I won’t wade too deeply into this object lesson in railroad marketing, since Greyhounds is a very qualified teacher who has done this for a living. Those of you following the exercise will learn from him. However, as someone else who has also done this for a living, I’d like to add a background comment. (Greyhounds can probably guess what’s coming, as he’s heard this from me before.)
I think you’re all being too hard on CN’s marketing people here. True, they control the origin, but the destination roads (CSX and, for arguments sake, BNSF) have just as much, if not more, at stake. It is they who will get the lion’s share of the linehaul revenue, and it is both the quality of their overall intermodal networks and their focus on this particular move that will determine the success of the venture. It would be relatively easy for CN to handle a daily block of 40-50 intermodal loads to a single Chicago facility and get it right - especially on a line that has excess capacity. It’s what happens after that, when you fan out to all the destinations nationwide and try to push those loads through a strainer that’s already gummed up, that’s the trick to manage. (Take a look at some of the other recent discussions here about capacity issues and performance on CSX and BNSF in general.)
And then there’s perhaps the biggest question (which Greyhounds has said we’ll get to in due course) of equipment supply. CN on their own can’t ensure that someone is loading 40-50 intermodal units a day into that part of Iowa, nor can they magically make 40-50 empty intermodal units (plus railcars to move them) appear every day in Chicago.
So, I would suggest that this is more than just a railroad cultural issue. It’s structural. This example illustrates the reasons why the U.S. intermodal industry has evolved as it has. The question we should be asking is not why CN isn
Having rode this line as a Hobo…Traffic is pig feed and paper products from Cicero to Dubuque and on to Waterloo IA. After Waterloo traffic is distributed to other short lines and feed lots and then peters out and there are few trains west of Waterloo. The Chicago Central railroad acted as a seperate short line and still kinda does in the CN System with its own little yard in Cicero S of the BN Yard
This is all very interesting and it seems a major hurdle is passing the IM loads onto another line, such as CSX. But the Chicago-Naperville, IL-IN-WI Combined Statistical Area has a population of 9,912,730. I would think that could support one meat train inbound daily.
A few comments:
CN…thanks for your great discussion on this matter. Until we have true transcontinental lines, this type of move (Iowa - East Coast) will be difficult to achieve unless there is big volumes, or big profits. Great point on any of the large truckers staying away from this. That is probably the best reason this is not occuring.
Second point. I talked to a person who sells refer trailers today and asked him what a typical monthly lease rate is for 53 ft refer trailer and he indicated $1500 per month. Now, that is probably for smaller companies, no doubt the rails or big truckers could do better and granted it is for a trailer, not a container. So, lets say you can drop the pricing down to $1200 per month. How many Iowa - East Coast turns would be made in a month? I dont think you could do 4 per month, so you would be looking at somewhere about $350 - $400 per trip in trailer or container costs, this doesnt include TTX flats. Possible margins are eroding quickly.
CN…I see all these JBH containers moving west on NS from Harrisburg and other DC locations. I have no idea of the percentage of which are loads, but probably not too many. Do the railroads charge same pricing moving containers empty as loaded?
Ed
Back when I worked in the industry we usually charged a lower rate for empties. That was more than a decade ago; things may have changed since.
I’ve got a health problem (which is not going to kill me ) and I’ve been slow participating. Hopefully, I’ll get back in this very interesting discussion soon.
CNSF knows what he is talking about. He formerly did this for a living too. But he did it at a much higher lever than I ever reached.
He’s cited a valid problem that needs to be dealt with. But I’m confident it can be successfully dealt with.
Now if I could just remember where I put those pills.
Most valuable info from CNSF. The scales are lifted from my eyes, and I see how it is easier to manage, on a daily basis, one 53-ft. trailer as opposed to 20 empties + the flat or well cars to accommodate them.
I will take no more cheap shots at railroad management.
It’s true: There are inherent advantages and disadvantages to every transport mode.
Maybe we really would be better off with only two more or less competitive rail systems in North America. Just to lose situations like CN’s (ex-WC’s) disadvantage to CSX in the situation described by CNSF.
So – maybe Hunter Harrison is right?
