• Post EHH Changes for CSX

  • Discussion of the operations of CSX Transportation, from 1980 to the present. Official site can be found here: CSXT.COM.
Discussion of the operations of CSX Transportation, from 1980 to the present. Official site can be found here: CSXT.COM.

Moderator: MBTA F40PH-2C 1050

  by ccutler
 
QB 52.32: It sounds like you have insight into the implementation of CSX pricing policies and I wish you success. I just wonder about the cost/benefit analysis for shippers and wonder whether CSX and other railroads try to capture too much of the short term benefit from shipping by rail, making long term advantages of investing in facilities for carload shipping too small for clients' attention.
  by QB 52.32
 
rr503 wrote: Sun Nov 10, 2019 1:53 am I honestly cannot think of any railroad who stated that they'd pursue any traffic that'd pay for its carriage + the marginal cost of capacity. CSX certainly has been striking a different note lately -- including, recently, distancing them somewhat from the OR metric in recognition of its reductive quality -- but I would say this has yet to translate into good shipper scores or significantly increased traffic. I'm optimistic, but cautiously so. Talk is cheap, and the economy seems to be slowing a bit.

As you wrote, talk is cheap, so if you want to understand that railroads will not simply pursue market share or revenue gains that takes capacity reducing reliability and can't justify capital investment, just look at recent history and their behavior moving forward.

Review this thread and you will see that, yes, CSX has been getting much improved good customer scores. One very large railroad customer just publicly acknowledged preference for CSX's PSR implementation vs. those slower implementations underway. In terms of significantly increased traffic, it's happening where it can justify capital investment (see above).
Something I'm going to enjoy watch unfold over the next decade or so is how PSR interfaces with train length in what seems to be like likely scenario of one person train ops. There is a not-insignificant set of infrastructure, reliability and dwell costs incurred with increased train lengths; I'm curious as to whether reduced fixed costs of operation will help swing the needle towards shorter, faster traffic.
PSR has proven that with technology and targeted supporting capital investment you reduce costs and increase capacity and reliability with fewer, bigger trains. I don't see one-man crews as changing the dynamic visa vi assets and capital investment to swing the needle towards shorter, (questionably) faster. Instead, that would take a watershed governmental transportation regulatory or promotional change, perhaps a technology-based change.
  by Dick H
 
One man crews will last exactly until the first accident with fatalities.
  by gokeefe
 
In fairness to CSX and the railroads generally current traffic numbers are off in part due to lower intermodal demand resulting from the trade war with China.
  by rr503
 
QB 52.32 wrote: Sun Nov 10, 2019 9:12 am As you wrote, talk is cheap, so if you want to understand that railroads will not simply pursue market share or revenue gains that takes capacity reducing reliability and can't justify capital investment, just look at recent history and their behavior moving forward.

Review this thread and you will see that, yes, CSX has been getting much improved good customer scores. One very large railroad customer just publicly acknowledged preference for CSX's PSR implementation vs. those slower implementations underway. In terms of significantly increased traffic, it's happening where it can justify capital investment (see above).
"The railroads have run this way" is not an argument for them being right, it's a statement of fact. Railroad costing is famously fraught, but a quick look through RVC scores for traffic shows that the vast majority of traffic covers considerably more than the marginal cost of carrying it. It's difficult to get an exact approximation of latent capacity on most systems, but if the statement of railroad execs, current trends in yard dwell times and current trends in traffic are any indicator, there indeed exists significant slack in the system for growth.

Re: CSX customer scores, yeah, they've been getting better, but against what baseline and in what absolute quantity? They're still well below anything a trucker would feel confident displaying publicly.
QB 52.32 wrote: Sun Nov 10, 2019 9:12 am PSR has proven that with technology and targeted supporting capital investment you reduce costs and increase capacity and reliability with fewer, bigger trains. I don't see one-man crews as changing the dynamic visa vi assets and capital investment to swing the needle towards shorter, (questionably) faster. Instead, that would take a watershed governmental transportation regulatory or promotional change, perhaps a technology-based change.
There are a lot of costs that come with that -- one time charges for lengthened sidings, increased delay magnitudes when knuckles inevitably break, safety risks that come when long trains aren't structured well, etc. You certainly _can_ run them well, but it isn't like there's no tradeoff.

