Paul_D_North_Jr Ulrich Not sure I stated the railroads made a mistake by trying to compete with truckers...although partnering with them (as with Expressway) might be the better way to go. I've found (from my own experience in business) that the line between partner and competitor isn't usually clear. I partner with my competitors on some projects just as the rails partner with one another in some areas while remaining very competitive in others. Look at CN and CP...they are certainly competitors..yet they partner with one another on track sharing where doing so reduces the cost for both. At one time CN and CP even shared joint ownership in a major international tunnel and in a railroad (Northern Alberta Railway)...Back in the 80s CN and CP also collaborated on a telecommunications venture...aptly named CNCP. In my scenario above the railroads and truckers collaborate on some business while remaining distinctly competitive in other areas. I sell loads to competitors on a daily basis...and when I have a surplus of equipment in a given area I will accept loads for transport on my own equipment from a competitor who may be short on equipment himself. So there again we're competitors but also partners. Certainly this is sensible enough - actually, really smart - from an economic and efficiency perspective, to avoid waste and under-utilized assets, etc. But if there's a customer, regulator, or reporter looking to make trouble, be advised that there's at least a potential anti-trust vulnerability here: making deals with ostensible competitors over splitting a customer's business, and possibly the rates as well. Example: "You want to explain why the rate for that shipment which you let your competitor handle was $500, whereas your rate is usually $400", or "Why was your rate $500, but his rate is usually $400 ?" I don't want to go down a sidetrack and get diverted here - it's been quite a while since I did any anti-trust work and I'm not providing legal advice here. Also, there are legitimate ways to handle that - such as by just renting/ leasing the equipment, without being involved in the rates or customer contacts - and maybe you're doing all that just fine and staying above-board and beyond suspicion, like Caesar's wife. But it did jump out at my sometimes cynical, suspicious mind that someone could think they see a fire and holler about that, where there's only smoke - or something like that. - Paul North.
Ulrich Not sure I stated the railroads made a mistake by trying to compete with truckers...although partnering with them (as with Expressway) might be the better way to go. I've found (from my own experience in business) that the line between partner and competitor isn't usually clear. I partner with my competitors on some projects just as the rails partner with one another in some areas while remaining very competitive in others. Look at CN and CP...they are certainly competitors..yet they partner with one another on track sharing where doing so reduces the cost for both. At one time CN and CP even shared joint ownership in a major international tunnel and in a railroad (Northern Alberta Railway)...Back in the 80s CN and CP also collaborated on a telecommunications venture...aptly named CNCP. In my scenario above the railroads and truckers collaborate on some business while remaining distinctly competitive in other areas. I sell loads to competitors on a daily basis...and when I have a surplus of equipment in a given area I will accept loads for transport on my own equipment from a competitor who may be short on equipment himself. So there again we're competitors but also partners.
I've found (from my own experience in business) that the line between partner and competitor isn't usually clear. I partner with my competitors on some projects just as the rails partner with one another in some areas while remaining very competitive in others. Look at CN and CP...they are certainly competitors..yet they partner with one another on track sharing where doing so reduces the cost for both. At one time CN and CP even shared joint ownership in a major international tunnel and in a railroad (Northern Alberta Railway)...Back in the 80s CN and CP also collaborated on a telecommunications venture...aptly named CNCP.
In my scenario above the railroads and truckers collaborate on some business while remaining distinctly competitive in other areas. I sell loads to competitors on a daily basis...and when I have a surplus of equipment in a given area I will accept loads for transport on my own equipment from a competitor who may be short on equipment himself. So there again we're competitors but also partners.
Certainly this is sensible enough - actually, really smart - from an economic and efficiency perspective, to avoid waste and under-utilized assets, etc.
But if there's a customer, regulator, or reporter looking to make trouble, be advised that there's at least a potential anti-trust vulnerability here: making deals with ostensible competitors over splitting a customer's business, and possibly the rates as well. Example: "You want to explain why the rate for that shipment which you let your competitor handle was $500, whereas your rate is usually $400", or "Why was your rate $500, but his rate is usually $400 ?"
