Posts Tagged ‘precision scheduled railroading’

Railroads Need Reliable Service to Win Back Shippers

March 14, 2019

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.

NS Quietly, Slowly Moved Toward PSR

February 23, 2019

Norfolk Southern began its move toward the precision scheduled railroading operating model long before the company publicly embraced it, an analysis by Trains magazine found.

The analysis described as wrong the perception that pressure from Wall Street investors forced NS to change course despite CEO James Squires having once been critical of the practice.

Shortly after becoming NS CEO, Squires said in November 2015 that PSR was a “short-term, cut-to-the-bone strategy that could cause Norfolk Southern to lose substantial revenues from our service-sensitive customer base.”

In particular Squires said the focus on lowering the operating ratio, which is central to PSR, would drive away truck-competitive traffic.

But earlier this year Squires said during an investor day that NS had adopted PSR “because it works.”

The Trains analysis noted quietly hired a consultant with PSR experience long before Wall Street analysts began asking why NS couldn’t be more like CSX.

Mike Farrell, who had worked at Canadian Pacific when it was run by PSR guru E. Hunter Harrison, studied NS operations with the idea of designing lower-cost, more efficient, and more reliable local and terminal operations, Trains reported.

“At the beginning, NS had one toe in and one foot out, all along testing PSR strategies,” Farrell, now senior vice president of transportation during the investor day.

NS has since began to phase in what it has described as a kinder, gentler version of PSR that will cut costs and provide reliable service while still seeking growth in merchandise and intermodal traffic.

Farrell said NS is seeking to work with customers rather than impose PSR on its customers as CSX did.

Although NS plans to cuts its workforce by 3,000 positions, the Trains analysis said that is about how many employees NS would lose through normal attrition.

Still, like CSX, NS plans to operate fewer and heavier trains.

STB Wants Info From NS About PSR Implementation

November 30, 2018

The U.S. Surface Transportation Board has asked management of Norfolk Southern to brief it in weekly conference calls about the progress it is making toward implementing the precision scheduled railroading operating model.

The STB held similar conference calls with CSX management in 2017 when it encountered service problems after implementing PSR and has asked Union Pacific to provide information about its move toward PSR.

STB Chairman Ann Begeman said in a letter sent to NS that the board has “strong concern about the potential dislocation that can result when a railroad makes wholesale operating changes, particularly railroads that have been confronting prolonged service challenges.”

Begeman said the STB wants to see NS avoid the type of service problems that CSX had.

NS has said it plans to implement PSR principles gradually and work with its customers in the process in order to minimize the potential for disruption.
The PSR plan is not expected to be fully implemented until sometime in 2019.