PSR at its heart is about a fluid system -- about trying to combat the unitary view of scale economy taken by railroads. PSR means reducing yard dwell, cutting down on cars on line, running manifests rather than unit freights, etc. Long trains are an efficiency strategy, but if you think about it they don't mesh all that well with the larger operational strategy at hand. They complicate yard ops, by fiat of having to gather cars for them they increase yard dwell, they generally are forced to work intermediate yards, etc. They aren't exactly creatures of the railroad of constant movement, they're tools necessitated by fixed train start costs, or crews. If you reduce those costs, it may well be that the costs of all the negative effects of long trains countervail crew savings -- may of course being the operative word there; I cannot quantify those costs with public data.
  by ccutler
 
Isn't PSR just implementing operations management batch-processing techniques long ago developed in other manufacturing processes? Is PSR revolutionary, or is it an indictment of sloppy prior management practices?
My concern isn't with PSR...it's the higher rail tariffs applied alongside it potentially driving away future growth. Then again, I'm not inside the industry, and talk is cheap. I could not possibly be happier if my inference is wrong, and CSX sees material traffic growth.
  by rr503
 
ccutler wrote: Mon Nov 11, 2019 10:55 am Isn't PSR just implementing operations management batch-processing techniques long ago developed in other manufacturing processes? Is PSR revolutionary, or is it an indictment of sloppy prior management practices?
My concern isn't with PSR...it's the higher rail tariffs applied alongside it potentially driving away future growth. Then again, I'm not inside the industry, and talk is cheap. I could not possibly be happier if my inference is wrong, and CSX sees material traffic growth.
Yeah, it's a somewhat modified version of the Toyota Production System applied to railroads...which, you know, makes sense, both for cost reasons and because that's the direction most industries are going.
  by gokeefe
 
The problem with applying "lean" process management to CSX is that it presumes the operation as it existed wasn't "lean" already.

All that's really happened is that CSX has chosen to abandon lower yielding customers in favor of trying to maximize higher yielding traffic.

There's nothing special or particularly inventive about that. What really changed with CSX under PSR was their willingness to serve certain customers. Doing this allowed them to reduce costs elsewhere.

It's all well and good but at the end of the day it points towards an inability to innovate and improve opportunities with existing customers.

That's just a sign of weak management and an inability to effectively deploy capital for better ROI.
  by mmi16
 
PSR in the case of CSX is nothing more and nothing less than Mantle Ridge hoovering all immediately available and easily mined cash from the operation at the expense of giving their customers the services they expected for their transportation dollars.

The hedge fund sucking the 'life blood' out of the soon to be corpse.

Now that Mantle Ridge has gotten all the 'easy' returns they are cashing in their stock position, by getting CSX to buy back their shares at 'today's price, not the price the shares would have dropped to had they been handled on the open market.
  by ccutler
 
All types of criticisms have been leveled against PSR but the higher current profits have proven that railroads are worthy of investors' capital. I am pleased to see more reliable operations at CSX and hope they do expand their service offerings to more customers. The transition was probably unnecessarily rough but the industry did need some disruption. My main concern is that pricing is probably too aggressive and management may be chasing away long-term business rather than attracting it. I certainly don't want to see NY and NJ trash revert to the highways from CSX because of an overzealous CSX official's revenue ambitions, nor insulated boxcars of wine, or loads of steel, nor combustible chemicals moving to trucks. Rail's share of scrap metal shipments has fallen below 50%...that seems like an obvious market to recapture natural clients.

