I have 2 questions about the routing of a shipment.
1. If a shipper buys from a seller, is the car routed by the most direct route (i.e. least number of railroads to interchange with) or is it by the most convient route at the time of shipment?
2. If the route is by the most direct route, is this a permenent routing for all shipments between the shipper and the seller?
Thanks In Advance
Ira
[Headline has been changed. The Editors]
You might want to check your spelling. Meow!
Thanks to Chris / CopCarSS for my avatar.
Murphy Siding You might want to check your spelling. Meow!
Johnny
It's my understanding that the shipper may choose a particular routing.
Otherwise it's probably the most direct, efficient route (not necessarily the same as shortest).
Chris van der Heide
My Algoma Central Railway Modeling Blog
Ira,
Today there are relatively few route and rate combinations available.
First if the trafic is local, that is all on one Class and (and affiliated short line) the route is CLASS I.
If involves two carriers, say BNSF and CSXT there are more or less natural routes, some either way, and some forced.
A "natural" route would be Pacific Northwest to a consignee on CSX in Buffalo NY. The obvious route is over Chicago BNSF - CHI - CSX.
Somewhere in CSXT there is a line on their system map that CSX prefers to get cars north of at Chicaqgo, and south of at Memphis. CSX may or may not enforce that preference by demanding $X via Chicago and $X plus or $X minus over Memphis. If BNSF wants same $ either way, then CSX revenue requirement will steer the traffic one way or another.
Another case is that the rates are the same on two or more reasonable routes. Here the owner of the goods, which could be the shipper if product sold FOB destination, or the consingee/buyer if sold FOB origin, will usually prefer the "best service" route, that is the least time/most reliable.
Now just to confuse the issue go back to that customer in Buffalo served by CSX and assume he is open to reciprocal switching. The idea of reciprocal switching is that CSX will spot NS cars to CSX customers and NS will spot CSX cars to NS customers within a defined switching district or terminal. Each line haul carrier will charge the other for the switching service, say $250 per car. If NS wants to compete for the traffic to that CSX customer, NS will absorb, or pay for the reciprocal switch. NS may choose its option.
NS is at a disadvantage here since if car comes over Chicago, NS must match CSX portion of the rate AND absorb the switch charge. In addition it will take at least 24 hours longer to get the car spotted because it has to go thru NS yard, and a transfer that a car arriving on CSX does not have to. In this case car will probably move CSX from Chicago due to some combination of better service via CSX direct, and reletively less interest by NS due to cost of switch charge. This decision will be made by the consignee who will tell the shipper how to route the car. If car originates on NS, then NS will obviously pay the switch charge.
As to permanence, again depends on the situation, but most traffic will move on the same route between any given shipper/consignee pair until somebody decides they need to change something, which will not happen often.
This is post Staggers situation. In the regulated days there were far more carriers, and far more routing options. Some were very slow and roundabout. That is a whole nother kettle of fish. One thing the carriers did post staggers was to close many of those turkey trail routes.
Mac
Deggesty Murphy Siding You might want to check your spelling. Meow! Yes, to rout cats, simply shout "Scat!" Each will then choose its own route.
Yes, to rout cats, simply shout "Scat!" Each will then choose its own route.
Routing cats = herding cats = whatever loose car routing plan in in effect at the time until somebody comes up with a new
Speaking of a kettle of fish...
Back in the '60's, a distant cousin who had retired from the RR made a little extra money by checking shipping charges. As I recall, he said the railroads were required by regulations to charge the cost of the least expensive route, no matter what the actual route was. Apparently, the shippers considered it worthwhile to employ him.
_____________
"A stranger's just a friend you ain't met yet." --- Dave Gardner
mudchicken Deggesty Murphy Siding You might want to check your spelling. Meow! Yes, to rout cats, simply shout "Scat!" Each will then choose its own route. Naw, they will just sit there and hiss at'cha.... Routing cats = herding cats = whatever loose car routing plan in in effect at the time until somebody comes up with a new
Naw, they will just sit there and hiss at'cha....
Paul of Covington Speaking of a kettle of fish... Back in the '60's, a distant cousin who had retired from the RR made a little extra money by checking shipping charges. As I recall, he said the railroads were required by regulations to charge the cost of the least expensive route, no matter what the actual route was. Apparently, the shippers considered it worthwhile to employ him.
