Update: New rail produce loading center to break ground in Washington state

[TomDiehl]

QUOTE: Originally posted by futuremodal
Now, if you will kindly post some references for the statements you've made over the weeks, you might actually buttress your claims. Try starting with this one: "Years ago, railroads wouldn't even talk to you for an intermodal move of less than 500 miles."

Trains Magazine, August 1994, "Scheduled and on Time, Conrail's Booming Intermodal Service"

Conrail's fast fleet operates from 21 terminals and includes more than 70 trains that sail at least once a week. The main routes for these are between Chicago and the East Coast metro areas of New York, Boston, Philadelphia, and Baltimore. The spacing of the runs was planned to provide the best return on investment, and to take advantage of faster rail transit time, that is offset by the terminal lift time (load and unload).

Chicago to ANY of those cities is at LEAST 500 miles.

[Anonymous]

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by futuremodal
Now, if you will kindly post some references for the statements you've made over the weeks, you might actually buttress your claims. Try starting with this one: "Years ago, railroads wouldn't even talk to you for an intermodal move of less than 500 miles."

Trains Magazine, August 1994, "Scheduled and on Time, Conrail's Booming Intermodal Service"

Conrail's fast fleet operates from 21 terminals and includes more than 70 trains that sail at least once a week. The main routes for these are between Chicago and the East Coast metro areas of New York, Boston, Philadelphia, and Baltimore. The spacing of the runs was planned to provide the best return on investment, and to take advantage of faster rail transit time, that is offset by the terminal lift time (load and unload).

Chicago to ANY of those cities is at LEAST 500 miles.

Excellent. Now, are you willing to go out on a limb and state as a fact that Conrail did not provide any intermodal service to the intermediate terminals such as Cleveland, Detroit, et al?

'Cause if they did................[8]

[TomDiehl]

Cleveland to Detroit is not listed on the table in the article, but they did pass through Cleveland and have a branch up to Detroit from Toledo. TV-25D served the line from Toledo to Detroit, a continuation of TV-25 Baltimore/Harrisburg//Cleveland/Toledo.

Unfortunately, this seemingly short run was shown to take 7 hours (leave Toledo 1:00 AM arrive Detroit 8:00AM)

[Anonymous]

QUOTE: Originally posted by TomDiehl

Cleveland to Detroit is not listed on the table in the article, but they did pass through Cleveland and have a branch up to Detroit from Toledo. TV-25D served the line from Toledo to Detroit, a continuation of TV-25 Baltimore/Harrisburg//Cleveland/Toledo.

Unfortunately, this seemingly short run was shown to take 7 hours (leave Toledo 1:00 AM arrive Detroit 8:00AM)

Ouch! Isn't it like 50 miles from Toledo to Detroit?

The point is this: Intermediate intermodal markets did have access to service in which end terminal mileage was less than 500 miles. Granted, this was done as part of the longer run, and not a dedicated train. It is my belief the "500 mile" standard relates more to carload operations than it does unit trains or dedicated trains.

However, such things are invisible to the customer, because all they want is to make sure X number of boxes gets to Destination Y in a timely fashion and at a competitive price. For the Quincy produce guys, they need to be able to meet the loading schedule of the outbound container ship, and to do so with as little time in transit as possible. Why the Quincy guys want a dedicated train as opposed to conducting add-ons and take-offs of pass through intermodals is not clear, but it could be that their prior experience with the pass through intermodals was not sufficient to meet their market needs, or BNSF's schedules do not allow for a stop at Quincy for such trains.

The interesting thing about Northwest Container is that they did somehow manage to convince UP to handle their double stack offerings out of Pasco for the shorthaul to Puget Sound, so I guess they just assumed they could ask for the same level of service from BNSF for the Quincy operation. BTW, Northwest Container owns their own well car fleet in addition to handling the transload operations.

[TomDiehl]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by TomDiehl

Cleveland to Detroit is not listed on the table in the article, but they did pass through Cleveland and have a branch up to Detroit from Toledo. TV-25D served the line from Toledo to Detroit, a continuation of TV-25 Baltimore/Harrisburg//Cleveland/Toledo.

Unfortunately, this seemingly short run was shown to take 7 hours (leave Toledo 1:00 AM arrive Detroit 8:00AM)

Ouch! Isn't it like 50 miles from Toledo to Detroit?

