Railroads Need Reliable Service to Win Back Shippers

CSX CEO James Foote recently told an investor’s conference that railroads will only regain traffic lost to trucks if they can provide dependable service just like truckers do.

James Foote

Foote said that the typical railroad carload shipper sends about 60 percent of its business by rail and the rest by truck.

“The reason they ship it in a truck is because they don’t trust the railroad to get it there on time,” Foote said.
Those shippers would rather send their freight by rail because of its lower cost, but transit time by rail can vary between five and nine days.

A rail car might arrive at its destination on time just 50 percent of the time. Foote said no shippers are going to send all of their freight by rail with that kind of performance, he says.

CSX and other railroads have adopted the precision scheduled railroading operating model in an effort to improve efficiency and reliability, which Foote said will enable railroads to reap a higher share of the billions of dollars of revenue from freight that’s moving by highway but could be on the rails.

That will only come with more reliable service. “We need to get that to 90 percent or so,” Foote said. “So there’s a tremendous amount of potential there for improvement.”

Foote said CSX has regained some merchandise traffic lost to truck, but it is not business that it lost during a period of service disruptions in 2017 as the carrier struggled to implement the PSR operating model.

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