Impact of Precision Scheduled Railroading on the Industry

This Wall Street Journal article is a great "coloring book", but I have to wonder to what extent has it increased my knowledge of Precision Railroading:

https://www.wsj.com/articles/a-revoluti ... mail_share" onclick="window.open(this.href);return false;

Fair Use:

DECATUR, Ill.— Norfolk Southern Corp. executives, employees and customers holed up for five days recently to work on a complex puzzle. How could they unclog a sprawling freight yard in central Illinois without triggering chaos?

They asked a multitude of small questions akin to word problems in a math class. Their answers point toward some of the most sweeping changes to the nation’s railroad system in decades.

There are 19 railcars bound for Kansas City that reach Decatur around 7:10 a.m. most days, about two hours before their connecting train. That isn’t enough time to unhook the cars, which are loaded with freight like coiled steel and corn syrup, move them along a grid of tracks, then attach them to the outbound train. So they sit in Decatur for an average of 26 hours—well over Norfolk Southern’s goal of 20.

Pushing back the Kansas City departure to 2:30 a.m. the following day would fix that problem but generate another: 21 cars from Conway, Pa., would miss the train to Kansas City. One fix would be to have the Conway train arrive later
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I’ve read on some B&M forums that they had operational efficiency evaluation and modeling done by MIT. Contrary to the Hunter idea about super long trains, smaller and more frequent trains were more efficient, and less costly. Maybe NS should consult with former B&M president, Alan Dustin instead of copying Hunter.

If I recall correctly, one of the guys who participated in our discussion was involved with the study. They found that short trains made better time over the road, as well as being easier to make up and take apart at the originating and terminating yards. There were less problems of excessive deep time because there was usually a second train, if the first connection was missed.

I believe the suggestion for "more frequent, more reliable, shorter trains avoiding intermediate yards" was one of many made by an MIT-supported 1973 Task Force on Rail Productivity jointly sponsored by the Council of Economic Advisers and the National Commission on Productivity, also including the suggestion for containerizing merchandise traffic. The biggest Dustin-era MIT research was focused upon equipment utilization driven by AAR and FRA efforts to deal with 1970's equipment supply problems. An MIT researcher, who developed a car forecasting and linear programming freight car demand and distribution model, Mike Messner, went to work for Dustin at the B&M as head of car utilization and distribution. Additionally, subsequent MIT studies showed that advances in railroad productivity coming out of the 1980's had largely benefited shippers in comparison to the rail carriers, carload service unchanged and unreliable with transit variability correlated to the number of yards in which any given shipment is handled, and freight car productivity also relatively unchanged. So, EHH's PSR is really of a different era with intermodal service at the vanguard of head-to-head truck competition and often offering those multiple departures, focused upon long-persistent issues with railroad service reliability, asset utilization and overall carrier financial performance.

Thank you. The discussion that I was referring to was one about the GP40-2 order. The question was raised about how that model was chosen. Previously the power was mostly ~2000 hp GP9, 18, and 38. The 40 had additional 1000 hp. The other part asked why not get SD40s. The answer was twofold. GP units were chosen because they’re more flexible. There was a famous picture of a 40 on a local serving the old Watertown Branch. The high powered units were chosen to speed up the schedule over what the older power could muster, since a typical 3 unit set of GP40s offered 3000 more horsepower than the 3 unit sets of GP38s. It went on to say that short, frequent services got over the road easier. There were more connections for a car to make. This reduced the chance of a car dwelling excessively to make a connection.

You might be right about the failings of this approach. Look how the plan was in place for more GP40 sets to be broken up with slugs. Part of this may have had no correlation to speed, but the power shortage, and the difficulty of procuring more power while in bankruptcy.

Interesting article in Train's magazine newswire concerning how the new way CSX & NS are assessing demurage charges to their customers as part of PSR. A small lumber transload facility in NJ. filed a complaint with the STB about how all of the penalties now being assesed to them is hurting their company.