I don't want to go down a sidetrack and get diverted here - it's been quite a while since I did any anti-trust work and I'm not providing legal advice here. Also, there are legitimate ways to handle that - such as by just renting/ leasing the equipment, without being involved in the rates or customer contacts - and maybe you're doing all that just fine and staying above-board and beyond suspicion, like Caesar's wife. But it did jump out at my sometimes cynical, suspicious mind that someone could think they see a fire and holler about that, where there's only smoke - or something like that.
- Paul North.
There's always possibility for trouble I guess..but the practice is so widespread that any crackdown would be like trying to cork Niagara Falls. In any event the current setup is driven by the shipper community. Prior to deregulation shippers were much more agreeable to working with a mulitude of service providers who serviced their various lanes...they had no choice really because regulations often narrowly defined lanes that a carrier could service and under what conditions. Today shippers want a few suppliers who can handle all of their transportation needs, and not even the largest asset based suppliers can provide all services on their own equipment. Thus, in keeping with customer demand, carriers have developed collaborative relationships to meet that demand. These relationships are often informal and shortlived..and arise to address needs as they occur.
But you're right..there is room for abuse...and abuse does happen...the current setup is by no means perfect.
henry6 Paul_D_North_Jr [ Give it up. For a fraction of that cost, we could improve the system with present technology and standards so much that there'd be no need for any of that, and have it running much sooner. - Paul North. Despite my jibe at looking outside the box for guage, etc. I often have asked if we have really explored and exploited what we have for both loading and speed? That's an excellent point, Paul.
Paul_D_North_Jr [ Give it up. For a fraction of that cost, we could improve the system with present technology and standards so much that there'd be no need for any of that, and have it running much sooner. - Paul North.
[
Give it up. For a fraction of that cost, we could improve the system with present technology and standards so much that there'd be no need for any of that, and have it running much sooner.
Despite my jibe at looking outside the box for guage, etc. I often have asked if we have really explored and exploited what we have for both loading and speed? That's an excellent point, Paul.
I think that essentially we have seen a subtantial amount of "re-gauging" in North America with the numerous projects to increase clearances for doublestacks and autoracks not to mention track improvements for the newer 286,000 lb. cars. In practical terms this is a larger loading gauge on much of the network. Compare modern freight equipment to what was common even in the 1970's and you will see my point...
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
beaulieu The Loading gauge of High-Speed 1, the Channel Tunnel link in Englund is call GB+. It is a slight enlargement of the UIC "B" gauge in portions of the envelope. France is a mixture of UIC "B" and UIC "B+", so the Channel Tunnel link isn't built with greater clearances than much of France. Germany is mostly built to the still larger UIC "C" gauge.
The Loading gauge of High-Speed 1, the Channel Tunnel link in Englund is call GB+. It is a slight enlargement of the UIC "B" gauge in portions of the envelope. France is a mixture of UIC "B" and UIC "B+", so the Channel Tunnel link isn't built with greater clearances than much of France. Germany is mostly built to the still larger UIC "C" gauge.
The channel Tunnel trains are 14' wide, that is somewhat more then a "slight enlargement" of the UIC B gauge. They are also very tall, but not quite the 20' of double stacks. The high voltage overhead wire is just bareley above the roof. And in Sweden they have big loading gauges too. Passenger trains there are over one foot wider then North American passenger trains are and can travel at 125 mph, with higher speeds planned in the future. My point is that standard gauge rail technolagy is not limited to the way things are done. A 20' tall freight car might have a similar center of gravity then a 14' wide car, depending on the designs.
TH&BThe channel Tunnel trains are 14' wide, that is somewhat more then a "slight enlargement" of the UIC B gauge. They are also very tall, but not quite the 20' of double stacks.