The point is this: Intermediate intermodal markets did have access to service in which end terminal mileage was less than 500 miles. Granted, this was done as part of the longer run, and not a dedicated train. It is my belief the "500 mile" standard relates more to carload operations than it does unit trains or dedicated trains.

Not according to this schedule, there were no end terminals that close together listed. There are intermediate points listed, but no short runs between them. Short branches got service connected like the one from Toledo to Detroit, but 7 hours would hardly compete with trucks on such a short run.

Maybe faster than a horse and wagon, though.

IIRC, as was explained to me a while back, where that 500 mile figure came from: As you pointed out, trains can run faster and more economically than trucks, if they have enough cargo to justify the run. On the opposite side of the equation, they lose time and money with terminal operations (load and unload trailers on train, load the entire train before it leaves, etc). At some point, they have to reach a "break even point." However as any transportation salesman can tell you, you're not going to win customers away from their present transporter with "as fast as" or "as cheap as" service, you have to go better in one or both categories. And of course, the railroad has to make a profit, otherwise there's no incentive for them to provide the service.

This is probably GREATLY simplified, and there are many more factors to consider as to how the sales and operating departments would judge the service and whether to offer it. And I'm sure there are variables which will change from one railroad to another and even one branch to another on the same railroad.

[jeaton]

The mileage point considered by railroad intermodal operators has a simple origin. These numbers are just a guess, but between origin cartage, lift costs and terminal overheads, there can be a couple of hundred dollars into the load even before the train leaves town. The same kind of costs appear at the destination. To continue the point let's say that the railroad has a cost of about 50 cents per container mile for the movement on the train.

Assuming the price ceiling for the railroad is set by truckers that will haul the same load for $2.00 a mile you have the following.

100 miles, $200 revenue, $450 cost
200 miles, $400 revenue, $500 cost
500 miles, $1,000 revenue, $650 cost

For the 500 mile haul, we are assuming that the $2 a mile rate could hold up. 500 miles is a nice overnight haul for a trucker. If his business is balanced, maybe he sets a price at $1.50 a mile, which puts the revenue down to $750. That is leaving a pretty low margin.

Try the numbers for 1000 miles, $2,000 revenue. It produces a margin of $1100 per load. If you have to make a choice, do you want $300 or $1100?

[MichaelSol]

QUOTE: Originally posted by jeaton
Try the numbers for 1000 miles, $2,000 revenue. It produces a margin of $1100 per load. If you have to make a choice, do you want $300 or $1100?

Jay, unless I am misunderstanding how you are saying this, this isn't how anybody counts revenue. The rate is not the revenue. The old short haul "problem" is gone. Railroads can set the rates to be as compensatory as they want.

Let me take a real world example, not intermodal, but at least real world:

234 miles, rate: $1262, mileage rate 4.11, profit per carload: $555, 8 day cycle time, monthly profit $2,081.

656 miles, rate: $2024, mileage rate, 2.63, profit per carload: $386, 19.17 day cycle time, monthly profit: $643.

1,297 miles, rate:$3961, mileage rate:2.82, profit per carload: $1204, 27 day cycle time, monthly profit: $1,338.

I'd take the short haul if I was interested in profit.

Best regards, Michael Sol

[bobwilcox]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
Try the numbers for 1000 miles, $2,000 revenue. It produces a margin of $1100 per load. If you have to make a choice, do you want $300 or $1100?

Jay, unless I am misunderstanding how you are saying this, this isn't how anybody counts revenue. The rate is not the revenue. The old short haul "problem" is gone. Railroads can set the rates to be as compensatory as they want.

Let me take a real world example, not intermodal, but at least real world:

234 miles, rate: $1262, mileage rate 4.11, profit per carload: $555, 8 day cycle time, monthly profit $2,081.

656 miles, rate: $2024, mileage rate, 2.63, profit per carload: $386, 19.17 day cycle time, monthly profit: $643.

1,297 miles, rate:$3961, mileage rate:2.82, profit per carload: $1204, 27 day cycle time, monthly profit: $1,338.

I'd take the short haul if I was interested in profit.

Best regards, Michael Sol

What "real" world are you describing? What is the source of your data?

[Anonymous]

You may hate me for saying this....But if Amtrak had not proven that there was a market in this they would not have done it. Amtrak could add a second Empire Builder and do the same service

[MichaelSol]

QUOTE: Originally posted by bobwilcox
What "real" world are you describing? What is the source of your data?

BNSF. Rates as of April 15, 2005.

