Large mainframe computers are very expensive to build but are highly profitable to build. You can build into the sale, the cost of training the customer’s technical support staff.
Small computers are cheap to build and low profit margin. Tech support must be handled by the manufacturer because people who only have a few computers don’t have the budget for an IT staff.
So IBM ignored the little guys and concentrated on the high budget big guys. Now some pretty big customers are running peer networks of hundreds of those little computers and the market for main frames is dwindling. There will always be a market for mainframes, but that market is no longer the primary computer market.
Instead of concentrating on how much it costs to put in more track and how many cars per day you need to remain profitable, perhaps more attention should be paid to the needs of the customer and how your system can be modified to meet those needs while still maintaining your profitability.
There are a lot more one or two truckload a day shippers than there are 5 boxcar a day shippers. Instead of writing them off, you should find a way to serve their needs. Perhaps instead of competing with trucks you should integrate trucks into your system. Just as you carry containers for others, perhaps you should pick those containers up and drop them off yourself. Instead of laying track to that small factory, perhaps you should send a truck (with the railroad’s name on the side) to pick up that small containerized shipment and bring it to your inter modal terminal, then drop the container at it’s final destination.
[quote user=“MP173”]
The NS comes to town 5 days weekly from Ft Wayne (100 miles) to switch a couple of industries. They are usually here at least an hour, and usually more. Part of that time is running around the train to return. No idea of how many cars are brought in (inbound service only), but there are usually 10-15 tank cars in one industry and the other has plastic pellets, with 10-20 cars on the siding.
On the other hand, NS runs a second daily turn from Ft Wayne to Van Loon to pickup cars off the old EJE. This is a daily run and consists of coil cars of steel heading back east. That train can be 10 cars, or as many as 75. Typically it is 15 - 20 cars in this economic climate and 25 - 40 in the good old days of the mid decade. Rumor has it that train is destined for a steel slitting/service company just across the Ohio border (cant recall the company or town).
That seems like a very interesting piece of business, great work for short haul class 1 railroading. Their service is like clockwork, at least here on the west end. Westbound to Van Loon around 1pm and return around 3 - 4pm. Every day.
So, to say railroads dont give great service is obviously going to depend on your definition of service. They sure are not going to pay attention to me if I call NS marketing and want a load of corn picked up at a team track in my hometown. ADM gets their attention.
It is very difficult to be everything to everyone. If you can figure out what you want to be when you grow up and have a plan, it has a great chance of working out. Same with railroading, trucking, etc.
RWM, thanks for the general info…any thoughts on that NS local and the NS steel turn?
edit: The last sentence above is not worded very well. I dont intend on putting you on the spot regarding NS’s operations, marketing, etc…but generally speaking, how do railroads determine how much ser
Long ago there may have been some relation between value and the rate level; if it was a factor it was dead 50 years ago. Nor are railway rates made as a markup above costs, unless government intervenes. The rate is made based on how much the customer is willing to pay for the service offered by the railroad. Cost only becomes important at the moment before the salesmen agrees to the deal. You need to know if what the customer is willing to pay is going to cover your costs.
Several folks have post comments concerning small receivers taking cars of plastic pellets. Plastic pellets could well be the highest profit margin traffic a Class I railroad handles.
It is a myth that railroads don’t pay attention to their customer’s needs. Warren Buffet would not have put a dime in the BNSF, NS or UP if he had even a hint that this was true.
Like Toyota, railroads chose about 30 years ago to reach truckload and less than truckload customers selling wholesale through retailers. If you ask Toyota to sell you a Camry they will send you to a local retailer. If you ask the BNSF to ship a truckload they will refer you to J B Hunt or Schneider. If you asked them to ship a package they will refer you to UPS. This is why Hunt, Schneider and UPS are among the largest rail shippers.
That may change soon. CN has opening expressed interest in going after retail transportation…a very smart move and one that would allow them to effectvely improve margins by 15 to 40% with minimal additional investment. Instead of buying another railroad…the way to grow just might be through some strategic freight forwarder acquistions…
[quote user=“bobwilcox”]
It is a myth that railroads don’t pay attention to their customer’s needs. Warren Buffet would not have put a dime in the BNSF, NS or UP if he had even a hint that this was true.
Like Toyota, railroads chose about 30 years ago to reach truckload and less tha
There are some exception to the wholesale channel to TL/LTL. The one that come to mind is NS’ Triple Crown Service buy I don’t know this business line’s share of NS revenue stream.
Triple Crown Services is a separate corporate entity from NS although it is an NS subsidiary. It contracts with NS to haul the RoadRailers in most cases, I’m not sure how it deals with over-the-road operations. At any rate, the shipper deals with Triple Crown, not NS.
I hesitate to jump into this morass, because there are a lot of other people commenting in this string (including you) who likely know more about the day to day workings of railroad pricing than I do (and since I personally know you, I know that to be true).