TH&Bbeaulieu The Loading gauge of High-Speed 1, the Channel Tunnel link in Englund is call GB+. It is a slight enlargement of the UIC "B" gauge in portions of the envelope. France is a mixture of UIC "B" and UIC "B+", so the Channel Tunnel link isn't built with greater clearances than much of France. Germany is mostly built to the still larger UIC "C" gauge. The channel Tunnel trains are 14' wide, that is somewhat more then a "slight enlargement" of the UIC B gauge. They are also very tall, but not quite the 20' of double stacks. The high voltage overhead wire is just bareley above the roof. And in Sweden they have big loading gauges too. Passenger trains there are over one foot wider then North American passenger trains are and can travel at 125 mph, with higher speeds planned in the future. My point is that standard gauge rail technolagy is not limited to the way things are done. A 20' tall freight car might have a similar center of gravity then a 14' wide car, depending on the designs.
You are referring to the Freight Shuttles used to ferry truck traffic through the tunnel, they cannot operate past Dollands Moor on the British Side. I thought that you were referring to the new line that runs from the Channel Tunnel through to St. Pancras Station, that is the line built to GB+ gauge. Clearances within the tunnel and for a very short distance on either side were built much larger so that the Freight Shuttles could carry full size trucks without resorting to the special low-floor, mini-wheeled wagons used for Rolling Highway services on the Continent, which are totally unsuited for the 140 kph (87 mph) required in the Tunnel so as not to use an encessive amount of track capacity.
Paul_D_North_Jr 1. For CN's InterModal people to now decide that this business is worth getting would be tantamount to them admitting that they either made a mistake, or have been 'asleep at the switch', in not going and getting it themselves already. Whoops ! What - admit an error in judgement ? From a corporate and bureaucratic standpoint, that can be 'shooting yourself in the foot' at best, and career-ending at worst. In any but the most enlightened corporate cultures, where's the incentive for doing that ? What would E. Hunter Harrison think of that ? Maybe a change in thinking will occur when the new guy takes over. - Paul North.
1. For CN's InterModal people to now decide that this business is worth getting would be tantamount to them admitting that they either made a mistake, or have been 'asleep at the switch', in not going and getting it themselves already. Whoops ! What - admit an error in judgement ? From a corporate and bureaucratic standpoint, that can be 'shooting yourself in the foot' at best, and career-ending at worst. In any but the most enlightened corporate cultures, where's the incentive for doing that ? What would E. Hunter Harrison think of that ? Maybe a change in thinking will occur when the new guy takes over.
I think there's more than a grain of truth in this.
I was on a conference call with a marketing director at another railroad trying to pitch a similar proposal on non-meat perishables. We pointed out that there were over 100 loads per day being generated proximate to that railroad and moving very long distances by truck, 2,000 miles +, to areas that could be served by his trains.
At that point I felt he became very defensive and began ratteling off information about their efforts to develop temperature controlled business and denying/questioning whether the subject traffic actually existed. It exists. It's been there for decades. It moved by rail at one time.
I've just stumbled across this fascinating and entertaining discussion. As someone who spent 15 years in the intermodal business with ATSF and CN, and collected quite a few burn scars trying to put together creative ideas to get trucks off the road, perhaps I can add a few relevent observations.
1. The discussion on costs (rail linehaul, drayage, etc.) here are pretty thorough and accurate, but one critical element hasn't been brought up: balance and repositioning. In my experience, this is the critical reason why high-volume opportunities outside of major metropolitan areas (such as the beef moves out of western KS cited here earlier) remain with truck. There may be lots of freight coming out of a concentrated rural area, but there's usually not a corresponding inbound flow that allows the railroad to get load/load efficiency. I could write a chapter of a book here on how truckers have much more opportunity and flexibility to pursue this sort of business without incurring a high empty repositioning cost. Suffice to say that they can triangulate and circulate; they can get a 750-mile headhaul load into Denver, then work a couple of 150 or even 75-mile loads going back out (say from the Denver regional DC to a local grocery store), and work their way close to the beef opportunity, running relatively few empty miles. They can also do this on any scale that works for them: 1 or drivers working the route, or 10-20. Intermodal just can't do this competitively. Better to go after that sort of business with a boxcar product that has such huge linehaul cost advantage it can absorb a high empty repositioning factor. But for some reason, boxcars just can't seem to move as quickly/reliably as intermodal. Is this cultural, or are there good operating reasons? Fodder for another thread.