Its been my experience that cats will just sit there and give you a bad look.......
My cat is tax deductible.
Ulrich My cat is tax deductible.
Yep. We have two hangar cats at the shop to keep the mouse population down. Those little critters can wreak havoc on airplanes. They chew on wiring and their excrement is corrossive to aluminum.
Norm
We discussed a similar topic here a while back, but I don't recall the context of the thread, so a search would be nearly impossible.
Back in the day, shippers could request routing as mentioned, and sometimes the railroads got together so as to compete with other lines. A shipment that could go via one line - NYC - from Chicago to Boston (B&A was NYC by another name) could instead travel an "alphabet route" that might include IC, NKP, Erie, and New Haven. And maybe more...
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...
Yes, the "Alphabet Route" routing looked like a nightmare to many who were unfamiliar with the cooperation that went into its performance. However, the Nickel Plate, Wheeling & Lake Erie, Pittsburgh & West Virginia, Western Maryland, Reading, Jersey Central, Lehigh and Hudson, and New Haven worked together to keep the trains moving.
ndbprrI was under the impression that a railroad tried to keep a car on line as long as possible. So a car from say city a to city b that could be handed off 10 miles from a or ten miles from b. With a thousand in between would be handed off at b to gain the lions share of the shipping $.
You are correct. Everybody wants the long haul because that generates the most revenue. That is why today the lowest rate may apply only by a particular route.
The other side of this is the division of the revenue that each carrier gets. The division is set by agreement, which may be very broad, such as to or from WA, OR & CA to New York state via Chicago or St Louis, or Memphis, or very narrow such as Yak Fat from Omaha NE to Binghampton NY via a specific route. Divisions are NOT generally on a mileage prorate basis.
In regulated days most rates applied by many routes. Today most rates are via one or a few routes.
If you put the new kettle of fish in a strategic place, it might be easier to route the cats.
Carl
Railroader Emeritus (practiced railroading for 46 years--and in 2010 I finally got it right!)
CAACSCOCOM--I don't want to behave improperly, so I just won't behave at all. (SM)
I routing cats similar to herding cats?
Never too old to have a happy childhood!
- Paul North.
BaltACD Is routing cats similar to herding cats?
Is routing cats similar to herding cats?
Semper Vaporo
Pkgs.
caldreamer I have 2 questions about the routing of a shipment. 1. If a shipper buys from a seller, is the car routed by the most direct route (i.e. least number of railroads to interchange with) or is it by the most convient route at the time of shipment? 2. If the route is by the most direct route, is this a permenent routing for all shipments between the shipper and the seller? Thanks In Advance Ira
Ira, typically the Shipper IS the seller, the Seller ships to the CUSTOMER.
Doug
May your flanges always stay BETWEEN the rails
unless they are a funicular car, the one with the flanges outside the rails.
daveklepper unless they are a funicular car, the one with the flanges outside the rails.
Deggesty daveklepper unless they are a funicular car, the one with the flanges outside the rails. A misdirected post? Should be in Transit, to the cable car thread?
A misdirected post? Should be in Transit, to the cable car thread?
She who has no signature! cinscocom-tmw
Our dog certainly makes every effort to route our two cats, particularly the larger kitty who tries to sneak up and eat her dog food.
The smaller, feistier cat will scratch if she feels threatened enough so the dog usually lets her find her own route;I guess she counts as a "hazardous commodity" in the dogs estimation...
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
Mac:Thanks for your insite on this. I am a former "traffic man" although it was in LTL trucking and not railroads. Part of my responsibilities was interline agreements with other trucking companies. The company I worked for was a very small, local company which covered about 1/2 of the state of Indiana plus Chicago Metropolitan area.
Interline agreements were established based on concurrence (agreement) of revenue splits. We used an old "factor" book which was based on railroad "rate basis"...which were first class railroad rates from years ago. These worked out pretty well for the shorthaul carrier.
I moved on to another career 25 years ago, but always have been curious about railroads revenue splits and agreements. Today, I consider myself more of an economic railfan more than anything else. The economics and business environment of the industry is intriguing.
