What's Wrong With This Picture?
This is a snapshot of the boxcar situation on some shortlines of my acquaintance.
Shortline A could handle another 200 inbound boxcars of paper and lumber every month if only the originating class I had the cars. Meanwhile, Shortline B stores boxcars for itself and its connecting class I for as long as four weeks while they look for shippers in need of them. Shortline C's customer loads boxcars of bricks for a market 600 miles away. Some loads take fourteen days, others do it in four. What's wrong with this picture?
What's wrong is this: the boxcar is probably the most misunderstood, mismanaged, and under appreciated asset in the business. Every day we see half empty van trailers of everything from paper to canned goods pulling up to our customers' facilities. The reason they're half empty is they weighed out before they cubed out. What an opportunity -- our basic boxcar can carry three times the tonnage of a single trailer van at lower cost per unit. So why aren't we running the wheels off the boxcar fleet? Because we're not managing the asset.
Shippers want reliable transit times above all else. According to survey of 230 Canadian shippers by KPMG/Montreal, here's how various transit variables ranked as "most important""by the respondents:
- Reliability: 99%
- Transit time: 90%
- On-time delivery: 89%
- Rates: 79%
- EDI 66%
Yet is seems that we as an industry spend more time on rates and EDI than we do on what shippers want most: doing what we say we will do. During one of my Acting General Manager stints a customer said to me, "We could ship more by rail but what you're selling isn't what we're buying." What he needed was consistent travel time. Remember, consistent does not mean fast; it means dependable. Rate was never an issue.
Here's more on boxcar mismanagement, sent to me by a friend with New Jersey DOT: an article about an MIT study on origin-to-destination trip times and reliability. Its findings are simply appalling. The typical boxcar cycle -- load release-empty-place for load -- is about 27 days. That's four times longer than for double stack cars, twice as long as unit train covered hoppers, and ten percent longer than covered hoppers not in unit train service. (And 23-27 days longer than your average truck cycle.)
So what's the holdup? The chief culprit, according to the MIT researchers, is the number of empty days between loads. On average, dwell time at origin and destination was about two days. Transit time was ten days. Which leaves those expensive boxcars empty and not producing revenue for thirteen days -- just about half the cycle. Is it because the boxcar market has dried up?
It certainly hasn't dried up for shortline A, missing out on 2,400 loads a year for want of equipment. Or for shortline C, where consistency is the market killer. Or for most of the 15 shortlines I surveyed last month on boxcar utilization and management practices. Combining "top three commodities" from all the responses created a list of 27 commodities. The top STCCs were 20 (food and related), 24 (lumber), and 26 (paper), followed closely by 32 (clay, glass, stone) and 40 (waste paper and rags.) This is just about all boxcar business -- the kind that all these shortlines could handle in greater volume from existing shippers or other potential shippers on their lines if they had a steady, dependable source of cars.
So why does Shortline A lose business for want of cars while shortline B has cars sitting? Because in most cases the class I owns the cars and its car management practices encourage this idle time. Two class I practices are at fault: car hire relief to the shortline and not matching pool size to market demand. As for the first, car hire relief removes the short line's natural incentive to move the car. To add insult to injury, the empties hanging around the shortline send the wrong message to the demurrage-paying customer: why is this car that just had to be unloaded last Thursday still over in the yard?
For the second, pool size is meant to be driven by the best management practices for car utilization. Shippers, consignees, and all the railroads in the route have a stake in the process. Short lines must keep their class I connections apprised of shifting market conditions to get the response required.
Pool cars excepted, none of the shortlines in my survey keeps cars longer than eight days on average, and most run in the three-to-five day range. So it's not the shortlines that are letting the equipment sit, although there are still some pockets where demurrage is (wrongly) viewed as an income item to offset car hire expense. By far the biggest culprit are class I train scheduling and car routing practices. On one major railroad, a pool car bad ordered at destination goes back to the destination before being returned to origin for loading. Another limits train operation to load volume -- not enough loads, no train. So your boxcar that was to go that train has to wait till the next time there's a train going its way.
Fortunately, there are glimmers of hope. Burlington Northern Santa Fe's new web page (www.bnsf.com), makes the point that running a scheduled railroad lets a customer stay ahead of his shipment, not behind it. Illinois Central's scheduled unit train operation forces scheduling of everything else on the railroad, which in turn sets up a nice chain reaction. Run dependably, charge more (dependability over rates, remember?), increase revenues faster than carload volumes, push the operating ratio down, push more to net earnings.
Car supply is growing on other roads. Norfolk Southern has added 305 new 50-foot high cube boxcars to their paper fleet (see NS web page, http://www.nscorp.com/) and has a dedicated fleet of 1,300 insulated boxcars for beverage service (5,000 cases of bottled beer per box, e.g.). Greenbrier's Trenton Works has 1,425 boxcars in process right now for two of its several Canadian customers. According to the 1995 CSX Annual Report, taking one day out of car cycle time will generate 83,000 more loads across its fleet without adding a single car to the fleet.
Still, the boxcar movement statistics tell us not all stakeholders are acting to improve the situation as boxcars take longer to earn their returns and continue to lose market share. Yet, as the handful of shortlines in my survey have shown, the market exits, and if you provide the cars the customers will come. So the solution is, if your class I can't supply the cars get your own. A third of the lines in my survey supply all or part of their shippers' boxcar needs, and still others are entering the lease market. At the same time, they are entering into agreements with their connecting class Is to keep cycle times down with properly sized pools, dedicated fleets, scheduled service, and no car hire relief.
As Bill Frederick of the Arizona & California says, "We can punch out overhead service boxcars in twelve hours or so interchange to interchange. Cars we place or pull take a bit longer. But nothing will ever rust to the rail around here." Amen to that. Return to: