NEARS: Shippers Panel Pulls No Punches

28.April, NEARS 2021 Virtual Conference –  NEARS President Dennis Wilmot moderated DuPont Category Manager Dwight Price and US Rail & Logistics’ CEO Wes Adkins in a candid discussion of the current rail service environment from the shipper’s perspective. Key takeaways:

“Just move my stuff. We shouldn’t have to keep figuring it out. And yet we keep having to figure it out time and again.”

Averaged system metrics don’t relate to real-time local performance

“The problem with an average is, it’s an average … it doesn’t measure local service. [Average train speed – that doesn’t cover local placement. How well you do spotting and pulling your customers at a local level, [and measuring] Local terminal performance is important: are you building your trains at the right time? [Those would be valuable] metrics.”

“There are a lot of different metrics that railroads don’t report that shippers keep track of, such as, how quickly do I get a response from customer service? How quickly do I get a rate?”

PSR benefits to shippers hard to see

“PSR was painful, certainly as implemented by csx. In general I see PSR as meaning the railroads aren’t that flexible. They weren’t that flexibile to begin with. The railroads are pushing to get shipper cars off-line … The railroad [service] budget only allows for exactly for what they forecast, and there is never a surplus there. … We haven’t reduced the size of a single one of our railcar fleets because of PSR.”

There have been some positive trends in how they are streamlining cars through their network. As the railroads continue to get better at executing their plans you’ll start to see velocity go up. Shippers need to be ready for that – that creates demurrage and embargo situations. We always encourage shippers to analyze the 90-day average. You’re starting to see some trends and metrics have positive results from PSR.

“[The railroads] have been saying for 25 years, ‘we want to be easier to do business with.’ But [they] aren’t any easier to do business with. Every [DuPont] plant has some kind of [unique] issue with the [rail] carrier. The railroads have to help the shippers with that. There is a lack of [staff] understanding at the shippers.

“One of the things I think the railroads do well is develop their people. They move their people around and push them up the organizational chart, and have the more rounded [personnel]. … [But] that can have a negative impact. There is a lot of new technology with the railroad platforms for how you can request rates or how you can flag a car to be expedited. [Railroad staff need to gain more expertise with those systems].

RR’s are investing heavily in asset resilience; not as much in personnel resilience

“The capital spending is there. Railroads have never been in better shape. It’s a people issue. One carrier [furloughed] a bunch of crews because of the pandemic, and [now that demand has revived, they say] it takes six months to qualify crews. Well, what happened to all those other guys?”

“When you’ve got an Operating Ratio in the [60% range], maybe the railroad could have enough staff to serve their customers.”

(Referring to unusually harsh Spring 2021 weather events): “Weather comes every year, can’t you prepare for it? A lot of shippers don’t have rail experts in house, they rely on the railroads to provide the information. The ones that have experts know [help shippers] plan a little better.”

Consolidation is not necessarily better

(Referring to the prospective merger of KCS with another Class I carrier): “Every single [merger is]  painful. The question is, how is this pro-competitive and how will this help shippers? The railroads already interchange. Increased competition that will lower rates? . . . [I’m just] not seeing [how that will be].”

“I’ve had experience as a shipper using the CP and KCS as a single move. It took some work getting them on the same page but once we did the operation went very smoothly.”

“[The UP] merger was bad all the way around. Conrail wasn’t very helpful either except that at the end of the day freight rates in New Jersey plunged because now there was competition (emphasis added).

“In the late ’90s Wall Street was confidently predicting a transcontinental merger. Then the STB said all mergers must be pro-competitive, lowering the value of the franchise. That’s why we haven’t seen a transcontinental merger.”

Effects of Congestion

JB Hunt says the intermodal network is 12-18 hours longer than they expected. Getting equipment is difficult. Ports are tied up and containers are tied up. Draymen are tied up. It just multiplies. Now the steamship lines are yanking containers from the midwest so they can load them in asia

“If intermodal is a day later, my company doesn’t want to ship on it. Trucks are 90-95% relability. Railroad’s touting 80% reliability is a non-starter.

Transloading plusses and minuses

I’m a huge believer in transloading where it sits today. Its a lot easier to build a transload facility than develop a terminal. We’re going to struggle in the future to havee enough truckdrivers to manage the demand. That’s where the railroads are very well positioned.

From a product security perspective my engineers are against transloading.

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