Best regards, Michael Sol

[TomDiehl]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
Try the numbers for 1000 miles, $2,000 revenue. It produces a margin of $1100 per load. If you have to make a choice, do you want $300 or $1100?

Jay, unless I am misunderstanding how you are saying this, this isn't how anybody counts revenue. The rate is not the revenue. The old short haul "problem" is gone. Railroads can set the rates to be as compensatory as they want.

Let me take a real world example, not intermodal, but at least real world:

234 miles, rate: $1262, mileage rate 4.11, profit per carload: $555, 8 day cycle time, monthly profit $2,081.

656 miles, rate: $2024, mileage rate, 2.63, profit per carload: $386, 19.17 day cycle time, monthly profit: $643.

1,297 miles, rate:$3961, mileage rate:2.82, profit per carload: $1204, 27 day cycle time, monthly profit: $1,338.

I'd take the short haul if I was interested in profit.

Best regards, Michael Sol

Michael, I'm missing something in your "cycle time" figures. Where are these coming from? For example, on your last entry above, 1297 miles, times two (round trip) is 2594 miles. Divided by a 27 day cycle time, this train is moving 96 miles a DAY. Either that, or it's an AWFUL lot of terminal time.

[MichaelSol]

QUOTE: Originally posted by TomDiehl
Michael, I'm missing something in your "cycle time" figures. Where are these coming from? For example, on your last entry above, 1297 miles, times two (round trip) is 2594 miles. Divided by a 27 day cycle time, this train is moving 96 miles a DAY. Either that, or it's an AWFUL lot of terminal time.

Your estimate is probably not far off the mark. It has been as slow as 60 miles per day on this railroad.

The current BNSF car cycle time for this particular category is 17.96 days, the average haul is about 900 miles. And as of this week, car orders are running 17.1 days late on the average. The longer the haul, the more likely that a carload sits in a yard. For this example, the routing for the short haul has no yard dwell time (doesn't pass through a yard), the second and third examples pass through a yard. The second example originates off the mainline 20 miles, and first and third are on a mainline. They all terminate at the same destination, involve the same commodity and travel the same mainline.

The current BNSF yard dwell time average varies between 17.2 and 50.2 hours depending on the yard. The rates cited are for the commodity that tends to hang on the high side of the average in terms of the yard dwell time involved. BNSF's current average dwell time of all yards is 32.5 hours. This commodity pulls the average up considerably; sitting there 2, 3,4, days.

Each way.

Given the average system cycle time for this category of freight, it is obvious that it 1) moves slow, 2) spends a lot of time on sidings, 3) has slow acceleration and braking, and 4) spends a considerable amount of time in the yard when it gets there.

The average car cycle time over the past three years for the category of freight which provided the tariffs has averaged between 17 and 28 days for the average 900 mile haul which is, yes, very, very slow. Railroads have never been so slow. This is why the 8 day cycle time on the Produce question struck many of us as ridiculous. However, you will note regarding the cited tariffs, the short haul cycle time of 8 days is something better than the Produce cycle time for the distance traveled, and that each longer haul is consistently more efficient in terms of cycle time than the short haul, although it does strike one, always, as pretty slow.

Best regards, Michael Sol

[bobwilcox]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by bobwilcox
What "real" world are you describing? What is the source of your data?

BNSF. Rates as of April 15, 2005.

Best regards, Michael Sol

How do you derive the "porfit"?

[MichaelSol]

QUOTE: Originally posted by bobwilcox

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by bobwilcox
What "real" world are you describing? What is the source of your data?

BNSF. Rates as of April 15, 2005.

Best regards, Michael Sol

How do you derive the "porfit"?

Of course this is not net profit since we don't have the fully distributed costs, but rather the amount of revenue in excess of the variable costs of the service.

Best regards, Michael Sol

[jeaton]

Michael- I don't disagree with your contention that for carload traffic a shorter haul may produce more profit than a longer haul. I was looking specificly at intermodal revenues and costs as an illustration as to why the railroads can't profitably compete for some of the shorter haul business.

I started with the premise that a truckload carrier in today's market may be setting truckload rates so that the revenue is equal to about $2.00 per mile. Obviously, that sets the ceiling for the total that a shipper will use for intermodal service. So using the 200 mile example, a trucker will have a rate that produces $400 revenue for the load. Now for the intermodal service, I assumed that origin and destination cartage charges were each $100, which leaves the maximum the railroad could get and remain competitive is $200. I was then saying that if the railroad's intermodal terminal cost were another $100 at each end, and the linehaul train cost was equal to 50 cents per trailer/container mile, the railroad loses $100 per load. However, given that terminal and cartage cost do not vary with the length of the line haul and and the line haul cost per mile is one quarter of the truckers revenue per mile figure, at some distance the railroad starts to make money.

