This is particularly true in the case of our Class I relationships. From one point of view, we short lines are vendors: we collect small quantities of product (freight) from the customers on our line, assemble them into a larger package, and sell them to the Class I connection. From another point of view, we're wholesalers, buying transportation services from our Class I vendors and then retailing these services to our lower- volume shippers along the line.
Of course, which of those roles we fill depends on who's looking at us, and from what perspective. Fresh from the Conrail connecting short line meeting in Philadelphia, it's clear to me how Conrail sees the relationship. Right now, Conrail is the buyer, and it's a buyer's market.
Senior VP/Core Services Group Gordon Kuhn laid it on the line for us. Last year, he said, Conrail said it would provide the trains if we short lines filled them up. This year, with Conrail so busy that it's bumping up against capacity problems all over the line, the question becomes: Which business makes the most sense? This question arises, Kuhn observes, not only in terms of price, but in terms of assets used to create the customer-satisfying service.
Kuhn went on to clarify: The guy at the end of the branch line that needs a lot of repairs may be moving the same amount of the same commodity as the guy on the main line 20 miles away, but in terms of resources needed to provide a satisfying service, the main line customer is the clear choice. (And, Kuhn stressed, Conrail would rather not serve a customer at all than serve him badly.)
On the other hand, a shipper who is serviced virtually painlessly through a short line interchange may be preferable to one on a congested main line where everything must slow down to service local freight. Conrail is looking at its connecting short lines the same way it's looking over its own shipper base: Which are most friendly to our assets and provide the best business fits?
Clearly, in today's business climate, the short line had best approach this particular Class I as a customer. Conrail is looking for improved asset utilization. The customers and short lines whose businesses best support that goal will be the winners.
The challenge and the opportunity for Conrail's short lines lies in helping Conrail identify those "best fits" -- and in helping them on issues such as pricing and divisions, where today's "one size fits all" is no fit at all. In many cases, this means gathering information and making Conrail -- or any other Class I connection, for that matter -- aware of opportunities it may otherwise overlook.
For all that our Class I partners are trying to do now, they're not omniscient. Much of what happens in the field, especially on the short line field, escapes notice. Conrail's field antennae have in many places been replaced by EDI and market models, providing detailed quantitative data but not the insights offered by a knowledgeable observer in the business.
As North Shore President Dick Robey points out, the successful short-liner is a "geographic economist." he knows how to add value to a product by placing it where it's needed most. To that end, he has to know what tools are available to get it there and how to get himself into the process of "creating place utility" better than the next guy. The strategies and ideas formulated at Class I headquarters, Robey maintains, may not accurately reflect the reality of what's happening on the short lines. The Class I needs to go see its short line customers and see how they add place utility. But, since Conrail, at least, sees itself as the customer right now, the short line will need to do the showing-and-telling.
Valuable insights about the ways that short lines can create a good business fit came from many participants at the Conrail meeting. Chuck Riedmiller, for example, showed how a Genessee Valley-based transload for Canadian lumber served, in effect, as an outsource resource for Conrail. By offering some values Conrail transloads didn't -- such as inside loading/unloading and storage, a key to successful handling of plywood -- the transload move was priced on parity with Conrail destinations. It brought more freight movement to Conrail without an additional Conrail investment in the transload, in addition to being a major contributor to Genessee's 34% increase in business.
Tom McOwen, Indiana & Ohio, showed off a new tool to make short lines easier to do business with: a tariff as easy to read as the mileage charts on a roadmap. Instead of a muddle of codes that take a Buck Rogers ring to understand, Tom has origins on a vertical axis, destinations on a horizontal axis, and rates at the intersections. He tested it on some local children -- and even a five-year-old could use it.
Sounding a more cautionary note, Ron Klein shared two or three horror stories about potential Providence & Worcester business that was frightened away when a Class I marketing representative didn't understand the kinds of flexible service and pricing options the short line could offer. Along with the caution, he offered a solution and an invitation. "Creating an environment which encourages communication between Conrail and its short line partners is vital," Klein told Conrail. "Have you considered involving short lines in training programs for new sales and marketing employees? The Providence & Worcester would be pleased to make our time and facilities available to provide trainees with a chance to obtain some first- hand knowledge of how we operate, our facilities, our customer base, and marketing strategies."
In a very real sense, our connecting Class Is are far and away our largest customers of the transportation services we offer. It's time we treated them like our best customers instead of evil step-parents: Cater to their needs, showcase our capabilities, make ourselves easy to do business with. We need to show them how our flexibility can contribute to a better fit -- and make it easy for them to buy us.