Senior Management of the Railroad-Do they know the business?

[Junctionfan]

This is slightly off topic but not too bad but I have always wanted to know if the railroads have ever tried to do sales for example buy 1 get one free or move a certain tonnage and recieve the next car load for 35% cheaper or something like that?

Would the CEO attempt to try this or would the board seriously frown on him for that kind of practices?

[Anonymous]

QUOTE: Originally posted by Junctionfan

This is slightly off topic but not too bad but I have always wanted to know if the railroads have ever tried to do sales for example buy 1 get one free or move a certain tonnage and recieve the next car load for 35% cheaper or something like that?

Would the CEO attempt to try this or would the board seriously frown on him for that kind of practices?

It has been done. Often it results in unforeseen problems resulting in another unforeseen problem. The firing of the marketing guy who had the idea.

LC

[Junctionfan]

Really?

Interesting; I didn't think that it would cause any problems as it usually works well with large furniture store chains and other retail giants. I know retail is quite different than a railroad but last summer I took my younger cousin on the VIA to Belleville and they had a neat bargain where he was free between June and September.

[mudchicken]

In the US, you run afoul of the Elkins Act and other similar legislation which often wipes out the incentive. Deregulation helps, but you still have market pressures and some irrational shippers at play.

Human foibles and luck need to be added to LC, UP829, Mark & Randy's excellent responses. Bad managers tend to last not for very long, but those from the "Ming The Merciless" school of business annoy me to no end.

[greyhounds]

The only thing that I'd like to add is that it is important to understand that no individual, organization, institution or system can be perfect. People are managing under conditions of uncertainty.

As George Will said in his baseball book "Men At Work", you can do everthing right, every time, and still loose 40% of the games.

Railroad management doesn't have perfect information and they don't have unlimited resources. They manage the railroad they have, not the railroad they want to have or wi***hey had. (Somebody just said that about something else.)

There are people in our society who find fulfilment in their lives by jumping on the "losses", mitakes, miscalculations, shortcommings, etc. of others. And the meida just loves the stories these people peddle. They don't care about the won-loss record. They care about exploiting the mistakes, the failures, the lapses that caused the specific loss. Well, those things are inevitable, you can try to minimize them but as long as humans are in charge, they're going to happen.

CN's a good railroad, an excellent railroad. But it's not perfect. It can't be perfect. Don't focus on the losses, put things in context. Look at the overall picture.

[Junctionfan]

I suppose that's true if I'm investor but wonder what customer satisfaction is like. That is my biggest concern. I would hate to loose customers because the customers needs were not being satisfied.

[bobwilcox]

QUOTE: Originally posted by Limitedclear

QUOTE: Originally posted by Junctionfan

This is slightly off topic but not too bad but I have always wanted to know if the railroads have ever tried to do sales for example buy 1 get one free or move a certain tonnage and recieve the next car load for 35% cheaper or something like that?

Would the CEO attempt to try this or would the board seriously frown on him for that kind of practices?

It has been done. Often it results in unforeseen problems resulting in another unforeseen problem. The firing of the marketing guy who had the idea.

LC

My wife, Charlotte, was the product manager for fertilizer at the UP when Staggers was passed. She did a 1 cent deal where for one time you could ship a car of fertilzer at the regular rate and pay a penny on the second car. The fertilizer shippers brought up in the ICC enviroment went nuts! Charlotte also got a better than usual option package that year.

It also got a lot of attention and let customers know new things were possible with the death of rate regulation under the ICC.

[Junctionfan]

I always though that it would great for intermodal particularly in the double stacking category. Pay for one domestic container, 30% off the other. Both containers only take up one well unit.

[jeaton]

bobwilcox

FOFLMAO. Good for her. Having worked in the business both before and after Staggers, I know she couldn't have gotten any more attention if she drove an SD40-2 right through the banquet at the annual NIT League convention.

I wasn't very involved in rail transportation at the time, but the after glow of the panic is still detectable by deep space probes.

Jay

[jeaton]

Andrew

The very idea you suggest was used extensively in the pre-Stagger regulated era.

Since most of the TOFC cars were were made for two trailers, most railroads established two trailers rate quite a bit lower than single trailer rates, and, as I recall, in some cases only offered two trailer rates. This became the starting point for so-called third party shippers or piggy back consolidators. If a shipper only had one trailer to ship on a given day, he would call a forwarder who would get a trailer from another shipper and acting as an agent ship both trailers as a single consignment. The forwarder would pay the two trailer rate and make a profit by charging each shipper something more than 1/2 that rate. Each shipper got a deal by paying an amount less than the single trailer rate.

Some very big money was made on this deal.

