CSX overhauling intermodal; UP customers affected

Download Union Pacific’s the entire matrix in Excel form at https://www.up.com/customers/announcements/intermodal/allintermodal/IM2018-260.html. Click on the word “matrix” in the first paragraph.

The peak season for intermodal traffic is fast approaching, and CSX in late July announced numerous changes to interline service, in particular, those affecting Union Pacific customers with eastbound shipments. The changes are in effect as of Sept. 17, 2018.

CSX eliminated 197 of 301 origin-destination pairs provided through interline service, citing low volume (in about one-third of cases, no volume) as the reason. Among the affected destinations are Baltimore, Charleston, Buffalo, Pittsburgh, Portsmouth, Savannah, Nashville and Columbus. CSX said that UP was consulted on the changes, and that customers were notified in advance.

UP’s Premium Marketing and Sales department addressed CSX’s changes in an Aug. 3, 2018 letter to customers:

“As a result of CSXT interline intermodal service changes, Union Pacific is no longer able to offer a number of interline intermodal services to the eastern U.S. Due to the complexity of CSXT’s intermodal service changes, Union Pacific is providing a matrix to assist you in identifying any effects to your interline business with [us], as well as presenting adaptive solutions.

“Traffic in-gated before midnight on Sept. 16, 2018, will be handled according to the current plan. Beginning Sept. 17, 2018, the operating practices outlined in the matrix will become effective …

“We recognize that service changes can be inconvenient and untimely; however, the value of Union Pacific’s premium intermodal network is that we offer multiple intermodal routes and solutions …”

CSX’s changes primarily impact service out of Chicago, with some traffic shifting to Memphis. The changes “allow a more streamlined service product to Southeastern markets through the Memphis gateway that will take many route-miles off the existing route through Chicago and improve fluidity in our Chicago and Northwest Ohio yards,” the railroad said.

CSX’s second-quarter domestic intermodal revenue was “relatively flat on a year-over-year basis because of the line rationalizations that we went through in the fall of 2017,” CEO Jim Foote said during the company’s 2Q18 earnings conference call. “Our intermodal network needs a ton of work in order to become the efficient part of our system that it needs to be, and we’re just really beginning to get in there and start to figure out how to rationalize that big part of our business, so we can become much more efficient and have a much better product for our customers.”

Intermodal accounts for 44% of CSX’s volume, but in 2017 its intermodal revenue per unit of $633 was the lowest of the railroad’s business units. In contrast, UP’s domestic intermodal business increased 7% in 2Q18, due chiefly to tight truckload capacity.

UP’s plan to address CSX’s changes includes shifting some interchange traffic to Norfolk Southern, for some of the affected regions in the East.

On Sept. 4, CSX Executive Vice President Sales and Marketing Mark Wallace issued the following letter to its intermodal customers:

“With the start of peak season quickly approaching, we know that finding capacity and managing high demand is top of mind for your business. It’s our goal to deliver quality service during this critical time and our team has been planning to ensure I want to share with you some of the steps we have taken to ensure our terminals remain fluid during this important shipping period.

“Service: CSX is focused on providing a consistent and reliable service product for you. Heading into peak, our performance metrics are on an upward trend with availability and velocity improvements, and our longer train lengths translate to additional capacity for your freight.

“Strategic Measures: CSX started the year with the rollout of Estimated Time of Notification (ETN) for enhanced, real-time shipment visibility. Mid-year, we augmented storage policies for better asset utilization and implemented a new gate reservation process at key terminals to improve in-gate traffic flows. More recently, we instituted network changes, streamlining interchanges, exiting lanes and adjusting service to ensure the ability to maintain high service levels. Though timing on some of these network improvements have posed challenges, we are committed to being transparent and communicating proactively.

“Peak-specific Actions: CSX has a comprehensive plan to accommodate expected volume increases across three critical routes: Chicago to Jacksonville; Jacksonville to the Northeast; and Chicago to Syracuse. We have added train capacity to support more days of service as well as extended and new service with crews available to perform and locomotives placed strategically along our network.

At the terminals, additional lift equipment and personnel are in place where needed, additional chassis are being brought in, and we have solutions in place to manage off-terminal parking in multiple locations. In addition, we have stocked replacement equipment parts, secured local drayage and contracted emergency manpower, who are able to deploy on a 24-hour notice.

”CSX is confident that these measures and pre-peak planning actions will ensure your service needs are met this peak season. An essential part of this year’s peak success requires close collaboration and communication with our customers. While we strive to maintain a balanced train plan and ensure network fluidity, we ask for your help and cooperation in keeping terminals fluid.

“Large volume surges into terminals without notice or reservations, and containers dwelling greater than 48 hours, can adversely affect our ability to meet service needs. For our private asset and international customers, maintaining a right-sized pool of chassis at our terminals is important for fluidity.

“CSX appreciates the valued partnership we have with our customers and we share an interest in ensuring a smooth peak season. To achieve our desired outcomes, we believe it is important to maintain constant communication, keeping each other informed of expected changes or challenges.”*

*Editor’s Note: In modern corporate-speak, the word “challenge” is almost always substituted for the word “problem.” Among the examples are “service challenges.” Press releases frequently refer to “solving challenges.” Challenges are not solved. Problems are solved. — William C. Vantuono