Why No Railroads?

Written by Nicholas Little, Director Railway Education, Center for Railway Research and Education, Michigan State University Eli Broad College of Business

Aug. 5, 2021, saw SupplyChainBrain publish its list of its “100 Great Supply Chain Partners of 2021.” The list includes many shippers, 3PL logistics companies, ocean carriers and intermodal organizations as well as trucking companies, but, alas, not a single railroad. Some of the nominees are railroad shippers/customers.

Why no railroads? Are we taken for granted? Are we failing to “bang our own drum,” or is there a deeper reason? Let’s look into the criteria used to arrive at the listing.

First, the critical criterion for inclusion in the list. Vendors must be nominated by their customers. This sorts out the false or unattainable public relations and advertising claims and substitutes it with real-world performance. However, our rail freight industry is not known for making false claims. We all know how tough it can be to keep railroads functioning to schedule all day, every day, 24/7/365. So, now let’s look at the specific evaluation dimensions.

Supply chains today are complex networks of companies and organizations using people and tools to provide consumers with an experience they value. Reputations can be won or lost by on-line reviews, news items and other perceptions. The real test is how well companies work as a fully functioning member of the team of other organizations that helps achieve intermediate supply chain customers, for the final consumer (putting real money into financing the whole supply chain), and for stakeholders in the chain such as shareholders and employees.

Supply Chain Brain listed its ten characteristics they say make vendors stand out from the crowd. These are all “no brainers,” not only to supply chain experts but to everyone who thinks about strategic and operational business success: Reliability, service excellence, value, knowledge of the customer’s business, problem-solving skills, an attitude of continuous improvement, solid after-sales support, a positive “can-do” attitude, global reach, and strong leadership.

Railroads certainly provide value. We also know our key customers’ businesses. PSR is helping us continually improve OR, but maybe not all the other dimensions. We often appear to replace a positive “can-do” attitude with a “take it or leave it” one – though there have always been pockets of new business development that stand out. However, railroads are not thought of as a first “go-to” place for new services. North American railroads, although they don’t operate globally, do operate internationally and across different economic regions of the continent. We also account for up to 30% of the nation’s exports and move a lot of long-haul international and transloaded intermodal traffic from the coasts to the interior of the continent.

In terms of strong leadership, for many years we have produced great leaders from within the industry. They have been strong railroaders and very sharp businesspeople. This is changing. We are seeing more diversity in today’s leaders of the larger railroads. We have Katie Farmer, the first woman Class I CEO. Other CEOs have been coming from marketing, finance (like Kansas City Southern’s Pat Ottensmeyer) and a more diverse management and leadership background than the traditional transportation/operations background of the past. That is good news!

The astute reader will have noted that I only discussed two of the ten characteristics used to compile the Supply Chain Brain list. Why? Because I argue that the other eight are the key areas our railroads need to concentrate on for today and tomorrow. If we are to grow, we need to become a key part of the supply chain team for the commodities we carry. Let’s stop thinking we are merely a “railroad” and begin to think and act as a key part of our shippers/customers integrated supply chain team.

Furthermore, I believe these dimensions omit an area we contribute to: helping achieve ESG (environmental and social governance) goals for our customers’ supply chains. Rail is currently a much better environmental and societally beneficial transport mode than trucking or airfreight. We need to continually promote these actions. It’s great to see our industry leaders’ commitment to the Science Based Targets initiative (SBTi) for emissions reduction.

Watch for a follow-on article focusing on developing great supplier/customer relationships. That will be based on recent research from Michigan State University’s supply chain management faculty. In case you didn’t know, MSU is recognized by US News and World Report as the number-one supply chain school for undergraduate and graduate programs for the past several years.

Our Center for Railway Research and Education is positioned to help railroads take advantage of that knowledge to improve their performance, education and recognition as an essential part of the North American supply chain industry. We have also published articles and studies into low- and zero-emission for specific railway applications.

Nick Little is Director of Railway Education at the Michigan State University Broad College of Business Center for Research and Education.

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