Thus, while watching trains, my interest is more with the cars and lading rather than the locomotives...a 180 degree switch over 40 years. Today I see these trains which often run thru Chicago directly from say...CN to NS (which interchanges considerable traffic).
So, a few more questions...are most of these rates single line rates with revenue split or are these movements combination of rates...say a CN rate from Western Canada to Chicago and NS rate from Chicago to destination? If these are single rates, then are these specific commodity or contract rates or does the freight move more typically on tariff rates?
So, if these are specific point to point rates, then does each specific movement have specific split of revenue based on per carload for each carrier instead of the percentage based on mileage?
Is special revenue consideration given to blocking the cars? Let's say NS has a westbound from Elkhart to CN. Will their agreement on a train be based on specific blocking of that train (in other words block the train for specific destinations on the CN) or are the cars floated? If there is specific blocking, would NS receive a higher per car agreement?
I hope this isnt too disjointed of questions.
Thanks,
Ed
Ed,
Thank you for the background, it helps frame the response. I too am very interested in the economic aspects of railroading and transportation. My backround is barely able to answer your questions. I retired from the railroad industry with better than 30 years service and part of that was as VP Marketing for a shortline in Washington State that was a BN spinoff, so some of this answer is from reading, some from experience.
Your first question is about interline vs. combination rates. From your own experience you know that the historical standard is interline rates. That is still the usual case in the railroad industry, even where the rate is a combination of revenue requirements, it will be published as an interline, or through, rate.
I think your trucking experience has caused a bit of confusion over class vs. commodity rates. The class rates you encountered had about 140 years of development by the time you saw them. Shortly after the railroads started to haul freight they could see that making rates by item would get unwieldly very quickly so they invented the notion of classification. Classification grouped a universe of things into five or six classes. Class 100 became the "basic" rate level, with others above and below ie 70 and 200, for example. Rates were then published for class 100 between all origin-destination pairs. Rates for items is classes other than 100 were on a ratio basis to 100, that is class 70 took a rate 70% of class 100, while class 200 paid double.
Commodity rates skipped the classification step and were based on the commodity and specific origin destination pairs. Commodity rates were/are always cheaper than class rates. As more origin/destination pairs were added, there was a tendency to group origins and/or distinations for convenience in administering the system.
Today in the railroad industry virtually all rates are commodity rates. LCL trucking, to the best of my knowledge still uses the class rate structure because they handle virtually everything. I suspect the railroads still publish class rates but only as a stop-gap and a starting point for negotiation.
The other item you need to know about is "rate authority" that is, where does the rate come from. How does the carrier know what rate to charge and how does the customer know what his rate will be? In the class rate case the authority is a combination of the Classification Tariff, and the Class Rate Tariff. The Classification tariff tells both parties what the class of the item is. The rate tarrif publishes the class 100 rate between the origin and destination points.
There are three sources of rate authority in modern railroading; tariff, contract, and letter quote.
Tariffs are a public price list available to all. The only committment by the railroad is that this is the rate and the customer makes no committment as to absolute or percentage of relevant traffic. It is a list price, take it or leave it arrangement. The rate level is entirely at the carrier's discretion, subject to a notification period for changes. It is easy to administer. It applies equally to all customers. Most grain moves on tariff rates. (lets not confuse ourselves with BNSF's Certificate of Transportation which allows rates to move up or down due to demand. UP has a similar program)
An other rate authority is a contract. Here both the carrier and the shipper agree not only on the rate but upon a whole host of factors. The railroad may agree to provide or assign specific equipment, may agree to specific performance items. The shipper generally agrees to commit specific traffic, either in absolute or percentage basis. There are generally penalties for non-performance by either party. Contracts represent a significant effort by both parties and can take considerable time to develop. If the contract covers an interline move, the carriers will agree among themselves what the revenue division will be.
The final rate authority is a Letter Quote. This is simply a letter from the carrier to the customer that establishes a rate for something from here to there. Issuing a letter quote can be very quick. I used them for a couple of local moves in my shortline days.
Now for the activities behind the curtain, revenue divisions. As you know if two or more carriers touch a bit of traffic all of them want to be paid. This is the aspect I know least about and it is private as between the carriers involved. Again there are two lines of inquiry, theory and practice.
