Railway Age,
March 1996

One Stop Shopping?

Conrail is setting out to make life a lot easier for its connecting short lines with its Feeder Line concept, which promises to offer all the convenience of one-stop shopping.

Rate relationships are set up so that the Conrial pricing manager will always know the shortline's revenue requirement and so can quote through rates quickly and accurately. Shortline rate requests to Conrail and points beyond can likewise be quickly retrieved.

The Feeder Line concept, says Conrail President Dave LeVan, "will be different from our existing shortline relationships and more like the way major airlines work with independent feeder commuter airlines. The independently owned and operated shortline will execute the all-important local delivery and pickup on these lines, while Conrail will manage the commercial aspects of customer transactions including billing, pricing administration, equipment supply and car tracing, plus many of the other administrative details that go with providing dependable rail freight service."

Wayne Michel, Director of Conrail's Shortline Marketing Group, points out that the shortline manager is freed from the time-consuming and often frustrating task of digging for rates and the subsequent haggling to arrive at a through rate. "Call your shortline account executive," says Michel, "because that individual is charged with putting Conrail's assets at your disposal to make the move work." One stop shopping, in other words. But are you sure you'll always get the right product--at the right price?

With all the convenience Conrail's one-stop approach offers its feeder lines, there can still be significant advantages to all parties for the dialog between a shortline and nonconnecting class Is to continue. The class I railroads are vastly different in their approaches both to their own lines of business and to the interline trade. Norfolk Southern Vice Chairman Henry Watts told me the other day, "We could grow our boxcar business to off-line points if our connections were as aggressive as we are. We definitely want to encourage non-connecting shortlines to reach out to us and keep us in the loop of their business development processes."

At CSX, Kel MacKavanagh echoes Norfolk Southern's Watts. "Wherever the origin-destination pairs match, we want non-connecting shortlines to get us involved directly. In paper, for example, CSX reaches seventy mills, and so can package moves for outbound product from more vendors giving shortline customers more options. The flip side is that we also have more destinations for scrap paper."

And, at the same time that Cynthia Archer, Conrail's SVP for intermodal, is telling Wall Street she projects little change in overall freight revenue for 1996, Illinois Central President Hunter Harrison told the same bunch of analysts that IC will continue to grow revenue per unit at a faster rate than numbers of unit (cars up 4%, revenue up 9% in the third quarter; cars down 3% in the fourth with revenues up 3%). When one analyst asked how, Harrison responded, "By keeping our focus on the quality of revenues. Tell the customer what you're going to do, do it, and charge him for it. That way you never have to worry about pricing to meet the market and customers have learned they don't have to waste time negotiating rates with us."

What does this have to do with anything? Let's say you're an Indiana shortline with a customer trucking plastic resins out of southern Louisiana from a plant served by both IC and UP. Your direct connection is with Conrail and your agreed-on per car fee for plastic resins is $400, regardless of origin. Experience tells you IC-Effingham-Conrail works better than UP-East St. Louis-Conrail. Under Michel's' plan, you would call Janice Sladzinzki, CR's shortline rep for that state, and ask her to set up the move.

The down-side is that your shortline rep also has fifty or sixty other "customers," so the question become how to shorten the queue. It may also happen that your customer's vendor or any of the possible class Is have master contracts governing how traffic moves, and you have no way of knowing -- let alone controlling -- something like that. So your best bet is to know as much as you can about the transaction going in so that your rep can cut to the chase and make the move happen quickly and efficiently.

Getting back to the earlier paper example, there are customers who buy rolls of wrapping paper both direct from the mills and through brokers, and much of it is FOB customer so the shipper selects and pays for he carrier. Here again, a downside. You want it to come by carload, yet it's a relatively small customer in the your serving class I's grand scheme and that road would just as soon see it come by TOFC because it keeps foreign car hire down. Your customer could care less because he's looking for the lowest delivered price. Two against one, and you lose.

So you pick up the phone and call MacKavanagh at CSX or Bob Gentzel, a group head in the paper marketing group at NS, and see what you can do. After all, these gentlemen earn their keep keeping boxcars rolling under load, and if they earn a little car hire in the bargain so much the better. Here again, there may be larger agendas between and among the class Is and the paper companies, and in this case you may be able to make them work for you.

For sheer ease and efficiency of process management, Conrail's Feeder Line concept, like the NS Thoroughbred program, is a blessing to harried short line marketers. But when it looks like a move isn't going to work, it's good to have a network that includes others to whom this move means as much as it does to you. Get to know the shortline liaison folks at the distant class Is -- and adding a market manager or two to your Rolodex wouldn't hurt, either.

As Cynthia Archer says, shippers make assumptions regarding our ability to perform and govern their carrier selections accordingly, and a major assumption has to do with ease of doing business with us. The beauty of shortline tools like Conrail's Feeder Line program lies in making it easier for shippers to do business with the railroad system whether Conrail, Illinois Central or the Fallen Flag & Eastern. It's up to the FF&E, however, to know when it's time to reach out and touch someone beyond the home road.

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