Everyone Wins With PSR

A renowned railroader offers his observations on Precision Scheduled Railroading, based on decades of experience.

“It’s time to run another train east.” These are the exact words I used when working for the Southern Pacific Railroad (SP) as an Assistant Terminal Superintendent at the Roseville, Calif., terminal in 1969. This was “smart railroading” for most railroads in the 20^th Century. Now, Precision Scheduled Railroading (PSR) governs operating decisions on most railroads. What was this “old way?” Why is PSR the “go to” management tool for today’s rail operations? This writing hopes to give the reader a better understanding of the light-year change in the railroad operation decision-making process, all to benefit the shipper, railroad management, employees and the investors. 

Much literature and pundit column writing covers PSR, both with a positive and negative perspective. PSR began with Hunter Harrison making operating changes on the Illinois Central Gulf Railroad (ICG), then later on CN. That followed several years later with his applying the same philosophy to the Canadian Pacific, and most recently with CSX. However, there is very little literature that best explains both the previous operational decision-making process, and how PSR has revolutionized everything. Even the shipping customers in many cases do not understand the long-term benefits. They only reported the chaos that ensued during the conversion to the new process. Even the “Bible” of PSR, How We Work and Why, written by Hunter Harrison, is now out of print. Yet, the real story must be told so all interested and affected parties today really understand how PSR has revolutionized the industry. The key word is “Schedule.”

Back in the mid-1960s and deep into the 1980s, the goal of “smart railroading” was to maximize efficiencies by operating longer, heavier trains so as to reduce the crew cost per car handled. Many railroads still operated with five-man crews and cabooses. This “large train” maxim was almost totally dictated by decisions made at each yard terminal where cars were accumulated. For SP, the Roseville Terminal with its twin hump yard gathered revenue cars from Northern California, the San Francisco Bay Area, the Central Valley of California, and especially the perishable traffic from the Salinas Valley of California. 

As a Terminal Manager, every morning at 6:00 AM, we built our “Game Plan” for the next 24 hours. To create the plan, the underlying axiom was to build large trains so as to maximize train crew utilization. Also, it reduced the total number of trains on the main line so as to make the route more fluid. Commodity type, such as reefers carrying perishables, also dictated priority for assigning cars to the first train to be sent east over the old Central Pacific original route. This we called Step 1. Did it work? SP in 1965 boasted handling the highest GTMs (Gross Ton-Miles) per track-mile of any of the Class I railroads, almost double the next best railroad. Almost all railroads were operated by actions dictated by the various terminals. Only locals, mostly branch line “single train a day” locals, had a predetermined schedule.

After Step 1—the decision that passed the “large enough” number of cars test— came Step 2, assigning a train schedule. SP had numerous schedules that could be assigned to a potential train, such as RSVNPT23. This indicated a Roseville (RSV) originating train for destinations on the Union Pacific North Platte, Neb., terminal (NPT) and beyond, set to depart on day number 23 of the month. Then came Step 3, the marshaling of resources. Are there sufficient locomotives? Is there a rested crew? Finally, Step 4 closed the decision loop by assuring all the cars selected to be on this train were switched out and ready to be placed on the new train. As part of this process, one would make a sweep of the car inventory of the terminal to spot any “hot cars” that had been badly delayed, or cars recently released from the Repair Track and ready to be put back in circulation. 

Now came the decision time to “Call the RSVNPT23 for 11:00 AM.” All that remained was execution. The switch crews had to build the train, the roundhouse had to select, inspect, test and fuel the locomotives, and move the power to the departing train’s track. Meanwhile, the mechanical department had to lace up the air hoses and make an Initial Terminal Air Brake Test. Last of all, the train crew, one that had been called for duty 90 minutes before the scheduled departure, was delivered to the train. At the end of this process, the train crew received the “green light” indicating the train was ready to depart and the route was lined for movement. Note, in this decision scenario, no factor was introduced that recognized that both the locomotives and train crews eventually had to make a return move to balance resources. The decision was always a “one-way” decision in which the return of assets fell to future train movements from other terminals, eventually bringing assets back to their origin. 