Rail officials need to think more about long-term deals with clients that assure them of a material advantage to shipping by rail, rather than thinking about what they can achieve in the short term in the spot market. I "get" the issue with avoiding overcrowded terminals and pricing for the true costs of servicing smaller clients. I suspect that the new teams focused on operations will be better equipped to handle smaller clients intelligently, if they are willing to put a little more effort into it.
  by QB 52.32
 
rr503 wrote: Sun Nov 10, 2019 11:22 pm
"The railroads have run this way" is not an argument for them being right, it's a statement of fact. Railroad costing is famously fraught, but a quick look through RVC scores for traffic shows that the vast majority of traffic covers considerably more than the marginal cost of carrying it. It's difficult to get an exact approximation of latent capacity on most systems, but if the statement of railroad execs, current trends in yard dwell times and current trends in traffic are any indicator, there indeed exists significant slack in the system for growth.
I will take the experience and strategy moving forward of the railroad industry's management along with fact-based understanding of railroad markets and finances as an argument "of being right" over an argument that there's a rabbit to be pulled out of the hat, if only. Of course the vast majority of traffic covers considerably more than the marginal cost of carrying it, but because railroading is so capital intensive, the crux is whether there are adequate returns vs. the cost of capital. I'll also take the 30 some-odd year experience of what's worked and what hasn't over the argument against railroad costing. No doubt there is capacity available for targeted business, but, keep in mind defining capacity takes much more than yard dwell or "current trends".
Long trains are an efficiency strategy, but if you think about it they don't mesh all that well with the larger operational strategy at hand. They complicate yard ops, by fiat of having to gather cars for them they increase yard dwell, they generally are forced to work intermediate yards, etc. They aren't exactly creatures of the railroad of constant movement, they're tools necessitated by fixed train start costs, or crews. If you reduce those costs, it may well be that the costs of all the negative effects of long trains countervail crew savings -- may of course being the operative word there; I cannot quantify those costs with public data.
The past is very likely prologue when it comes to crew cost reduction and train size. All the while crew sizes have been incrementally reduced since the 1980's train sizes (and load factor) has increased unabated. The capital costs of infrastructure and locomotives, as well as the reduction in variable costs like fuel, has outweighed labor costs in the equation of fewer, bigger vs. more, smaller trains.

An anecdote for consideration for those who focus on big vs small trains comes from Conrail who was a first-in-class premium intermodal provider. One of their biggest intermodal trains also was one of their fastest, carrying sizable business with high service standards moving under contracted penalty and reward provisions. Even though service was provided on one of its biggest intermodal trains, they were very successful in reliably providing one of their fastest services.
  by rr503
 
QB 52.32 wrote: Wed Nov 13, 2019 7:05 am
I will take the experience and strategy moving forward of the railroad industry's management along with fact-based understanding of railroad markets and finances as an argument "of being right" over an argument that there's a rabbit to be pulled out of the hat, if only. Of course the vast majority of traffic covers considerably more than the marginal cost of carrying it, but because railroading is so capital intensive, the crux is whether there are adequate returns vs. the cost of capital. I'll also take the 30 some-odd year experience of what's worked and what hasn't over the argument against railroad costing. No doubt there is capacity available for targeted business, but, keep in mind defining capacity takes much more than yard dwell or "current trends".
I'm surprised that an observer as informed as yourself sees there being one 'correct' path that all Class 1s have taken over the past, say, 3 decades. Whether it be PSR, the vision-less mix espoused by the likes of UP pre-PSR, or BNSF's more growth centric model, many different approaches have been taken to running railroads, even within companies. Take CN: for years, especially towards the end of Harrison's tenure, their traffic growth levels were low. Now, they're outperforming most of the rest of the industry -- partially on account of some exogenous factors, but in large part because they've chosen to prioritize growth. And yes, they are doing well with it.