Fair use quote:

WASHINGTON — CSX Transportation and Norfolk Southern say their higher demurrage charges will encourage shippers to load and unload freight cars more quickly, which will reduce the number of cars online, make their networks more fluid, and ultimately improve service.

But a mom-and-pop lumber yard in southern New Jersey says the charges are diverting freight to trucks — and wiped out its entire profit last year.
The Delanco, N.J., lumber transload operation rarely received a demurrage bill in 29 years, Shea tells Trains. Then last year, when the allowable unloading time was reduced to one day from two and the company handled record volumes of nearly 1,500 cars, the charges began to mount.

Part of the problem was self-inflicted, Shea says, because volumes last spring built up faster than the lumber yard could handle on its nine-car spur. At one point, more than 40 cars were sitting in Conrail’s Pavonia Yard in Camden, N.J., and were buried there by other freight cars while awaiting placement, Shea says.

But the prime culprit for the soaring demurrage bills was CSX’s policy of charging demurrage on weekends, Shea says. Conrail serves Shea’s lumber yard only on weekdays.

Also contributing factors: The reduction in free time means Shea can’t earn positive credits for unloading a car in one day, and the Conrail car-ordering and CSX and NS demurrage clocks are out of synch, so Shea might accrue two days of demurrage charges before it sees the car.

The rest of the story:

http://trn.trains.com/news/news-wire/20 ... er-company" onclick="window.open(this.href);return false;

I would bet that this is going to bring more scrutiny to the railroads by the STB in regards to PSR. They had better be careful how far they carry some of these things or some kind of government regulation may follow. That would not be good for the industry.

In the 1970's/1980's railroads pulled up tracks and "rationalized" their mainlines.
You see where that got them when business boomed in the 90's.

But it looked good on paper back then, probably looked good for investors, as well.

Now, along comes "PSR" which seeks to rationalize as well, but this time it's people and equipment. Sumthin' tells me that this is gonna bite 'em on the caboose end, similar to what happened before.

- J.Albert

Time for my "Maiden Post" on the new platform!

I think the best analogy coming to mind for operations under a Precision Railroading model is that of a funicular railroad. This is where two cars, one at "A" and the other at "B" start moving in opposite directions towards one another.

Right where there would otherwise be a "cornfield meet", there is a stretch of double track, and the cars pass without incident.

Therefore, under the PR model, that stretch of double track is where two trains would meet. That meet would occur when each train was, say, five hours into their journey. At the meet, the trains exchange crews, and each crew is on its way home, with no lodging costs and no HAFHT ("Cabin Time", "Alimony Pay"). The two hours is the necessary "pad" for "prep" and contingencies.

Now the drawback is for traffic flowing opposite to that plan. That includes Intermodal, which often is on a schedule and with severe penalties from delays.

It also does not bode well for passenger train operations, but that is left for discussion at other forums.

I failed to reply to my last post about the MIT studies. For sure tight schedules are efficient in many ways. More car, locomotive, and crew turns. Better connections help too. I’ve seen the results of how customers are hurt by the new approach. Many times customers with 5-7 day per week service are told that they’ll only get every other day, or even two days per week. Where I am we had two locals. Both handled large paper mills. Both jobs worked M-F. Now they’re combined. Both places are in opposite directions. There is other work along the way. One place got M-W-F, while the other got T-Th service. They were told to buy a track mobile if they needed an interim spot on their off days. Many plants don’t have room to store excess cars. They need daily service. The railroads seem to forget that service is what brings in the cash.

Where do we go from here. Should the network be further pruned to all but the biggest customers? Is the answer more bulk distribution centers, then scrap the service to the small customers? Maybe it is viable, but maybe not. Maybe regulation is headed back. Maybe the railroads took too much advantage of a good thing. My thought is that it’s like drinking. Maybe having a beer or two after work makes you feel pretty good. Where’s the point where too much of a good thing becomes detrimental? How many beers before it’s not so good anymore? Furthermore, when deregulation happened there were more players in the market. Now each half of the country has a duopoly, and some a monopoly, except where the Canadian roads add to the choices.