So what changed? What did PSR do to make this the “new way to railroad?” Note the wording above that says “scheduled train.” That was a very accurate statement, and became the source of most management performance reviews. However, what was the “car schedule?” If the carload came off a branch line or short line with once-a-day service, the shipper usually could anticipate the time of day that the car would be pulled from the loading dock by the local. It “left on schedule.” However, once that car reached a terminal or interchange track, it became co-mingled with many other cars, and totally lost its schedule identity. The only time clock that was acknowledged to occur was when there was a sweep of the car inventory in the terminal to spot any cars having not moved in the past 24 or 36 hours. As mentioned in Step 4, delayed cars might become part of the next train.

At this period in railroading, all Class I railroads made weekly reports to the Association of American Railroads that showed “terminal dwell time.” It consistently averaged well over 24 hours. Some railroads tried to reduce that average by including trains that only changed crews or locomotives, but otherwise were “run through” trains, but the average dwell time told the story. Only CN consistently reported dwell times under 20 hours. This was well under the 24 hour average At that same time, CN was the only Class I railroad reporting an Operating Ratio at least 10 points lower (better) than its competitors. Here in lays the base for the success of PSR: Operating Ratio is the Revenue divided by the Expenses for the railroad. 

When a railroad changes from a “train schedule” to a true “car schedule,” the railroad industry starts to talk like a truck driver. That trucker will tell their customer the exact time the load will reach destination. The loaded trailer never stops, except for fueling, food, and rest, all scheduled by the driver. For a PSR railroad, the same type anticipated schedule can be built, combining advanced train schedules for the railcar to connect to each next scheduled train along the route. That time the local train picked up the new loaded car becomes the basis upon which the schedule for the whole trip becomes the basis for performance. It becomes the railroad’s measured and committed obligation to deliver the car “on schedule.” Once the shipper realizes the benefits of PSR, they find they can plan their loading (or unloading) work schedule more efficiently and avoid the bunching of cars that often leads to demurrage charges. My company, RailTex, had four of our 24 Class III railroads connected with CN. New customer sales success was much easier to achieve with the CN connections than with our other primary interchanges with CSX, Union Pacific and Norfolk Southern. The shipper using CN long-haul loved PSR.

Where does the railroad that practices PSR achieve the benefits? How can you possibly make more of a profit if the schedule calls for a certain train schedule connection, and only 50 cars are available to fill the train to meet the scheduled departure time? The answer relates to that old Army axiom, “Poor Prior Planning Produces Poor Performance.” Before PSR, the Step 1 (see above) to run a train when there are 100 cars never factored in the return of the locomotives or crews back home for the next 100-car train. It was assumed there would be traffic moving in the opposite direction that allowed repositioning the crews and power back home. That did happen, eventually, but there were many “penalty costs” associated with the lack of prior planning to balance resources. Crews would be “deadheaded home” to avoid “Held Away From Home Terminal” penalty pay. Often, locomotives would be moved back in the opposite direction as “cab hops” with only power and crews, but no railcars in the created “train.”

Under PSR, once a crew is rested, there should be another train coming in the opposite direction to balance crews. Deadheading is eliminated. The Held Away penalty is eliminated. On the ICG, Hunter Harrison even reorganized crew districts so crews would swap trains midway in the crew district, and be back home within the 12 Hours of Service Law. This eliminated all lodging costs for hotel and food expenses. Another benefit of PSR is the improvement of terminal fluidity, where congestion from train bunching causes some arriving trains to be “held out” of the terminal. Often that “held out” train had the train crew “die” under the 12 Hours of Service Law. This resulted in another crew being called to “Dog Catch” the held-out train. This new crew often had to move the train only the last 10-20 miles, yet received a full day’s pay. There was the taxi cost, too, to exchange crews. PSR eliminates most, if not all, “non-productive” costs. That situation greatly affects the expense side of the Operating Ratio. It is not cost “reduction.” It is cost “elimination.”

Consider the benefits of balancing locomotives by scheduling their assignments. Some railroads completely eliminated the Locomotive Service Bureau function because of PSR. No longer will one find locomotives idling in remote areas. There is no need “to accumulate power” in anticipation of the demands over the next 24 hours. As recently as this past Fall, railroads showed they had 4,000 locomotives in storage. Yes, business might have slowed, but PSR has contributed to a significant improvement in locomotive utilization.

