Some Railroading facts of Life

Railroads are in the Customer Service Business. Services, unlike products, are fleeting. There is no product at hand when the transaction has been completed, only the paper trail it left and the memory of it. That memory shapes the next buying decision, and the next, and the next. Whether it's a good memory or a bad one drives the vendor's reputation among customers, and colors what they tell their friends about the vendor.

Quality is measured by the customer, not the vendor. Your product is only as good as your customer thinks it is. And how much you can charge for that service depends wholly on the value of that service to the customer. I've had railroad sales people tell me in all seriousness, "We run a great railroad." That doesn't matter if empty car delivery is late or the load is late at destination. Quality is in the eyes of the buyer, not the vendor.

Running trains is akin to the assembly line in manufacturing. You order a New York strip steak in a restaurant medium rare. You don't care what kind of stove is used, the size pan, or the number of sous chefs in the kitchen. You surely don't need to ask what kind of stamping equipment was used when you bought a car. Or the source of the crude before you tank up at the convenience store. All you want is a steak you can eat, a car you can drive, and fuel that gets you where you're going. So what makes railroaders think shippers care about all the operating minutiae?

Customers don't have to "understand" anything. How many times have you heard this one? "Customer X has to understand that this is a railroad and.." Customer X has only one reason to use any transportation vendor, and that's to get his goods into a place he wants 'em from a place he doesn't want them. His only cares are the value of the goods, the distance they have to travel, and the cost of the transportation.

To the extent that your railroad can add more value the to time-place relationship than your competitor, you will win the business. You will definitely not win the business by trying to undercut your competitor's price, and if that's all you have to offer you're in trouble. It's a given that no matter how low your price there's always somebody with a lower price, and any advantage you had is wiped out.

If, on the other hand, you can offer a quality product without the hassles of The Three Ds (damage, dunnage, demurrage) and do it consistently at a lower landed cost than the competition you will win every time. Taking the question above and turning it around, "The railroad has to understand the shipper has options and it's not the only game in town."

Demurrage is a no-no. The only time you see a demurrage charge is when something isn't working as it's supposed to, and it's up to the astute railroad sales rep to be sure cars flow to meet customer requirements. Constructively placed cars indicate cars arrived before the customer was ready for them. Cars languishing at the customer's loading dock tell you they are not being loaded or unloaded in a timely fashion. What a great opportunity to get inside the customer's head and find out what's going in his process management.

To be sure, this is just a smattering of railroading's Facts of Life. The best measure is to ask employees how each of their actions adds value to the customer's ability to use the railroad and come away with a good impression. If it does not add value, it's a wasted action. And a waste of finite resources.

--Roy Blanchard



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