The 500 mile figure for a railroad to generate an adequate profit on intermodal service has been around since the 1960s. I really don't know if that reflects conditions today, and I have been out of the business for so long that the value of the factors I use for my illustration could be way off. However, the principal still applies I rather doubt that any of the Class 1's have a specific distance locked in stone. If operating circumstances are just right, a short intermodal haul might turn a nice buck. On the other hand, there is also the matter of oppurtunity cost. If you take on one piece of business, even if profitable, does that result in the inability to take on another piece of business? Or, are there other higher return uses for the money that might need to be invested to get this particular piece of business? Put it bonds? Buy back stock?

It is hard for an outsider to get all the facts that went into a specific business decision.

Jay

[MichaelSol]

QUOTE: Originally posted by jeaton

Michael- I don't disagree with your contention that for carload traffic a shorter haul may produce more profit than a longer haul. I was looking specificly at intermodal revenues and costs as an illustration as to why the railroads can't profitably compete for some of the shorter haul business.

Can't and shouldn't. Couldn't agree more. But, in some instances, they can and when they can, it can often be very profitable traffic. What some erroneously conclude is that short haul is inherently unprofitable because it is short haul.

Those are the old days.

Best regards, Michael Sol

[TomDiehl]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by TomDiehl
Michael, I'm missing something in your "cycle time" figures. Where are these coming from? For example, on your last entry above, 1297 miles, times two (round trip) is 2594 miles. Divided by a 27 day cycle time, this train is moving 96 miles a DAY. Either that, or it's an AWFUL lot of terminal time.

Your estimate is probably not far off the mark.

The current BNSF car cycle time for this particular category is 17.96 days, the average haul is about 900 miles. And as of this week, car orders are running 17.1 days late on the average. The longer the haul, the more likely that a carload sits in a yard. For this example, the routing for the short haul has no yard dwell time (doesn't pass through a yard), the second and third examples pass through a yard. The second example originates off the mainline 20 miles, and first and third are on a mainline. They all terminate at the same destination, involve the same commodity and travel the same mainline.

The current BNSF yard dwell time average varies between 17.2 and 50.2 hours depending on the yard. The rates cited are for the commodity that tends to hang on the high side of the average in terms of the yard dwell time involved. BNSF's current average dwell time of all yards is 32.5 hours. This commodity pulls the average up considerably; sitting there 2, 3,4, days.

Each way.

Given the average system cycle time for this category of freight, it is obvious that it 1) moves slow, 2) spends a lot of time on sidings, 3) has slow acceleration and braking, and 4) spends a considerable amount of time in the yard when it gets there.

The average car cycle time over the past three years for the category of freight which provided the tariffs has averaged between 17 and 28 days for the average 900 mile haul which is, yes, very, very slow. Railroads have never been so slow. This is why the 8 day cycle time on the Produce question struck many of us as ridiculous. However, you will note regarding the cited tariffs, the short haul cycle time of 8 days is something better than the Produce cycle time for the distance traveled, and that each longer haul is consistently more efficient in terms of cycle time than the short haul, although it does strike one, always, as pretty slow.

Best regards, Michael Sol

If they're having this much trouble meeting current contracts, it sounds like a good reason not to take on new traffic.

[MichaelSol]

QUOTE: Originally posted by TomDiehl
[If they're having this much trouble meeting current contracts, it sounds like a good reason not to take on new traffic.

It might "sound like it", but they are still not earning their cost of capital. A good place to increase the marginal return is in short, fast operations on underutilized, uncongested track. Nothing qualifies better than Stampede Pass, as an example.

Best regards, Michael Sol

[TomDiehl]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by TomDiehl
[If they're having this much trouble meeting current contracts, it sounds like a good reason not to take on new traffic.

It might "sound like it", but they are still not earning their cost of capital. A good place to increase the marginal return is in short, fast operations on underutilized, uncongested track. Nothing qualifies better than Stampede Pass, as an example.

Best regards, Michael Sol

Depends on whether track congestion is the problem, or if it's a matter of rolling stock and/or personnel shortages.