From another perspective, consider the track capacity utilization before and after PSR. When most dwell times for cars averaged well over 24 hours, it told the situation of revenue cars sitting for more than a day, and often at more than one terminal along their journey. Dick Spence, SP Vice President for Operations, once lectured me when “inspecting” my rail yard filled with cars from interchange in New Orleans. I was the Terminal Superintendent. “Bruce, what I see here are revenue loads the customer is paying us to move, not to sit still.” PSR is the answer. Move cars that have their own schedule for connecting trains. That delayed car occupies 50 feet or more of track. Operating terminals are not storage yards. Yet the dwell time data shows the true situation of delayed revenue loads. 

Now, realize there is another benefit of PSR—safety. As a Division Superintendent, one of my greatest fears was a train crew falling asleep when operating a train. The most common accident involving a sleeping crew occurs when a train is diverted into a siding on a CTC-controlled route and not stopping between switches to meet an opposing train. A collision occurs. Because of sleep deprivation, the crew does not respond to red signal indications. Positive Train Control (PTC) will address most of these types potential accidents, but it is still important to recognize this sleep deprivation situation. An accident investigation will show “crew sleeping” as the cause. 

However, the root cause is something entirely different. Disturbingly often, the root cause occurred back when the sleeping crew was returning home after a run, and was signing off duty around 10:00 AM. When asking the dispatcher or crew caller when the crew would next be expecting to be called to staff another train, the answer would be, “There is nothing to be called for you until at least tomorrow morning after 7:00 AM.” As a result, our employee saw that daylight time as free, and still got 8 hours rest in the evening before being called to work again. The persons might play golf, garden, or paint the house. This was a responsible, dedicated employee trying to properly manage their rest cycle before having to return to work. However, because of “unforeseen operating conditions,” that employee was called back to work at 11:00 PM just as the sleep cycle was beginning. Realize, under the Hours of Service Law, the employee is considered fully rested. The condition of sleep deprivation catches up with the employee after several hours back on duty. Under a PSR scenario, there is no need for “short-rested” calls back to work because of “unforeseen operating conditions.” Recall, Poor Prior Planning Produces Poor Performance, even in the area of safety.

PSR can easily take the blame from shippers, investors and “rail experts” who express the many negative occurrences when converting to PSR. Execution, when not done in a decisive manner, and not fully understood by all parties, can cause major distress for everyone. However, once implemented, PSR is a “win-win” for everyone:

1.  The shipper – The party that pays the freight cost receives a trucker style transit schedule:
   1. This allows more accurate planning at the loading and unloading dock.
   2. Cars have the potential to arrive without bunching situations, which can lead to the penalty payment of demurrage charges. 
   3. The freight rate will be much lower than the truck cost, even with a slightly longer transit time.
2. The train crew – There are multiple cost eliminations making for a better work experience:
   1. No Held Away from Home Terminal penalty payment by railroad.
   2. No non-productive deadheading payments to balance crews.
   3. For many situations, no away from home situations by trading train crews enroute.
   4. No “short rested” calls to return to work improves safety.
   5. No situations where their train is close to the terminal, but held out due to congestion in the terminal.
3. Yard Terminal operators – PSR has proven to reduce the average dwell time of cars in a terminal which shows these benefits:
   1. More unused track capacity.
   2. More efficient use of the Mechanical Department employees by better matching crews to scheduled arriving and departing trains.
   3. No “held out” trains due to congestion in the terminal from a bunching of train arrivals, so eliminating “dog catching” expenses to bring the held out train the last 10-20 miles, including eliminating taxis.
   4. Not having to worry about adequate motive power for the next train.
   5. No rested crew issues to staff the next train.

4) Operating Ratio Improvements by increasing the ratio top line revenue and reducing the ratio bottom line number by lowering expenses:

1. Eliminating expenses, not just lowering expenses, by avoiding nonproductive costs, such as deadheading crews, cab hops and “Dog Catching” trains held out of terminals.
2. Eliminating Held Away From Home Terminal penalty expense.
3.  Reducing and often eliminating Away from Home hotel and food expenses.
4. Increasing revenue due to shippers having the confidence of a “trucker like” scheduled transit time, so they will ship more by rail than truck. Shippers like PSR.
5. Investors in railroad stocks:
   • Increase the market value of the publicly traded stock. Just ask investors in CSX or CP stock.
   •  More profits for a PSR operator.
   • More revenue due to satisfied shippers.

