Railway Age, September 1993

Do Your Homework

The homework you need to do to bring a shipper from "we have a need" to "here's an order" often looks like a lot of frustrating slogging for a dubious payoff. But the payoff can be real, as these examples show:

Dick Robey's North Shore won 120 cars of auto carpet from the trucks--by doing their homework and showing GM how to save $200,000 a year. The Long Island RR and Liquid Carbonics moved a transload 100 miles closer to the market and cut truck delivery costs in half. And the TP&W teamed up with Central RR of Indianapolis (CERA) to open new soybean moves for ADM.

In July we told our readers to "go see the people." Most of the time, that's just the first step. As you make the rounds, you'll hear all sorts of objections to using your service. It's then your job to identify (or even invent) the service package that will lead the shipper to say yes when you ask for the order.

You'll probably hear price objections when first you go see the people -- either that or "we're just-in-time and can't possibly use rail." Doing your homework helps you find solutions that address these concerns. In the first place, there's a big difference between price and cost, differences that doing your homework can help you highlight. As for just-in-time: just in time for what? Is the issue really speed of delivery? Or is it constancy of supply? You have to go beyond these early objections and learn what's really driving the shipper's carrier selection.

Take Robey's situation. They have a customer making carpet for General Motors. After losing one GM plant to downsizing, this customer won another (a light truck plant in Shreveport), snatching the contract from the jaws of a trucker's just-in-time, two- nights-on-the-road deal.

Winning this business meant addressing transit time (six days door-to-door), service guarantees (contract provision for non-performance discounts), empty return of carrying racks (racks re-designed to be knocked down and returned on the same cars) and improving the rail-truck advantage (use 86' cars). The total savings: $260,000 per year.

Doing the homework to win this business meant more than talking with the customer. Robey had to show Conrail how providing 86' cars would let them deliver six truckload-equivalents per car instead of four, and deliver the pricing economies that would drive the deal. He also had to work with both Conrail and the Union Pacific to price the move to a customer requirement rather than to a computer model.

Robey managed this by putting the rationale for the bigger cars and pricing methods in terms of benefits to the Class I carriers. This meant stressing the revenue to be generated by the move, anticipating objections and finding out a way to meet them.

To use another example, the Long Island Railroad anticipated potential objections before going to show Liquid Carbonics how to serve more customers with fewer trucks. This shipper had been covering the outer boroughs of New York City, Nassau and Suffolk counties from a Philadelphia transload. Since it was working, as far as they could see, why change it?

Changing economics made a changing picture, the Long Island realized -- and pointed that out to the shipper. Growing congestion, the partial closure of a critical highway connection, and a strict adherence to weight restrictions by municipalities along the way meant an increase in transit time to service the local customer base. It was clear to the Long Island that the customer's four-truck fleet would surely have to expand in order to continue with business as usual. At more than $100,000 a unit, more trucks was a major issue. The Long Island's solution lets Carbonic do the truck with just two trucks. And no traffic hassles.

Long Island's homework, in this case, involved taking a close look at the set of circumstances facing a truck move: and finding ways its own resources could provide a more logistically- sound approach.

In the midwest, TP&W's managers knew they had lots of country elevator operators selling soybeans to ADM's rail-served Frankfort, Indiana plant by truck direct. Although ADM wanted rail, the connecting line's routing, service schedule, and pricing didn't work.

It was time for the TP&W to do its homework and take a look at the economics of ADM's rail shipments. After seeing the people and looking at the need -- grain to move from elevators with short sidings to a processing plant -- TP&W and CERA then turned to their own operations to see what flexibility they had to meet this need. They came up with short unit trains (25 cars) dedicated to the Frankfort plant, built from cars picked from up to three elevators on the line.

No one is suggesting that doing your homework is going to be easy. We're used to answering the question: "Here's how I want to move my shipments: what's it going to cost me and how long will it take?" Doing your homework means making your prospect a partner in rethinking the entire logistical process to answer the question: "Here's my need -- how can we exploit our mutual resources to achieve it?" But I can promise you that doing your homework and answering this second question will be more than a mere academic exercise.

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