charge per vehicle, and 15 vehicles per trilevel, the gross revenue to the automaker is $12,000. From that must be paid ramping costs at the factory, the railroad's line-haul charge, deramping costs at the destination ramp, trucking costs from the ramp to the dealer, storage charges at the destination ramp, and mixing center costs. Each multilevel will account for two truckloads, and the truck even on a short haul to the dealer is going to have trouble doing better than one turn per day, which at $125-$150/hour for the truck means that trucking costs alone are $2,000 of the $12,000 gross. I have no idea how much profit the automaker makes on destination charges, either ... for all I know it's a significant profit center for the automaker.
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. The service committment is high meaning that the cost of operation is high. Not all railroads chase the business too hard in all lanes, especially the lanes that have higher value freight using up the capacity.
Same here. I remember reading an issue a while back (I think the Fast Freight issue) that said loaded autos are enormously profitable for UP. With the wording the author used, I would think that even with the empties figured, they still had to be quite profitable. I guess I was misled.
TimChgo9 wrote: I have "ringside" if you will, seat along the BNSF here, and I have always wondered which trains make the most, and which ones cost the most. I see everything from grain, to autos, to coal, and containers pass by my house. Also included are empty coal trains headed west, do those trains cost the railroad money, or is the cost of bringing the empties back included in the cost of shipping a loaded train? Also, what about empties of other types? I have heard many a manifest freight as they prepare to leave Clyde Yard, announce to the dispatcher the number of loads and empties they are pulling, is the shipper charged a fee to move the empty car, or is that cost absorbed by the railroad? One last note: I occasionally see trains of empty containter, or intermodal cars, both inbound and outbound, and one was all BNSF container cars, is that train costing money, or is money made somehow on the movement of those empty container cars.
I have "ringside" if you will, seat along the BNSF here, and I have always wondered which trains make the most, and which ones cost the most.
I see everything from grain, to autos, to coal, and containers pass by my house. Also included are empty coal trains headed west, do those trains cost the railroad money, or is the cost of bringing the empties back included in the cost of shipping a loaded train? Also, what about empties of other types? I have heard many a manifest freight as they prepare to leave Clyde Yard, announce to the dispatcher the number of loads and empties they are pulling, is the shipper charged a fee to move the empty car, or is that cost absorbed by the railroad? One last note: I occasionally see trains of empty containter, or intermodal cars, both inbound and outbound, and one was all BNSF container cars, is that train costing money, or is money made somehow on the movement of those empty container cars.
The cost to move the empty car is captured in the rate charged to the shipper for the loaded move. It is not broken out separately. For unit coal trains cycling repetitively between the same mine and the same power plant, the empty 1/2 of the cycle is fairly simple to cost. It's similar for loose-car freight using assigned cars, though not nearly as simple. For loose-car freight using system cars, the empty costs are not so easy to calculate, as they are never the same for each loaded car, as the empty car is not captive. An average number for empty handling for that car type and lane is built into the rate for the loaded car.
jeaton wrote:Perhaps more than profitability, it might be a question of the need for speed. COFC/TOFC trains run at higher speeds in part because of need to provide transit times that will be somewhat competitive with truck, but there is also the fact that speed over the road for those trains can make a real difference in the productivity of the railroad equipment used for that service. That is not so with trains of "loose car" freight. Suppose you have about 100 cars a day from various shippers in and around point "A" going to shippers around point "B" which is 1000 miles from point "A". You run the train to get an average of say 40 MPH and it takes about 25 hours to get from "A" to "B", however, assuming great planning, it will take at least a day to get each car from the shipper put on the train ready to go and another day to get the car off the train and spotted on the consignee's track. Call it three day service. Now suppose you up the power so that you can get 60MPH average between "A" and "B". You have now increased the power requirement (locomotives) and fuel, but you are only going to reduce the over the road time by about 8 hours. Given that most industry switches are a once a day event, even with the reduction in the over the road time, you still are only getting three day service, but now the cars are just setting in the yard for 8 hours waiting for the industry jobs to make the delivery.I think such matters as I have mentioned have more to do with establishing what's hot and what's not than profitability.
Perhaps more than profitability, it might be a question of the need for speed. COFC/TOFC trains run at higher speeds in part because of need to provide transit times that will be somewhat competitive with truck, but there is also the fact that speed over the road for those trains can make a real difference in the productivity of the railroad equipment used for that service.
That is not so with trains of "loose car" freight. Suppose you have about 100 cars a day from various shippers in and around point "A" going to shippers around point "B" which is 1000 miles from point "A". You run the train to get an average of say 40 MPH and it takes about 25 hours to get from "A" to "B", however, assuming great planning, it will take at least a day to get each car from the shipper put on the train ready to go and another day to get the car off the train and spotted on the consignee's track. Call it three day service.
Now suppose you up the power so that you can get 60MPH average between "A" and "B". You have now increased the power requirement (locomotives) and fuel, but you are only going to reduce the over the road time by about 8 hours. Given that most industry switches are a once a day event, even with the reduction in the over the road time, you still are only getting three day service, but now the cars are just setting in the yard for 8 hours waiting for the industry jobs to make the delivery.
I think such matters as I have mentioned have more to do with establishing what's hot and what's not than profitability.
Increasing over-the-road speed increases cost for fuel and locomotives -- that's an absolute. Increasing over-the-road speed may reduce cost for equipment, may increase main line capacity, may increase turns for crews -- maybe. Or, as you suggest, it just might "get you to the red light faster."
Intermodal trains have higher speeds because the shippers are willing to pay extra to get it. If the intermodal train is moving a long distance -- and few don't -- the higher speed has a real effect on their inventory carrying costs, customer restock intervals, and equipment costs. The fact that intermodal trains are largely point-to-point without intermediate sorts, or at most have one or two block swaps en route, instead of consolidated, networked trains like loose-car manifest means they stay out of classification yards and higher over-the-road speeds aren't swallowed up by yard dwell.
trainboyH16-44 wrote: Soo 6604 wrote:This is out of my league but I'm going to guess that any train that moves makes money for the railroad Hmmmm...not quite
Soo 6604 wrote:This is out of my league but I'm going to guess that any train that moves makes money for the railroad
Hmmmm...not quite
If that were the case, the Penn Central might still be alive today.
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