2) CP Expressway: there's profit, and then there's contribution, i.e. are we better off with or without it? The poster who noted that CP jumped into Expressway with a "build-it-and-they-will-come" mindset was right on - and they did invest a lot of money, first in the Iron Highway product development, then in a network of dedicated terminals and a fancy computer reservation system that itself cost, IIRC, over $10M. With all that money sunk into something, it's always hard to walk away from it. A key factor I think is that CP's trackage in that part of the system is chronically underutilized. As competitors, we at CN simply concluded that CP had done the math and decided that they were better off with the revenue than without it, because it's not displacing other revenue opportunities and so many of the assets deployed (terminals, Expressway cars, computer reservation system) can't be redeployed to higher-margin business. As for the New York lane, it was part of CP's original plan and at one point they issued a release announcing that expansion to NYC would occur within a year. They were also talking about Chicago. The fact that they soon decided not to invest another cent in expansion says all you need to know about the true profitibility of the operation.
3) No mention of RailRunner? (no, not the New Mexico commuter trains). If you're not familiar with this, check it out at www.railrunner.com. The concept is to use carless technology to extend container service from the big doublestack hubs to lighter-density markets. (Think of the stack train as a 757 or Airbus and RailRunner as commuter prop plane). I've worked with them on opportunities in Canada; high equipment cost due to small production volumes was always the killer. That and Hunter quite rightly pointing out that you can pretty much do the same using good ol' circus TOFC with existing, fully depreciated flatcars. Again the rural balance thing also comes into play, but if RailRunner equipment was mass-produced and in wide use, the model would probably work (chicken/egg problem here).
4) Co-operation/competition between rail & truck. See ATSF/JB Hunt. For an earlier example in a slightly different vein, see ATSF/Fred Harvey.
5) "Control": One or two posters touched on this, and it's a fascinating and poorly-understood issue. Why do all the many thousands of banana containers landing on the Gulf Coast use highway to reach the big cities in the northeast US and eastern Canada rather than rail (IC was always vexed by this). As one poster pointed out, to whom do you make the "sell"? No one person or player controls this complex logistics web. Yes, the banana move northbound involves a few big, visible corporations, but check out how those containers get back south (almost always loaded). There's a business book on the market (can't think of the title right now) making the claim that highly decentralized, fragmented, organic structures (think of the internet) will beat highly centralized, single-point-of-control operations every time. Not sure I'd buy into that 100%, but speaking as a poor old intermodal marketing director tasked with getting everyone to, in effect, stop using the "web" and migrate to my single-source, closed technology solution, there's a lot of truth in it.
And thanks for those apt observatons and insights, too.
Funny, isn't it - for all the supposedly maturity and 'number-crunching' rationality of this market and the 'players' in it, how random, chaotic, and ad hoc certain aspects of it turn out to be ?
- PDN.