Current contracts are on paper, and legally enforcable, so these should be the first priority. A lawsuit for violating a contract could easily surpass the profits made by the new service.

As a technician, it's my nature to look at the "nuts and bolts" of a problem and figure out WHY something isn't working. Simply put, you have to understand the "why" before you can solve/fix a problem.

[Anonymous]

Where will the terminal be in Albany?

[MichaelSol]

QUOTE: Originally posted by TomDiehl
A lawsuit for violating a contract could easily surpass the profits made by the new service.

Well, you'd think.

BNSF violated virtually all of their COTs contracts in the Fall of 2003.

The consequences?

As many guesses as you want.

Best regards, Michael Sol

[TomDiehl]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by TomDiehl
A lawsuit for violating a contract could easily surpass the profits made by the new service.

Well, you'd think.

BNSF violated virtually all of their COTs contracts in the Fall of 2003.

The consequences?

As many guesses as you want.

Best regards, Michael Sol

Sounding more and more like they're on the verge of a UP style service meltdown.

[Anonymous]

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by TomDiehl
A lawsuit for violating a contract could easily surpass the profits made by the new service.

Well, you'd think.

BNSF violated virtually all of their COTs contracts in the Fall of 2003.

The consequences?

As many guesses as you want.

Best regards, Michael Sol

Sounding more and more like they're on the verge of a UP style service meltdown.

Wasn't the whole UP meltdown based on their seeming inability to "borg" SP into their system, and not really related to basic UP service dynamics?

[TomDiehl]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by TomDiehl
A lawsuit for violating a contract could easily surpass the profits made by the new service.

Well, you'd think.

BNSF violated virtually all of their COTs contracts in the Fall of 2003.

The consequences?

As many guesses as you want.

Best regards, Michael Sol

Sounding more and more like they're on the verge of a UP style service meltdown.

Wasn't the whole UP meltdown based on their seeming inability to "borg" SP into their system, and not really related to basic UP service dynamics?

They could easily have the same end result from taking on more traffic than they can handle, be it a shortfall of the rolling stock, operating personnel, or the network capacity. The UP thing threw too much of the traffic into certain areas causing major bottlenecks to become outright choke points that brought traffic to a screeching halt. THAT was where the customer saw the service meltdown.

[Anonymous]

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by TomDiehl
A lawsuit for violating a contract could easily surpass the profits made by the new service.

Well, you'd think.

BNSF violated virtually all of their COTs contracts in the Fall of 2003.

The consequences?

As many guesses as you want.

Best regards, Michael Sol

Sounding more and more like they're on the verge of a UP style service meltdown.

Wasn't the whole UP meltdown based on their seeming inability to "borg" SP into their system, and not really related to basic UP service dynamics?

They could easily have the same end result from taking on more traffic than they can handle, be it a shortfall of the rolling stock, operating personnel, or the network capacity. The UP thing threw too much of the traffic into certain areas causing major bottlenecks to become outright choke points that brought traffic to a screeching halt. THAT was where the customer saw the service meltdown.

My opinion was that the UP meltdown was caused by trying to integrate two disparate systems. It wasn't the traffic levels, it was more like trying to mate a fish with a bicycle.

[TomDiehl]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by TomDiehl
A lawsuit for violating a contract could easily surpass the profits made by the new service.

Well, you'd think.

BNSF violated virtually all of their COTs contracts in the Fall of 2003.

The consequences?

As many guesses as you want.

Best regards, Michael Sol

Sounding more and more like they're on the verge of a UP style service meltdown.

Wasn't the whole UP meltdown based on their seeming inability to "borg" SP into their system, and not really related to basic UP service dynamics?

They could easily have the same end result from taking on more traffic than they can handle, be it a shortfall of the rolling stock, operating personnel, or the network capacity. The UP thing threw too much of the traffic into certain areas causing major bottlenecks to become outright choke points that brought traffic to a screeching halt. THAT was where the customer saw the service meltdown.

My opinion was that the UP meltdown was caused by trying to integrate two disparate systems. It wasn't the traffic levels, it was more like trying to mate a fish with a bicycle.

But the end result of having too many trains trying to run through a bottleneck will have the net end result of halting operations in a certain area, then the domino effect will take over and choke the whole system. Sort of like Interstate 80 heading toward NYC in the morning, The movement is fair to good, but add much more traffic or have an accident, well, just hope you didn't drink too much coffee before leaving home.