Railway Age, January 1993

Who Owns This Business?

Who owns the business on your railroad?

Ownership doesn't necessarily mean whose name is on the door. Ownership means having a personal stake in the outcome of a business transaction -- whether that stake is motivated by ownership in the classic property sense, by pride of craftsmanship, a sense of esprit de corps, or the simple desire to earn a pay- check.

Ownership means "buying into" a sense of responsibility for seeing that the customer's needs are met and expectations exceeded. And in short line railroading, it also means getting rid of the misconception that the railroad is divided into two types of people: operating and marketing.

Nobody on your railroad knows more about how customers run their plants, schedule their cars, hire or lay off workers, police their areas, or repair their buildings than the folks who run the trains, fix the track, or make the locomotives behave. In a word, every employee has an ownership stake in every customer's business, which is what "marketing" is all about. And if there weren't a sense of ownership, nobody would care if a car wasn't switched or if a plant closed. But they [[do]] care, and that's what this month's column is all about.

Some business transactions have many owners along the way. A case in point is this pipe move taking place on a northeastern short line.

It all began when the local water company wanted to run a pipeline down the railroad right-of-way. But they wanted to truck in the pipe from a distant supplier, store it on the railroad's land, and then use short rail hauls to ferry pipe and tools to the job site.

As it turned out, there was a way to save the water company significant transportation costs by making this a 100% rail move. But it involved getting several organizations to "take ownership" of a part of a complicated move.

The short line took ownership of the success of the overall logistical process, coordinating the needs and the actions of the vendor, the water company, the originating railroad and, of course, itself. They convinced the customer that they could bring the pipe in by rail, off-load and stockpile it, and then reload it on work flats for transfer to the job -- all bundled into one freight rate with no hidden extras.

To make this work, each of four players had to buy into (agree to take ownership of) their part before the process began. Because if just one player didn't buy in and make a real commit- ment to the move, the whole process would fail. And the cost of failure is the loss of repeat business.

So the vendor owns the task of manufacturing the pipe as it will be needed on the ground. The origin railroad owns the task of supplying the right cars in the right sequence, making sure the tie-down process is right, and moving the loads in sequence to the short line.

The short line owns the task of placing cars for unloading, providing a clear space for stockpiling, providing cars for reloading and shunting them to the job while keeping out of the regular trains' way, and returning the empties to the origin road.

This pipe story is a true story and it has a happy ending. Although all players got some bumps and bruises in the process of finding the best way to coordinate their efforts, the good news is that it's working. The vendor (who wrote off rail transportation a long time ago) is looking at railroads with new respect. The participating railroads have captured some new revenue with the potential for repeat business, and the water company has had its needs met cost-effectively.

What may not be as obvious, though, is the way marketing and operations had to live in each others' hip pockets and walk in each other's shoes to make this move work and pave the way for repeat business.

To identify the product, marketing and operations collaborated just about 50/50 to identify customer needs, ways the railroad can serve the customer's long-term logistical strategies, competitive issues, and political concerns.

To package and present the product, marketing and operations had another 50/50 partnership. Operations identified the railroad resources to meet price and performance standards to win the business and yield an acceptable return; operations and marketing handled coordination with connecting roads; and marketing put together the pricing and proposal.

To follow-up and close the deal, marketing carried the ball about 90% of the way, with operations standing by to help fine-tune the service package to meet changing requirements.

To provide the service to the customer, operations pulls 90% of the weight on car supply, timely place and pull, demurrage, L&D prevention, over-the-road movement and delivery to destination or connecting railroad, with marketing running interference or troubleshooting as needed.

Be forewarned, though. The road to total ownership is fraught with danger -- in the form of the crusty old-timer who will swear that Customer X will never amount to anything because "those people don't understand the railroad." He'll tell you how, on the old Fallen Flag & Eastern, customers knew what the railroad expected of them.

Of course, the old FF&E isn't listed in The Official Guide any more. Maybe they never figured out it's not up to the customer to understand the railroad. It's the other way around. And the railroaders -- marketing and operations people alike -- who own this point of view are the ones who will run tomorrow's trains.

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Created July 31, 1995. Send comments to lblanchard@aol.com