CNSF I've just stumbled across this fascinating and entertaining discussion. As someone who spent 15 years in the intermodal business with ATSF and CN, and collected quite a few burn scars trying to put together creative ideas to get trucks off the road, perhaps I can add a few relevent observations. 1. The discussion on costs (rail linehaul, drayage, etc.) here are pretty thorough and accurate, but one critical element hasn't been brought up: balance and repositioning. In my experience, this is the critical reason why high-volume opportunities outside of major metropolitan areas (such as the beef moves out of western KS cited here earlier) remain with truck. There may be lots of freight coming out of a concentrated rural area, but there's usually not a corresponding inbound flow that allows the railroad to get load/load efficiency. I could write a chapter of a book here on how truckers have much more opportunity and flexibility to pursue this sort of business without incurring a high empty repositioning cost. Suffice to say that they can triangulate and circulate; they can get a 750-mile headhaul load into Denver, then work a couple of 150 or even 75-mile loads going back out (say from the Denver regional DC to a local grocery store), and work their way close to the beef opportunity, running relatively few empty miles. They can also do this on any scale that works for them: 1 or drivers working the route, or 10-20. Intermodal just can't do this competitively. Better to go after that sort of business with a boxcar product that has such huge linehaul cost advantage it can absorb a high empty repositioning factor. But for some reason, boxcars just can't seem to move as quickly/reliably as intermodal. Is this cultural, or are there good operating reasons? Fodder for another thread. 2) CP Expressway: there's profit, and then there's contribution, i.e. are we better off with or without it? The poster who noted that CP jumped into Expressway with a "build-it-and-they-will-come" mindset was right on - and they did invest a lot of money, first in the Iron Highway product development, then in a network of dedicated terminals and a fancy computer reservation system that itself cost, IIRC, over $10M. With all that money sunk into something, it's always hard to walk away from it. A key factor I think is that CP's trackage in that part of the system is chronically underutilized. As competitors, we at CN simply concluded that CP had done the math and decided that they were better off with the revenue than without it, because it's not displacing other revenue opportunities and so many of the assets deployed (terminals, Expressway cars, computer reservation system) can't be redeployed to higher-margin business. As for the New York lane, it was part of CP's original plan and at one point they issued a release announcing that expansion to NYC would occur within a year. They were also talking about Chicago. The fact that they soon decided not to invest another cent in expansion says all you need to know about the true profitibility of the operation. 3) No mention of RailRunner? (no, not the New Mexico commuter trains). If you're not familiar with this, check it out at www.railrunner.com. The concept is to use carless technology to extend container service from the big doublestack hubs to lighter-density markets. (Think of the stack train as a 757 or Airbus and RailRunner as commuter prop plane). I've worked with them on opportunities in Canada; high equipment cost due to small production volumes was always the killer. That and Hunter quite rightly pointing out that you can pretty much do the same using good ol' circus TOFC with existing, fully depreciated flatcars. Again the rural balance thing also comes into play, but if RailRunner equipment was mass-produced and in wide use, the model would probably work (chicken/egg problem here). 4) Co-operation/competition between rail & truck. See ATSF/JB Hunt. For an earlier example in a slightly different vein, see ATSF/Fred Harvey. 5) "Control": One or two posters touched on this, and it's a fascinating and poorly-understood issue. Why do all the many thousands of banana containers landing on the Gulf Coast use highway to reach the big cities in the northeast US and eastern Canada rather than rail (IC was always vexed by this). As one poster pointed out, to whom do you make the "sell"? No one person or player controls this complex logistics web. Yes, the banana move northbound involves a few big, visible corporations, but check out how those containers get back south (almost always loaded). There's a business book on the market (can't think of the title right now) making the claim that highly decentralized, fragmented, organic structures (think of the internet) will beat highly centralized, single-point-of-control operations every time. Not sure I'd buy into that 100%, but speaking as a poor old intermodal marketing director tasked with getting everyone to, in effect, stop using the "web" and migrate to my single-source, closed technology solution, there's a lot of truth in it.
Welcome CNSF. You certainly know what you are talking about. Especially the part about the decentralized operations beating the centralized operations. Pointing out the need for backhauls was the mark of someone who knows of what they speak.
But I'm going to differ with your informed opinion that intermodal can not compete for movements such as the beef out of SW Kansas. (and Bananas) (and especially RailRunner)
Let's go with SW Kansas first. This area produces 400 beef loads per work day. The truckers can't work 400 truckloads of short haul freight into SW Kansas per workday. The freight isn't there to do that. They might work some in there on very short hauls out of Denver, but most of those trucks come into SW Kansas empty. Truckers have empty, non revenue miles too. Minimizing the difference between rail non revenue miles and trucker non revenue miles is, as you correctly point out, a key to intermodal competitiveness. There is not a requirement to equal the non revenue miles of a trucker. Rail miles are cheaper than truck miles, so we can "spend a few" and still come out ahead. And, they're going to "make their drivers unhappy" if they stick 'em with a series of short hauls. I know, they pay more per mile for a shorter haul. But still, a driver is paid by the mile, even the empty miles, and he/she wants to be putting miles on the truck and making money, not waiting to be unloaded. Retention of good drivers is a continual problem for trucking companies. The companies don't want to be "making the drivers unhappy." They'll leave.