The first theory is mileage prorate. It is simple to figure but disadvantages the origin and/or destination carrier who has few miles. By the 1880's it was clear that there was a bucket of costs around originating a shipment, anorher for terminating a shipment, and another for line haul. The logic is the same for carload and less than carload, but lets use LCL which usually moved on class rates as does modern LTL. The originating carrier must recieve the shipment, inspect the shipment, sign the bill of lading, create a freight bill, and load the package in a car. For costing purposes these may be considered fixed costs that have nothing to do with mileage. The receiving carrier has to unload the package from the car, hold it, notify the customer, and dig it out of the freight house to present it. Lets assume the shipment was collect, the destination carrier must collect the entire freight, and remit all other carriers their division of the revenue. Again these are fixed costs not related to mileage. The costs of the line haul are more or less uniform on a per mile basis, they are variable costs for purposes of this analysis. That is why freight rates are always taper on a mileage basis as the longer haul has more miles to absorb the terminal costs.
The practical solution was a series of agreements providing for the division of the revenue that recognized the terminal costs on each end. Most rail traffic moves on a "through bill of lading" where the customer issuses one bill of lading and sees one freight bill per shipment. The railroads divide the revenue based on their private agreement. That is what you described in a LCL truck context.
Rates can also be constructed on a combination basis. Railroad A has some new potential traffic it wants to offer railroad B at a specific junction. A calls B, describes the traffic and says "What is your revenue requirement?" Sooner or later B says $X. Usually the origin railroad will quote the customer a through rate by contract or letter quote, and the railroads split the revenue as agreed, that is B gets $x, A gets the remainder which must be at least his revenue requirement.
The customer will see a combination rate most often in a "Rule 11" situation. This most often comes up in the short line world where the class I does not trust the short line. If the shortline participates in interline settlement then it collects all of the revenue for prepaid shipments that it originates and for collect shipments that terminate on its line. It is obligated to pay all other carriers in such moves from the revenue it collects from its customers. Even for a low traffic shortline these balances can grow into the millions of dollars. When the Seattle and North Coast in the State of Washington went bankrupt it stiffed the Class I carriers for a few million dollars.
Most modern shortlines are treated as switch carriers or Rule 11 by their class I connections. The switch carriers are paid x$ per car by the class I. The class I publishes a joint through rate, does all the billing and pays the shortline. This is a very convenient arrangement for all concerned. If the class I wants to distance itself from the short line it refuses to publish joint rates which creates a Rule 11 situation. Under Rule 11 the shortline makes and communicates its rate to the junction, and the class I makes and communicates its rate from the junction to destination. Customers must now issue two bills of lading, and pay two freight bills, one to the shortline and one to the class I. Fortunately these situations are relatively rare.
As to preblocking affecting rate divisions, I do not know. I very strongly suspect it does not for two reasons.
First the division system is complicated enough as it is. Do the carriers really want to adjust divisions by a tiny amount on a car by car basis? Another reason is that to the best of my knowledge these deals are reciprocal, that is I will preblock for you here if you preblock for me there. The final reason is that preblocking is only done when it reduces operating cost. I think the carriers' thought is to capture the cost reduction without employing an army of programers and accountants to squable over the modest spoils.
Ed, I hope I answered your questions without too much confustion. If something is unclear I will be happy to try again.
Mac, do letter quotation and contract have the same force legally? I never worked with shipments by rail (my plant was somewhat removed from the nearest track), but, even though I was not in our traffic department, I was somewhat familiar with the regulations--and I understood that if a carrier gave you a reduced rate without a contract the carrier, and perhaps you also, was in trouble legally.
Most of my outgoing shipments were intraline, but a few were interline, to the east coast--and I needed to write only one bill of lading for the originating carrier had an agreement with the receiving carrier. After Fed X Freight came into being, all of my shipments were intraline. What I needed to be careful about was the description of what I was shipping, for I was shipping empty hazmat containers (though the gas cylinders were not really empty). From time to time, I shipped non-hazmat (vacuum pumps going out for repair), and then I made certain that I had the right classification on the bill.
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