Jay

[greyhounds]

QUOTE: Originally posted by Junctionfan

I suppose that's true if I'm investor but wonder what customer satisfaction is like. That is my biggest concern. I would hate to loose customers because the customers needs were not being satisfied.

A happy customer is an expensive customer. There's always a friction between a buyer and a seller. The buyer wants a "more/better" service or product at a lower price. The seller wants more money for what he/she is providing. This natural friction is a good thing since it keeps both the buyer and seller seeking more efficient alternatives. This begets progress and improvements.

You don't want to be the perfect solution for your customers, you want to be the best available solution in terms of product/service/price for your customers. It's impossible to hit it perfectly. If you're not loosing one pound of frieght because some customer somewhere can find a better alternative, then your prices are probably too low. Happy customers are not the goal. Profitable customers are.

It doesn't change one dang bit in the few socialist countries left. Ownership doesn't change economics. It's the realtionship of inputs measured in cost vs. outputs measured in income that counts wether the dang gubernmint owns the rayroad or private investors own the railroad. It's just that private investors have been continuously shown to be less wasteful and therefor more benificial to the general population than gubernmint ownership.

[arbfbe]

In brief, I think they are up on the financial situation they face on Wall street but are poorly versed on the connection of railroad investment and operations to the financial results they want to achieve.

[Anonymous]

QUOTE: Originally posted by greyhounds

A happy customer is an expensive customer. There's always a friction between a buyer and a seller. The buyer wants a "more/better" service or product at a lower price. The seller wants more money for what he/she is providing. This natural friction is a good thing since it keeps both the buyer and seller seeking more efficient alternatives. This begets progress and improvements.

You don't want to be the perfect solution for your customers, you want to be the best available solution in terms of product/service/price for your customers. It's impossible to hit it perfectly. If you're not loosing one pound of frieght because some customer somewhere can find a better alternative, then your prices are probably too low. Happy customers are not the goal. Profitable customers are.

It doesn't change one dang bit in the few socialist countries left. Ownership doesn't change economics. It's the realtionship of inputs measured in cost vs. outputs measured in income that counts wether the dang gubernmint owns the rayroad or private investors own the railroad. It's just that private investors have been continuously shown to be less wasteful and therefor more benificial to the general population than gubernmint ownership.

I'll go with your argument 100%, all the way until the last sentence, Grey. Government isn't any less aware of reality than a corporation. Sometimes more -- you worked for your average U.S. corporation lately? I'm still amazed at their stifling bureaucracy and foolishness. The idiocy of a corporation often knows no bounds except bankruptcy, just as the idiocy of a politician knows no limits except failure at the voting booth. And there are plenty of examples of both that don't get it and drive their silly little egos right off a cliff.

The difference between the voter and the investor is zero. They both want loot. The investor measures it in profits. The voter measures it in benefits -- a national park to vacation in, a scholarship for his no-good kid, a well-equipped military to kill people he doesn't like. The government might be inefficient in delivering profit, but that is only because the voters by law can't GET profits. They can only get benefits. The government is remarkably efficient at delivering those other things, too. Check out the U.S. military -- now THAT'S efficiency. We get a lot of bang for our buck.

This goes right back to the Amtrak question, where I just hang my head in disbelief how so many people don't get it. They keep thinking that if they talk long enough about Amtrak's inefficiency, etc., etc., that all its supporters will have this magic vision and say "Of course! Now I get it! How could I have been so blind! Amtrak must go away right now!" Amtrak isn't supposed to deliver profits. It's supposed to deliver benefits. As long as there are enough voters who want the benefits -- hang the profits -- Amtrak ain't going away. It's no different than a national park or a flood control dam in some valley you don't live in. I may not use those, but so what. Other voters do. I had better plan on deporting them, or paying them off, if I want them to agree to give up their cherished benefits. It's a democracy. Them's the breaks.

OS

[Anonymous]

QUOTE: Originally posted by arbfbe

In brief, I think they are up on the financial situation they face on Wall street but are poorly versed on the connection of railroad investment and operations to the financial results they want to achieve.

In other words, they're just like 99.9% of the senior management in every other industry. It's unfortunate, but humans tend to see in others only what they want to see, so they typically promote people who look good, sound good, and make them feel good. If the people they're promoting actually have any ability to make tough decisions and take appropriate risks, it's almost a coincidence. Seen any ugly, stuttering, brutally honest CEOs lately?

In my experience, railroaders are a cut above average. I'm thankful that the transportation business is so tough and competitive, because it weeds out a lot of the liars and slackers that ruin so many other good businesses. God knows they're rampant in the non-competitive businesses -- anything that has a brand on it, generally, where consumers don't price-shop viciously. It pains me to no end to see how slowly the market moves to cru***hose businesses.

OS

[Anonymous]

O.S. You will never be shot for lack of candor!!