Railway Age: Short Line and Regional Marketing Advocate


obody ever got fired for buying IBM, or so the saying goes. Why? Because IBM, as the first clear market leader in main frame computers and computing, set the standards. Today, one could say "Nobody ever got fired for buying Microsoft."


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Or JB Hunt, or Schneider, for that matter. These are the companies that set the standards for entire industries, and competitors go against the grain at their peril. That is the theme of The Gorilla Game, which, despite its emphasis on high tech industries, is an object lesson for the railroads.

In today's point-and-click culture customers don't want to have to use different systems with different suppliers. They want continuity, in a word. Call a trucker, a vehicle shows up, it gets loaded, it goes away. The railroads are not there by a long shot, and nobody has time for the discontinuity experienced with that suppler. And since gorillas get to be gorillas by providing continuity, the railroads are out of the loop.

They don't have to be. The other part of the Gorilla Game is exploiting discontinuity among vendors, which is exactly what the truckers have done with their one box, one vendor, anything, anywhere paradigm. The railroads approach this model with intermodal and unit trains. Like trucks, these services are hook and haul, point to point: profitable batch processes, if you will, with no gathering or dispersal network.

The merchandise carload business, on the other hand, requires both gathering and dispersal networks and, in the extreme, approaches custom-made, the antithesis of the batch process. The railroads have to figure how close to custom-made they can afford to get. Those lines of business whose custom processes come at too dear a cost in resources should be exited and either contracted out or abandoned.

The challenge is in knowing how to segment the carload business. One approach is the classic grow, maintain, or harvest model. Grow what's profitable and doesn't make inordinate claims on the asset base; exit what will never make any money and uses up resources far in excess of the desired rate of return. The Internet, believe it or not, can help solve the dilemma of what to do with the middle-of-the road business.

The answer lies in Customer Relationship Management (CRM). One of the fastest-growing sectors of e-commerce is CRM software because it provides the very continuity the customer wants, regardless of the hour, day or night. Perhaps The Motley Fool (www.fool.com ) sums it up best: "Enterprises are utilizing CRM applications to attract, retain, and leverage relationships with customers across all touch points in the organization.

"It is much more cost-effective to retain an existing customer than to attract a new one. CRM applications can be used to provide customized product offerings, marketing campaigns, and an additional communication channel via the Web. Richer marketing strategies and sales tactics predicated on better data, combined with superior customer service, can lead to increases in top-line growth and profitability." In other words, use the Net to decide which carload products have markets and forget about the rest.

There are those who will tell you the Internet is the Death of a Salesman. They're wrong. The Internet is the sales rep's biggest ally. The Internet tells you who's buying what and how much. It qualifies leads and opens doors. The clever sales rep uses that open door to walk in, tell the story, distribute a few trinkets, and leave with the order. Then let the customer point and click his way to transportation nirvana.

Markets are conversations. And in today's wired world those market-making conversations are taking place on websites and e-mail at an accelerated pace. There simply isn't time for phone-tag, and customers are necessarily impatient. Jim Giblin, Paper Supply Chain Manager for RR Donnelley, writes in a recent e-mail, "Most companies have moved to some kind of J-I-T program. As a result, inventories and safety stock have been reduced to all-time lows. This puts a much higher premium on on-time performance."

Independent Wall Street Analyst Tony Hatch says most emphatically that the Internet can help schedule the carload business. "More information flowing faster and more accurately means railroad marketers, ops people and customers can coordinate to fill the trains then move them on time and according to plan. JIT needs are met, revenues go up, avoidable costs are controlled, and shareholders can smile." And new standards in customer continuity are set.

Burlington Northern and Santa Fe, as if to drive the point home, now does more than $60 mm a month over the Internet with some 3,000 customers. Says BNSF's Greg Fox, VP for e-Commerce, "We have an aggressive program to make local area service design more efficient, reduce terminal dwell times and rationalize our scheduling. We are revamping our measures for carload on-time performance to make them more stringent and ensure that customers receive their shipments when they need them, not early or late."

That's how to start setting standards again, 100 tons at a time. Be the Gorilla.

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