I’m not generally in favor of another round of mergers, but then again, is the situation in Canada, with two transcontinentals, any less competitive than what you get with four semi-transcontinentals in the US today? Maybe two east-west mergers in the US would make sense. The thing is, CN and CP are relatively simple systems compared to the US railroads. CSX still doesn’t seem to have figured its spider web out, and of course we all remember what happened the last time UP merged. I’ll tell you this: CP-CSX doesn’t make any sense to me. Nice can of worms you opened up there, Dakotafred. Watch this discussion veer waaayy off topic now.
OK, CNSF has raised some valid concers that need to be dealt with. There are several methods of dealing with such concerns.
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Just give up and quit. Wait for someone else to show up with a solution. In the meantime do nothing. Enjoy life as best is possible. This is sometimes referred to as “The French Solution.”
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Just ignore the issues. Plunge on ahead as if they didn’t exist. If things go wrong blame CSX or another entity to the top of your lungs. How dare they use the rail equipment to cover real, existing, ready to go, loads instead of returning it to you empty. Just plunging on ahead is sometimes referred to as “The Titanic’s Solution.” since it usually leads to a similar result.
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Solve the identified problems. This is the least favored method. It requires thought, reason and analysis. You might miss a round of golf if you actually work on solving problems. This is sometimes referred to as “The How Did I Get Stuck With This Assignment?” solution.
All three tend to get used by commerce and government on an international scale.
Before we go further, it is important to note that the failure of the Wisconsin Central operation was not due to a lack of economic viability. It failed becuse the interests of the WC and CSX diverged. Managing and preventing such a divergence in any future such effort is a newly identified problem to be solved.
How do we solve it?
Well, part of the problem was that CSX wouldn’t turn flatcars back to WC when CSX needed those cars to handle its own traffic needs. (A perfectly reasonable thing for CSX to do.) To solve this one I suggest we need to make a change in the proposed opeation.
Don’t let CSX ever get its hands on the flatcars. They can’t keep what they don’t have. We need to use street interchange in Chicago for the
Just for the record, trailers and empties weren’t the problem in the WC-CSX example I gave. Equipment was controlled by Schneider, and they presumably got a reasonable proportion of loads back to Chicago. Everything seemed to hinge on the steel wheel interchange working. I’m guessing that rubber interchange didn’t work in that case because once the trailers were on the ground with a driver on them, it made more sense for Schneider to just dray them up to Green Bay and back, which probably saved them a day or two on equipment turn. But that’s just a guess. Anyway, there may be differences with the Iowa scenario. Carry on!
My question on IC/CN was for greyhounds. Why doesn’t it carry refrigerated trailers of meat to the Chicago area to be distributed around here? There are ~10 million folks in the area and several large food distribution centers. Incompetence/laziness as above or no profit?
Ethenol may have been a factor here but with low oil prices that may not have played out as well as we thought
Oh, it’s beyond no profit. It would be a flat out loss. I don’t think anyone is incompetent or lazy. The railroads just no longer have the skills needed to aggregate shippers into market segments. Not having a particular skill is in no way the same as being incompotent. I have intentionally avoided showing how the government regulatory morons drove a wedge between the railroads and the potential customers here. When the railroads were not allowed to use this marketing skill they lost the skill. Let’s leave it at that for now.
One way to look at the cost of a rail intermodal service is:
TC = TDO + (RLHCPM * RLHM) + TDD
Where:
TC is Total Costs
TDO is Terminal and Drayage Costs at Origin
TDD is Terminal and Drayage Costs at Destination
RLHCPM is Rail Line Haul Cost Per Mile
RLHM is Rail Line Haul Miles
TDO and TDD really are insignificant for competing motor carriers. They don’t go through termnals. The driver just picks up the load at origin and drives it through to destination. Basically, the only costs on an over the road truckload shipment are the line haul miles.
Rail line haul cost per mile are generally less than motor carrier line haul cost per mile. It’s only when there are enough miles between origin and destination that rail intermodal can be competitive with trucking. The total reduction from using the lower cost rail line haul miles must be enough to offset the added expenses of terminal and drayage at each end.
At Denison, IA you can still see where they loaded trailers at the IBP (now Tyson) plant. I never noticed it, it was hiding in plain site, until a few years ago a retired IC dispatcher gave a presentation at the monthly Ames Railfan show. He had slides he took of his familiarzation trips riding freight trains over the Iowa Division. He mentioned the TOFC loading there.
He said one of the reasons they stopped loading TOFC was that many of the trailers being supplied for loading at the plant were being rejected by IBP.