There are significant reasons that PSR has become the 21^st Century way of railroading. However, for a railroad to convert to this new paradigm, there must be Perfect Execution. That is a management challenge, often difficult to execute. Second, shippers, especially prospective new customers, must be educated to the benefits of PSR. Railroads practicing PSR are offering a service just like a trucker promises, a planned total trip schedule. However, the railroad can offer that service at a significantly lower cost than its truck competition. Everyone wins with PSR.

About the Author

Bruce M. Flohr began his railroad career in 1965 as a Management Trainee at the Southern Pacific. As part of the Management Training Program, Bruce worked as a brakeman in Eugene, Ore., then in each of the various departments for one year. He then became an Assistant Trainmaster in Tucson, Ariz., followed by Assistant Trainmaster in Los Angeles Terminal. Next he was in headquarters as an Assistant to the Vice President of Operations leading a group to enhance management decisions based on the then-new computer generated reports on railcar location status. From there, he became an Assistant Superintendent of the Roseville Terminal, where duties included supervising snow removal operations over the Sierra Nevada main line at Donner Summit. This was followed by Terminal Superintendent of the New Orleans terminal for two years. In 1971, Bruce was promoted to Division Superintendent of the San Antonio Division, which was the longest in track-miles of the nine divisions of Southern Pacific and had the second-largest number of employees of any division. During this assignment of four years, the San Antonio Division improved its record for personal injuries and accidents from the worst of the nine divisions to the best of that group. Also significant with his SPemployment was that another member of his Management Trainee Class was Rob Krebs, who eventually became CEO of BNSF. Rob and Bruce had parallel promotions during the time they worked for Southern Pacific.

In 1975, Bruce was appointed Deputy Administrator of the Federal Railroad Administration (FRA). His responsibilities included all enforcement activities of FRA Regulations, lead person for all rail safety and personnel issues. He headed the Railroad Test Center at Pueblo, Colo. (at the time when the first FAST track for heavy use testing was initiated), and then was President of the Alaska Railroad, when it was still owned by the Federal Government. In 1977 on the election of Jimmy Carter as President, Bruce became FRA Acting Administrator.

In July 1977 Bruce resigned from the FRA and founded RailTex, Inc. This company began in a bedroom of his home in San Antonio. The first business was renting open-top hopper cars to shippers of rock products, primarily crushed rock for construction projects. That fleet grew to 620 railcars, with haulage applications in Alaska, California, Texas, Ohio and Florida. In 1983, RailTex acquired its first railroad, the San Diego & Imperial Valley. The short line segment of RailTex grew over the next 17 years with the company acquiring 32 separate lines operated as 23 railroads. These railroads were in Oregon, California, Texas, New Mexico, Michigan, Indiana, Virginia, North and South Carolina, Georgia, Vermont, New Hampshire, Massachusetts and Connecticut, and in Ontario and Nova Scotia, Canada. The company sold its railcar rental business in 1991 and subsequently became the largest short line railroad operator in the world. In 1993 RailTex became a publicly traded company on the NASDAQ stock exchange. RailTex also invested $21 million in the railroad privatizations in Brazil and Argentina and had employees working as consultants to rail operations in Kazakhstan. Bruce retired as CEO in 2000 at age 60. In 2001, the company was sold to RailAmerica at a time when revenues were $176 million and had assets of $368 million. Genesee & Wyoming eventually purchased RailAmerica.

Significant for RailTex was receiving the Short Line Railroad of the Year Award from Railway Age twice, and the Golden Freight Car award in 1991 for its innovative marketing program from Modern Railroads (which Railway Age acquired in 1992). Flohr served on the Association of American Railroads Executive Committee for six years and was Chair of the Regional Railroad Association for four years, prior to its merger with the Short Line Association to become today’s ASLRRA (American Short Line and Regional Railroad Association).