If I were to propose and "Ideal" solution to this I'd start with the fact that Denver is a freight market that is imbalanced inbound. More freight comes in than goes out. Aside from the Coors Beer, beef from Cargill at Ft. Morgan and JBS Swift at Greeley, and the best lamb in the world, Colorado doesn't really produce very much. (I know, there's coal, but that won't move intermodal.)
But there are five million people in Colorado and they consume, even in this economy. To serve these five million people there is exactly one dedicated intermodal train per day on one lane. (The UP does have intermodal service at Denver. It's not important)
What I'd do, if'n I was a BNSF honcho, would be to take a good long look at routing the Chicago-Denver intermodal through Pueblo via the old Santa Fe route instead of the old BN route. You'd add about 250 train miles per day, and it would be contingent on the Joint Line being able to handle the traffic. But if you could do it you could serve that SW Kansas market with minimal extra expense AND solve your empty miles problem. Loads into Denver, empties a few miles to Garden City/Dodge City, loads out of Garden City/Dodge City going back east. Every eastbound truck you displaced out of Garden City/Dodge Cty would be another load for the railroad into Denver. Cold Coors and grilled lamb.
The Chicago-Denver IM schedule isn't exactly a barn burner anyway. 32 Hours westbound and 40 eastbound. Your could do as well through Pueblo. If the Joint Line can take the traffic.
Food production is a huge, long haul transportation market. It's dominated by trucks. The production areas are not where consumers are. So controlling empty miles, which is critical, is necessary for the railroads to succede in this multi-billion dollar market. Railroads can do the necessary triangulation. It's true, they can not get their non-revenue mile percentage as low as the truckers can. But it's equally true that they don't have to. They do have to get the empty miles as low as possible. With some work and thinking they can take a good share of the market. They can't have it all by any means, but they can increase their market share and do it profitably. There is no good reason to just "give up" and say intermodal can not compete. It's our task to make it competitive, nor just shrug our shoulders.
As to RailRunner, I had a bad experience with them. I pitiched the meat out of Iowa to the Northeast to them and wound up on a conference call with their President. It quickly became evident to me that the guy's goal was to sell his equipment, not set up an efficient transportation system. He wanted a meat unit train from Iowa to the Northeast. (No, that won't work.) I wanted to use RailRunner as a feeder system into the existing IM network at Chicago. He was trying to tell me how to run a low volume IM terminal at Denison, IA. When I was at the ICG we had a low volume IM terminal at Denison. It worked fine. We argued about how to interchange the loads in Chicago. I wasn't going to fight them too.
As to bananas, I got Chiquitas on the rail from Gulfport to Chicago. (Over the New Orleans Ramp.) We found that UPS and LTL filled up a southbound banana box just fine. And after we did that, we didn't have to drag a non-revenue empty out of New Orleans.
CNSF [snip] 1. The discussion on costs (rail linehaul, drayage, etc.) here are pretty thorough and accurate, but one critical element hasn't been brought up: balance and repositioning. In my experience, this is the critical reason why high-volume opportunities outside of major metropolitan areas (such as the beef moves out of western KS cited here earlier) remain with truck. There may be lots of freight coming out of a concentrated rural area, but there's usually not a corresponding inbound flow that allows the railroad to get load/load efficiency. I could write a chapter of a book here on how truckers have much more opportunity and flexibility to pursue this sort of business without incurring a high empty repositioning cost. Suffice to say that they can triangulate and circulate; they can get a 750-mile headhaul load into Denver, then work a couple of 150 or even 75-mile loads going back out (say from the Denver regional DC to a local grocery store), and work their way close to the beef opportunity, running relatively few empty miles. They can also do this on any scale that works for them: 1 or drivers working the route, or 10-20. Intermodal just can't do this competitively. Better to go after that sort of business with a boxcar product that has such huge linehaul cost advantage it can absorb a high empty repositioning factor. But for some reason, boxcars just can't seem to move as quickly/reliably as intermodal. Is this cultural, or are there good operating reasons? Fodder for another thread.