For whatever it's worth, there's a large body of historical scholarship that points towards this issue of myopia in rail management. The observers in the 1970s tasked with revitalizing the industry pointed out the exact issue I'm discussing here: railroads focus too heavily on cost-effectiveness metrics, and cut themselves out of growth. See:

https://babel.hathitrust.org/cgi/pt?id= ... 2up&seq=58

As for the cost of capital issue, the STB estimates that to be about 10%. More than half of all rail shipments are >180 on the RVC scale, and operating ratios are in the 50s-60s these days. I daresay there's pursuable traffic that will (more than) cover their marginal capital costs, if extant. The question of capital costs is of course similar to that which asks whether or not railroads are at capacity. While there are of course massive nuances to the issue, the existence of a traffic decline and a fluidization of terminal areas generally produce latent capacity.
QB 52.32 wrote: Wed Nov 13, 2019 7:05 am The past is very likely prologue when it comes to crew cost reduction and train size. All the while crew sizes have been incrementally reduced since the 1980's train sizes (and load factor) has increased unabated. The capital costs of infrastructure and locomotives, as well as the reduction in variable costs like fuel, has outweighed labor costs in the equation of fewer, bigger vs. more, smaller trains.

An anecdote for consideration for those who focus on big vs small trains comes from Conrail who was a first-in-class premium intermodal provider. One of their biggest intermodal trains also was one of their fastest, carrying sizable business with high service standards moving under contracted penalty and reward provisions. Even though service was provided on one of its biggest intermodal trains, they were very successful in reliably providing one of their fastest services.
You may be right, but as you yourself said, past trends are not necessarily predictive. Given the supply chain forces pushing people towards minimum inventory, and given the very real costs and safety risks incurred in running longer trains, this may well change.

The CR example, BTW, isn't a perfect one. A long train back then would be a medium or short train for today's railroads.
  by QB 52.32
 
rr503 wrote: Wed Nov 13, 2019 12:42 pmI'm surprised that an observer as informed as yourself sees there being one 'correct' path that all Class 1s have taken over the past, say, 3 decades. Whether it be PSR, the vision-less mix espoused by the likes of UP pre-PSR, or BNSF's more growth centric model, many different approaches have been taken to running railroads, even within companies. Take CN: for years, especially towards the end of Harrison's tenure, their traffic growth levels were low. Now, they're outperforming most of the rest of the industry -- partially on account of some exogenous factors, but in large part because they've chosen to prioritize growth. And yes, they are doing well with it.
All Class 1 railroads (managements) have moved and are moving in the same strategic direction to one degree or another, responding to the real world of our economic and political systems, their derived demand and competitive advantages within the marketplace, and financial cost and railroad industry structures, as well as what's worked and what hasn't since deregulation. It's why BNSF is focused upon long-haul intermodal to Texas, among other lanes, instead of the I-5 corridor, UP focused upon Mexico and not Denver, no one focusing upon a network of shorter-haul or smaller trains, no focus upon lighter-loading carload commodities instead of energy markets, or no focus on a return to 1950's-era rail-based small shipment service, for example. CN's growth strategy in Eastern Canada will be interesting to watch in terms of any differentiation from CSX or NS, though understood through the lens that they are the transcontinental carrier that EHH thought strategically important for the US Class 1's as well. Without understanding the big picture, you run the risk that PR, bias and click-baiting, and poor or outdated sourcing leads to incomplete or inaccurate conclusions.

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You may be right, but as you yourself said, past trends are not necessarily predictive. Given the supply chain forces pushing people towards minimum inventory, and given the very real costs and safety risks incurred in running longer trains, this may well change.The CR example, BTW, isn't a perfect one. A long train back then would be a medium or short train for today's railroads.
I don't recall making the point that past trends are not necessarily predictive, and instead given the long history of railroading I'm more inclined to heed Tolstoy's advice that "history, like a deaf man, answers questions no one has asked". The inventory productivity squeeze began in the 1980's and was the reason transportation service reliability became most important, though some near 40 years later largely unmet in carload. PSR addresses what that 1973 report identified as the correlation between the number of times a shipment is handled in a yard and service reliability.