I "just got around" to Brian Solomon's June '19 TRAINS column.

I had previously dismissed his material as "railfan chatter", but after reading his informed and analytical column regarding "Precision Railroading", he gained new respect with me, and I will no longer simply pass over his columns.

I’m glad that you are taking Brian Solomon’s work seriously. I’ve been friends with him for over twenty years. He has interviewed me about a book on locomotives, and he has also asked other mutual railroader friends for their input. My opinion is that he does his homework.

Might it be time for some "rethinking" of Precision Scheduled Railroading strategies?

This Wall Street Journal article might be suggesting just that:

The railroads may also be losing some traffic from self-imposed changes to their networks, Mr. Hatch said. Several companies, including Union Pacific, Norfolk Southern Corp. and Kansas City Southern , are in the midst of broad operational overhauls that involve running fewer, longer trains on tighter schedules, a strategy known as precision-scheduled railroading. Some shippers are moving their business away from the rails while the changes are implemented.

One benefit of the weaker volume is that it may be less challenging for some railroads to overhaul their operating schedules and procedures without the added pressure of having to handle more railcars.

“Clearly, the better time to implement such a fundamental change as a PSR-based operating plan is in a period that is absent volume pressure,” Loop Capital analyst Rick Paterson said, referring to the precision-scheduled railroading strategy that railroads are adopting.

No question whatever, railroad managers, especially in Operations, can be accused to one extent or the other as viewing their traffic base as "captive", or otherwise "if you don't like it, walk". For much of the base, such as Products of Mines. Agriculture, and Forests, that holds true. But so much of the "new" business - containers, piggyback - came from other sources; namely highways. It can just as easily go back.

As the Precision Railroading model develops, the industry must be ever vigilant to distinguish between the customers that can be "bought" with favorable rates in exchange for the "you ship it when we say you will" mentality, and those not overly rate sensitive, but hold "are you here to serve us, or do you think it's vice versa"?

Admittedly, this is a Union "take" on the impact of Precision Scheduled Railroading, but it also is "worth a review" by the other stakeholder communities:

https://ttd.org/policy/precision-schedu ... ail-system

Fair Use:

…Since the first U.S. freight trains departed from Baltimore nearly 200 years ago, the freight rail industry has served as the backbone of domestic commerce, providing reliable, safe and responsive service and in the process creating and sustaining good union jobs. The success of the rail industry is premised on the fair treatment and utilization of its frontline workforce, balanced economic regulations and an expectation that railroads will meet their service obligations. Unfortunately, the introduction of an operating model known as Precision Scheduled Railroading (PSR) threatens to weaken these conditions and undermines our freight rail industry.

Freight railroads today are generating record revenues and operating at high levels of efficiency. But for some, these profits are not enough. To satisfy their outsized needs, short-term investors and hedge fund managers have forced PSR on large segments of the freight rail industry. This decision is not based on what is best for customers, workers, or even the long-term needs of the industry—it is about satisfying what Transportation and Infrastructure Committee Chairman Peter DeFazio described as the “Wall Street Jackals” who now dominate this sector.
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I've noted at another topic that the "momentum" railroad securities are enjoying is largely, I believe, driven by the outsized dividend and stock repurchases endemic today. This represents, again drawing from JGK, an "unreported liquidation" in the same manner as was that derived from "deferred maintenance" from "back in my industry days (70-81)". I have greatly reduced my exposure to the industry within my portfolio (which admittedly makes possible my overseas journeys of late and a Lex in the garage) from five common stocks to one today. It will be with heavy heart should I deem it's time to "pull the pin" on the last.

disclaimer: author hold long position UNP

After a quick review of April '20 TRAINS, and the PSR reportage within, I walk away with the thought; "what took the industry so long"?

Expressed otherwise, "how has the nature and scope of the industry changed so much in the past thirty years to make operating practices being implemented today that they could not have been implemented earlier"?

disclaimer: author holds long position UNP