Railroad Service Improvement Perhaps a C+

Written by Jim Blaze, Contributing Editor
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Precision Scheduled Railroading overall so far is not anywhere near “precise-delivery railroading.”

Quarterly reports traditionally are a financially portrayed score card written to investors. Equity and debt holders want to see how the railroads are doing.

The railroads don’t seem to talk much to their customers at these quarterly reviews. But there are a few messages that shippers should take away when listening. Yes, we do know that some important rail customers do listen in.

Here is the latest about what rail shippers should consider as they read the details in these financial reports. The good news is that a few of the Big Seven carriers are in fact telling us how their customer delivered service expectations are being met. 

CSX and Union Pacific continue to post their trending service delivered score cards. They do so even if the numbers are sometimes deteriorating. That’s important because they can manage to improve as long as they measure and share. That’s to be appreciated. 

The bad news is that customer-delivered shipments are slipping. The benefits that PSR was to eventually give as cost savings to customer supply chains are floundering. The improvement isn’t always continuous.

Let’s examine customer performance reports from two of the PSR railroads. Most Wall Street watchers have been impressed at their continued high freight capability. I’m likewise impressed.

After reviewing the first reports published openly by four of the Big Seven North American Class I rail carriers, here are this economist’s takeaways:

  1. Despite the pandemic, most financial results look relatively outstanding. The outlook by accounting and financial Wall Street watchers looks to be upbeat for significant year-2021 and into-2022 “returns” as traffic slowly returns to the slimed down and more productive railroads. Translation: Most of the fixed and variable costs of each freight train start have been streamlined. As traffic returns, the marginal cost of adding back each carload of new freight to a train is relatively small.
  2. Gradually, laid-off workers (furloughed is the word railroaders often use) will be hired back.
  3. The US track network has plenty of capacity to add back traffic. Yes, even to grow more volume as trains and ton-miles per day.

QUALITY OF SERVICE DELIVERED

Unfortunately, here is the darker side of the picture entering 2021. Railroad performance that counts for shippers is about reliable and consistent bullseye-like final shipment delivery to the final receiver’s dock. A truck’s expected-on-the-day promised scorecard is in the 96% and above range for valuable shipper inventory. That is typically measured within one to two hours of the achieved ETA target, certifying perhaps that marketing term PSR is likely one of the worst slogan misnomers in advertising history. PSR is an acronym beloved only by Wall Street.

ACKNOWLEDGE THE IMPROVEMENT

Railroad carload has in the past decade often seen a 60% to 70% on-time performance rate. Stop and reflect: That was an abysmal 30% to 40% failure range. Even worse is the case where some branch line locations might only be served by a local delivery train once or twice a week. That is a huge failure penalty as to the backup delivery plan. A missed day’s delivery can become a two-day or longer backup delivery.

CSX and Union Pacific were the first to recently report their year 2020 service results. The bad news is that even with less traffic volume to handle each day across their track networks because of the pandemic traffic impact, their rail carload on-time service delivery averages have deteriorated.  

SCORE CARDS

Here are a few score cards independently graphed by using each railroad’s quarterly presentation website slide data. As a reminder: Averages suggest a pattern of some below and some above as well as differences in selected lanes as opposed to specific lanes.

Union Pacific service delivery trend for quarter 1 to Quarter 4 of 2020

Next are two graphs showing the longer two-year running report card record shared publicly by CSX. 

CSX service delivery trend 2019 to 2020 reported by quarter

Translation: There is no continuous quality improvement pattern yet for either rail carrier. There should be an expected quality target range.

Based on public and private marketing and operation studies, here is what might be a best-of-rail-freight performance:

As an illustration, here is the pattern some of the PSR railroads have been reporting. It’s a hypothetical look at the change in the distribution of arrival times that final carload receivers (shippers) are seeing. There is still some bunching of railroad cars before and after the date that the warehouses or production lines are set up to receive and process the goods. Theese graphs were prepared by researching the past eight quarters of each railroad’s reports to investors. It is public information. Not all carriers are publicly sharing these delivery customer score cards. Warning: Each railroad uses its own productivity/delivery formula. Therefore, no two carrier’s metrics will be identical:

CONCLUSIONS

The marketplace is the real determinator of reliability. That assessment takes place when overtime shippers react to a combination of rates and services promised vs. the services delivered. Entering 2021, there is not much evidence of a truck-to-rail carload mode share shift. Why? In part because carload service delivered has not been on a continuing improvement curve. Customers should be questioning where and when the promised shipper improvements will show up as “world class.”

Yes, a few of the Big Seven railroads are reporting quarterly measured improvement. But beware the carrier that reports only when it has a continuing good score change. What is your opinion of required performance? Even if you disagree; let’s engage in a dialogue. 

Independent railway economist and Railway Age Contributing Editor Jim Blaze has been in the railroad industry for more than 40 years. Trained in logistics, he served seven years with the Illinois DOT as a Chicago long-range freight planner and almost two years with the USRA technical staff in Washington, D.C. Jim then spent 21 years with Conrail in cross-functional strategic roles from branch line economics to mergers, IT, logistics, and corporate change. He followed this with 20 years of international consulting at rail engineering firm Zeta-Tech Associated. Jim is a Magna cum Laude Graduate of St Anselm’s College with a master’s degree from the University of Chicago. Married with six children, he lives outside of Philadelphia. “This column reflects my continued passion for the future of railroading as a competitive industry,” says Jim. “Only by occasionally challenging our institutions can we probe for better quality and performance. My opinions are my own, independent of Railway Age. As always, contrary business opinions are welcome.”

Categories: Class I, Freight, Freight Forecasting, Intermodal, News Tags: , , ,