While not perfect, that CR anecdote is a tad closer to perfection when you consider the technology of that time. In fact, the contemporary version of this train continues on as still one of the biggest, fastest and most reliable within its carrier's network. Food for thought.
  by gokeefe
 
QB 52.32 wrote: Sun Nov 17, 2019 7:00 amAll Class 1 railroads (managements) have moved and are moving in the same strategic direction to one degree or another, responding to the real world of our economic and political systems, their derived demand and competitive advantages within the marketplace, and financial cost and railroad industry structures, as well as what's worked and what hasn't since deregulation.
Are you acknowledging capital extraction without regard to long term prospects beyond tenure of ownership as a motive?

I wasn't sure if this was included in the "real world of our economic and political systems" that you mentioned.
  by rr503
 
QB 52.32 wrote: Sun Nov 17, 2019 7:00 am
All Class 1 railroads (managements) have moved and are moving in the same strategic direction to one degree or another, responding to the real world of our economic and political systems, their derived demand and competitive advantages within the marketplace, and financial cost and railroad industry structures, as well as what's worked and what hasn't since deregulation. It's why BNSF is focused upon long-haul intermodal to Texas, among other lanes, instead of the I-5 corridor, UP focused upon Mexico and not Denver, no one focusing upon a network of shorter-haul or smaller trains, no focus upon lighter-loading carload commodities instead of energy markets, or no focus on a return to 1950's-era rail-based small shipment service, for example. CN's growth strategy in Eastern Canada will be interesting to watch in terms of any differentiation from CSX or NS, though understood through the lens that they are the transcontinental carrier that EHH thought strategically important for the US Class 1's as well. Without understanding the big picture, you run the risk that PR, bias and click-baiting, and poor or outdated sourcing leads to incomplete or inaccurate conclusions.
Sure, they're all taking the same path (ish, there's a good bit of variance in approach between UP, CN and BNSF for example) now, but if I had asked the same question 3, 5, 10 years ago? Nope. There's of course _some_ logic to their strategies, but those strategies do generally exist within a paradigm that has been somewhat baked into the network's capacity and train flows wherein railroads do not attempt to differentiate their service product or compete on service. While it'd be easier than in 2006 or 2014 to change your approach to competition, you're right that there's a level of path dependency here.

That said, I object to your characterization of railroads pursuing only long haul traffic in conventional railroad markets. There's been a good bit of short(er) haul traffic development over the past few years on regional railroads, and even lines like CSX and CN are getting involved in short haul markets, for example out of the PoNYNJ. Their ability to pursue short haul opportunities is of course very much a function of the massive amount of latent terminal capacity in the NYC area -- opportunity costs are low; once again, we see this issue of path dependency -- but I think it's nevertheless illustrative of the potential railroads could reap.

More broadly, I absolutely think that the 1973 report's conclusions hold in the 21st century. You need look no further than the juxtaposition of the issues railroads face today and the management rhetoric about OR (one which, in the ironies of ironies, seems to be breaking at CSX right now -- Foote is on the record discounting those efficiency metrics). While the railroad landscape of today is certainly different than that of '73, there's a through line wherein analysts and railroad industry professionals continue to criticize specifically larger railroads for their failure to capitalize on market opportunities that do not meet their narrow definition of acceptable traffic.
QB 52.32 wrote: Sun Nov 17, 2019 7:00 am
I don't recall making the point that past trends are not necessarily predictive, and instead given the long history of railroading I'm more inclined to heed Tolstoy's advice that "history, like a deaf man, answers questions no one has asked". The inventory productivity squeeze began in the 1980's and was the reason transportation service reliability became most important, though some near 40 years later largely unmet in carload. PSR addresses what that 1973 report identified as the correlation between the number of times a shipment is handled in a yard and service reliability.

While not perfect, that CR anecdote is a tad closer to perfection when you consider the technology of that time. In fact, the contemporary version of this train continues on as still one of the biggest, fastest and most reliable within its carrier's network. Food for thought.
I was referencing your objection to my reference of current trends in your previous post.

With you 100% on PSR; to view its benefits, one must look no further than CN or CP.
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