Wednesday, March 14, 2012

CSX Short Line Workshop excels

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The 23d Annual CSX Short Line Workshop was yet another standard-setter in terms of content, delivery, and overall message. The emphasis throughout was more on customer service than the mechanical aspects of running a railroad—a welcome change. And I think CFO Fred Eliasson summed it up best when he said to the group, "A strong service product is the foundation for achieving price, productivity and growth targets."

Clearly there's work to be done. CSX Director of Regional & Shortline Development Len Kellermann laid out several discrete challenges "to improve the intensity of our commercial efforts." In addition to sustaining 2011's momentum, he said, short lines would do well capturing more modal conversions, getting more business from existing customers and growing the customer base, making more joint sales calls with their CSX reps and arriving at the right price for the given commodity lane.

This last implies—in my opinion—-a short line requirement to have a price range in mind beforehand: the highest price that will work and still win the move and the lowest that will cover all shortline direct avoidable costs associated with that move. Unfortunately, based on my conversations during the meeting, the number of short line operators who have a handle on customer-specific revenue per revenue ton-mile and operating costs is de minimis. This must change for the Class I-short line partnership to reach its full potential.

The tools are there. Data suppliers like GE Transportation's RMI have whole suites of tools to track key metrics like revenue per ton-mile by customer; US Rail Desktop's costing system captures operating cost and revenue potential by by commodity lane. Running the two side-by side short lines can quickly identify which customers add the most to operating profits.

"It starts with the customer" is the first of five Core Values at CSX and Kellermann's short line charge certainly does that. Now it's up to the short lines to identify which customers are the best prospects for organic growth and where the short lines can add the most value to the supply chain function.

Roy Blanchard

Roy Blanchard is principal of The Blanchard Company and a Contributing Editor to Railway Age.