Updated Benchmarks for Shortline Railroaders

Download Excel Spreadsheet Due to popular demand, I’ve updated the Short Line Benchmark tool to reflect current Income Statement expense line items and what leading short lines are spending in each as a percentage of revenue. It’s a convenient way to make sure your numbers are in the range of what other shortlines are experiencing. Moreover, even at this late stage of shortline development, the relationship between the individual carload and the assets consumed to handle it is not universally well-understood. Relief is at hand.

Benchmarks set targets for achievement and a methodology for discovering the root cause of failure in any part of the business enterprise. Shortline railroads, especially those that are privately held, owner-managed sole proprietorships, do not always have the financial controls typically found in larger firms. The reason too often is, simply, they have never seen the need. That’s unfortunate.

The shortline world has rapidly evolved away from the time a small railroad with one or two locomotives, 20 miles of FRA class 1 track and a handful of carload customers could eke out a living. The growth of a worldwide economy and manufacturers' shift toward sharper inventory management has mandated more frequent but smaller shipments from fewer vendors. At the same time there has been a consolidation of shipments from distant origins to regional distribution centers for shipment to destination in truckload lots or smaller. Economies of scale matter.

The shortline operator has two groups of highly-demanding customers: the businesses along his own route and the class 1s that provide the long haul. Both demand an involved, sophisticated management style in every company they deal with, from equipment suppliers to short lines. That’s why smart shortline operators are constantly measuring their own company performance against the competition. Benchmarking, in a word.
There are two kinds of small railroad benchmarks, financial performance and productivity, and they are inextricably linked. Excellent financial performance provides the wherewithal to provide superior customer service, and the benchmarks provide a measure of what is excellent or merely passable. Railroad productivity benchmarks tell the shortline owner whether his financial resources are being properly deployed.

Track, locomotives, fuel, even good employees are a "wasting asset," meaning they have to be replaced continuously and the rate of replacement is determined by the rate of consumption. Too high a rate and revenues will be insufficient to cover the costs and profits will suffer.

Because the shortline industry is so diversified, creating a set of benchmarks has been a challenge, at best. The Blanchard Company has over the years identified the Best Practices of railroads large and small, has combined them with investor performance standards, and has developed a set of ten financial and ten railroad productivity benchmarks specifically designed with the shortline operator in mind.

This downloadable Excel spreadsheet is also available in Numbers for Mac so you can carry it around on your iPad or iPhone--contact me if you need the Numbers version. As always, feedback and suggested are welcome. Updated March, 2014

Download Excel Spreadsheet
(If you can't download the spreadsheet,
e-mail Roy and he'll send you one)

--Roy Blanchard

 

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