OK, but if the rail intermodal operation is not marketed directly to shippers - but instead is a partner or sub-contractor to the truckers - then the railroad is somewhat insulated from this dilemma, which then remains more of the trucker's marketing problem than the railroad's. Any fraction of the available traffic that looks like the long-haul return move - maybe even the empties, at a low-priority, discount rate - will probably gravitate to the rail haul. Of course, if the territory is utterly barren of long-haul return traffic, any percentage of zero is still zero, and so there won't be that volume for the rail move, as you clearly illustrate.
CNSF 2) CP Expressway: there's profit, and then there's contribution, i.e. are we better off with or without it? The poster who noted that CP jumped into Expressway with a "build-it-and-they-will-come" mindset was right on - and they did invest a lot of money, first in the Iron Highway product development, then in a network of dedicated terminals and a fancy computer reservation system that itself cost, IIRC, over $10M. With all that money sunk into something, it's always hard to walk away from it. A key factor I think is that CP's trackage in that part of the system is chronically underutilized. As competitors, we at CN simply concluded that CP had done the math and decided that they were better off with the revenue than without it, because it's not displacing other revenue opportunities and so many of the assets deployed (terminals, Expressway cars, computer reservation system) can't be redeployed to higher-margin business. As for the New York lane, it was part of CP's original plan and at one point they issued a release announcing that expansion to NYC would occur within a year. They were also talking about Chicago. The fact that they soon decided not to invest another cent in expansion says all you need to know about the true profitibility of the operation.
Well, as Henry Ford famously observed, ''Pioneering don't pay''.
I can see CP making the development investment in the equipment - I believe they essentially wrote-off the 1st generation CSX-NYAB designed 'Iron Highway' trainsets, but then used the information gained from that experience to refine and build the current 310 or so platforms in the late 1990s or early 2000s. (For context, at $50K [guess] per platform , that's about $15.5 million - not a huge sum.)
But to then drop another 10 megabucks on the computer system ? Why not just buy or license something off-the-shelf and adapt it - like a small airline's seat reservation program ? Is that a symptom of ego or the 'not-invented here' syndrome trumping common business sense ?
And yes - 'What they do - or don't - speaks louder than what they say'.
[snips]
CNSF 5) "Control": [snip] There's a business book on the market (can't think of the title right now) making the claim that highly decentralized, fragmented, organic structures (think of the internet) will beat highly centralized, single-point-of-control operations every time. Not sure I'd buy into that 100%, but speaking as a poor old intermodal marketing director tasked with getting everyone to, in effect, stop using the "web" and migrate to my single-source, closed technology solution, there's a lot of truth in it. [emphasis added - PDN]
- Does this 'inform' us at all regarding the wisdom of the Class I railroads centralizing their dispatching and operations centers ?
- Any more info or recollections on the title or author(s) of that book ?
Thanks again for your contributions to this discussion.
Greyhounds, if I were still a BNSF honcho, I'd be talking to you! Well done!
...but I wonder what happened to those banana loads. They weren't there anymore when CN bought IC.
CNSF ...but I wonder what happened to those banana loads. They weren't there anymore when CN bought IC.
I don't know what happened to the Chiquitas after I left. I ran into Dick Boteroff some years after I had resigned. Dick was Director of Intermodal Marketing and Sales. He knew I had been very interested in this business and mentiioned that they were handling bananas. So the giant herbs (they're not a fruit, they're a "Giant Herb") moved by rail intermodal years after I left.
If I had to guess, I'd guess that you put your finger on the reason bananas left the railroad (again) in an earlier post. It's hard to get all the seperate departments in a railroad bureaucracy pulling in the same direction. Each little fiefdom has its own seperate goals and if they suboptimize the results for the firm they don't realize it. (Or care about it.)
Our freight claims people were particularly bad. They fought developing the banana business tooth and nail. (I'd even say they did their level best to drive it off after we got it.) The fact is that when a railroad accepts a load of freight for movement it assumes a risk of buying the load. If a car of furniture is wrecked, the railroad is going to pay for the furniture. The railroad effectively acts as an insurance carrier as well as a freight carrier.