Jeff
I like Greyhounds’ point that the US railroads no longer have the capacity to manage moves like this. In my view it’s due to numerous government regulatory and policy decisions made over the years, as well as the fragmented structure of the industry. Biased, nonsensical ICC decisions, the advent of the interstate highway system, even the Railroad Retirement Act which makes railway employees more costly than those of companies covered by Social Security, all conspired over time to force the migration of these sorts of skills from the railroads to truckers, freight brokers, and third-party logistics companies - all of which could use rail, but have no particular mandate to.
It’s ironic that the railroad in question here is CN, because if this move was inside Canada, they’d be handling it. Unlike the US, where we still don’t have a railroad that can offer a shipper direct service to every significant market in the country, Canada has essentially had two competing transcontinentals since the 1920’s. As a result, CN has one of the largest trucking companies in Canada, used entirely for intermodal drayage, plus a special logistics arm which does really sophisticated work to promote use of both intermodal and carload service. It works great, because it’s their railroad, their tractors/drivers, their trailers, their integrated computer systems. But when you start involving other railroads and have to rely on independent local drayage companies, it can fall apart pretty fast. I was at CN during an early attempt to extend their door-to-door ‘retail’ intermodal service to the US, on the recently-purchased IC and… wait for it… an interline marketing alliance with CSX. The CN sales guys and gals were ecstatic - booking all sorts of loads from Alberta or Quebec to Memphis, Florida, etc. which they’d always known about but never could compete with the truckers for before. It lasted a few months and was a disa
Jeffherget, you’ve highlighted yet another weakness of the old US intermodal system - the ‘common pool’ of rail-controlled trailers, where use (and abuse) was seperated from ownership, making quality control very difficult. That was a big reason why Santa Fe abandoned the old system in favor of Hunt.
[quote user=“greyhounds”]
schlimm
My question on IC/CN was for greyhounds. Why doesn’t it carry refrigerated trailers of meat to the Chicago area to be distributed around here? There are ~10 million folks in the area and several large food distribution centers. Incompetence/laziness as above or no profit?
Oh, it’s beyond no profit. It would be a flat out loss. I don’t think anyone is incompetent or lazy. The railroads just no longer have the skills needed to aggregate shippers into market segments. Not having a particular skill is in no way the same as being incompotent. I have intentionally avoided showing how the government regulatory morons drove a wedge between the railroads and the potential customers here. When the railroads were not allowed to use this marketing skill they lost the skill. Let’s leave it at that for now.
One way to look at the cost of a rail intermodal service is:
TC = TDO + (RLHCPM * RLHM) + TDD
Where:
TC is Total Costs
TDO is Terminal and Drayage Costs at Origin
TDD is Terminal and Drayage Costs at Destination
RLHCPM is Rail Line Haul Cost Per Mile
RLHM is Rail Line Haul Miles
TDO and TDD really are insignificant for competing motor carriers. They don’t go through termnals. The driver just picks up the load at origin and drives it through to destination. Basically, the only costs on an over the road truckload shipment are the line haul miles.
Rail line haul cost per mile are generally less than motor carrier line haul cost per mile. It’s only when there are enough miles between o
Drayage Costs!
OK, after spending fruitless time trying to get actual numbers I’m going to SWAG the drayage costs.
If I assume the CN Cedar Rapids intermodal terminal goes at the current CN yard, this picture becomes relevant:
http://www.railpictures.net/viewphoto.php?id=484112&nseq=14#remarks
That’s the Quaker plant in the background. Remember, the drivers will be shuttling the containers between that close by plant and the yard. They’ll be operating used day cab highway tractors. So I’ll guess this dray can be had for $65/load. The General Mills facility is five miles from the Quaker facility. So I’ll budget another $10 to serve that plant, $75/load total.
For the points farther from the ramps I’ll guess $50 + $3.50/running mile. It’s 52 miles from Waterloo to Cedar Rapids so the charge is $50+($3.50104) or $414/load. It’s 50 miles from the NS terminal in Bethlehem, PA to Tobyhanna so the charge is $50+($3.50100) or $400/load.
Does anyone have any objections to these numbers?
Ken - The numbers sound reasonable…I would only add the possibility of shippers in the Iowa City/Coralville area; a relatively quick hop down I-380 from Cedar Rapids.