If you hold yourself out to additionally protect the temperature of the load you increase your risk. There's nothing wrong with that, as long as you get paid for it. (It cost more to insure a home in Florida than it does in Wisconsin because there's more risk in Florida. A Floirda homeowner can buy insuance, but he's going to pay more for it because the carrier is assuming a greater risk.) The freight claims people didn't have this risk/reward mind set. They only looked at the risk. Getting the bananas on the railroad increased the risk of a damaged freight payment, and consequently the amount they were going to pay out. So they fought it. The reward side, the extra money, didn't enter into their thought process.
If I had to guess, I'd guess the freight claims folks finally aliented the customer enough so that he took his freight elsewhere. Them or the operating department that hated any freight that had to be somewhere on time.
Now here's "What Might Have Been" with the Chiquitas. After we had demonstrated an ability to deliver the product in good condition and in a timely manner that saved them some dollars, Chiquita came to us with a proposal. That's when market development has really been successful. When you've got the customers comming to you trying to give you freight. You're not chasing them, they're comming to you. That's success.
Chiquita wanted to establish a distribution center in Chicago. They then had two ships a week into Gulfport. They wanted to give us 40 containers off each ship to move to a storage facility in Chicago. They could then sell out of that facility instead of out of the port. (The bananas would have been stored in the containers.) This would give them an advantage. Any grocery chain in Chicago, Milwuakee, the Twin Cities, Detroit, etc. could get a Chiquita delivery within hours, not days.
We obviously had to cost it out. We couldn't load 80 reefer containes a week southbound and we told them that. They'd have to pay for the round trip. The concept was to run two 20 car trains round trip per week between Gulfport and Jackson, MS. At Jackson the cars would be added to existing IM trains and taken off the existing trains.. It would have added around 640 train miles per week.
We needed to gather information for the costing process. We asked the operating department how many locomotives it would take to move these 80 loads. Care to guess what the answer was? They said they'd need to assign six locomotives and they didn't have six to spare so they couldn't handle the business. (They had 1,100 locomotives so they couldn't "spare" 1/2 of one percent for new business.)
The requirement of six locomotives was just silly. They were going to change the locomotives at Memphis. When I asked why they couldn't run through the answer I received was "Things just don't work that way". To this day I believe they just simply sabotaged the project because it would have been time sensative freight and they wanted to run the railroad on a Ad Hoc basis.
Mr. Harrison's scheduled railroad must have caused a lot of retirements.
CO and KS are indeed imbalanced with alot more freight (at least general freight) in than out. My own way of dealing with that is simple: I price my services HIGH going in to compensate for the likelihood of having to come out empty. Thus my rates going in are high...and one side benefit of that is that I know exactly WHY those customers use me for those loads...and it ain't because I'm the cheapest! And I price it HIGH on the outbound too...the market be damned. The way I see it..someone has to have highest price with big juicy margins...and that someone may as well be me.
Sounds familiar enough:
''Geez, Kneiling, you're gonna schedule this thing right down to the day, aren't ya ?''
Thanks for sharing, greyhounds - these are all interesting 'war stories', and they ring true and illustrate the challenges better than a 'textbook' approach or any other method. We hope that 'it's a different world' now, and maybe it is in a lot of places and ways, but it seems there's still a lot of work to be done.
I also really liked your analysis of the risk/ reward of the claims exposure, pricing it, etc. - all very well said, on those 'giant herbs' !
Request for minor clarificationin the following quote: ''We couldn't load 80 reefer containes a week southbound and we told them that. They'd have to pay for the round trip. The concept was to run two 20 car trains round trip per week between Gulfport and Jackson, MS.''
Two 20 car trains round trip per week = 40 cars per week, not 80 - are am I misunderstanding something here ?
Thanks again.
Paul_D_North_Jr Two 20 car trains round trip per week = 40 cars per week, not 80 - are am I misunderstanding something here ? Thanks again. - Paul North.
Two containers per car.
Duhhhh . . . . . . but that's why I asked. OK, thanks for clarifying.
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