I would just like to make one observation. There is a difference between the way a pricing person makes his/her pricing decisions and the way an economist may view overall pricing behavior after the fact. For example, I know from my own personal experience that “value of the commodity”, as such, isn’t something that’s weighed very heavily in railroad pricing decisions. As you say, the bottom line is what the customer is willing to pay for the service (and whether that price covers costs by a sufficient margin to be attractive). However, there may still be an economic relationship between the two over the universe of rail traffic. That’s because the value of the commodity is a factor which may affect the prices the customers are willing to pay - customers may be somewhat more willing to p
I agree with this take on it. I would add that only for hasty or opportunistic shippers does the price value of the good potentially influence shipper psychology to the degree that the shipper is willing to pay a higher rate because the transportation proportion of the delivered price declines in importance as the value of the good rises. As illustration, the transportation charges for long-term, high-value goods such as autos are aggressively shopped by the shipper and can be less lucrative for the railway than some fairly mundane goods such as lumber.
I also have never, ever, heard anyone mention Ramsey Pricing at a railway. Only in academic environments.
Edit – I take that back on Ramsey Pricing, a little, after thinking about it. It has come up a couple of times. But it was not in the marketing department where it was mentioned.
But doesn’t the value of a commodity have to be included in the tariff if only because of what has to be done to earn that tariff? Effectually all you have to do is dump 60 or 80 tons of coal into a hopper, weigh the car and be off. But there has to be cushioned loading and handling for electronics, manual driving of auto’s onto racks, etc. which takes manpower, special equipment, special loading and unloading facilities, and so forth, which all has to be considered in coming up with a price. The concept of one ton is equal to any other ton in transportation cannot exist.
I would think that the railroad’s piece of the transportation pie is chiefly moving a loaded container (be it a hopper, boxcar, container, autorack) from point A to point B. The contents from a tonnage standpoint are of little consequence (HP/ton notwithstanding) - most contents are loaded and secured to handle routine train handling, even a trip or three through a hump.
I’m sure that Wabash cares little beyond the tonnage on the drawbar (and any special handling considerations) when he takes over a train.
Flood loading of coal notwithstanding (and not even that in some cases), the railroads generally have little to do with preparing a product for shipment. The generating facility simply hands over a loaded car to the RR, be it automobiles or wheat.
The opportunity the railroad has to charge variable prices comes from premium handling - be it expedited (UPS, et al), hazmat, or a host of others things.
To the extent that carriers are on the hook for loss and damage to lading, the value of the commodity being shipped is a function of the pricing. Additionally, in today’s world of HAZMAT transportation and the carriers being liable for any spills and resultant cleanups those realities also factored into the rate that is charged. So in the real world, a ton of one commodity is not the equal to a ton of another commodity when it comes to it’s transportation value.
Well, I’m the guy who mentioned “Ramsey Pricing”. I’ll both agree and disagree with you here.
First, I never promoted the idea that railroad pricing people were going through life wondering “WWRD?”. (What Would Ramsey Do?) But they overwhelmingly price railroad services that a way.
I’ll agree that his observations are just that, he observed pricing structures and synthesized his observations. It was after the fact. But he explained what was being done. And that was my point, if you want to understand railroad pricing you’ll need to understand an explination of the Ramsey thing.
Conciously or not, that’s the way rail pricing is generally done. If you want to understand rail pricing, read up on Ramsey Pricing.
I’ll disagree that most railroad pricing managers haven’t heard of Ramsey Pricing. A good portion of these guys/gals are MBA’s and they’ve had graduate economics classes. The railroads, IMHO, would do well to make gosh darn sure any new hire MBA pricing analyst sat through some training on Ramsey pricing. He/she is going to be doing it and he/she will benifit from understanding the theory behind what they’re doing.
We all make economic decisions behaving (well most of us behave) in accordance with establ
That was a great explanation of L41 and 323 and how they fit into not necessarily the “big picture” but the “regional picture”.
I knew a little bit about both L41 and 323, but not the Fort Wayne side of the story. That is a pretty slick operation for the EJE/323/L75. Two railroads, a steel mill, and a customer basically providing overnight service on steel. I can definately see the need for L41 and 323 to be separate operations.
What I dont know is what L41 does between the Fort and Valpo. Are they servicing the big bio-diesel plant in Claypool? I guess my point in this discussion is it is very obvious NS is offering very good local service, often with a train with only a few cars out this way. I fell into the trap of seeing a short train and reading more into it than I should.
BTW, the eastbound parade is off and running tonight, 295 just cleared South Wanatah, with 215 on yellow blocks following. Soon 262 will be following. Last night there was a 365, so the connection at Claypool (for Elkhart trains) must not be in place yet. NS ran a second section of 236 today (I36). The Nickel Plate spirit is alive and well tonight…all is well.
Thanks for the overview on the operation out of the Fort.
Well, I’m the guy who mentioned “Ramsey Pricing”. I’ll both agree and disagree with you here.
First, I never promoted the idea that railroad pricing people were going through life wondering “WWRD?”. (What Would Ramsey Do?) But they overwhelmingly price railroad services that a way.
I’ll agree that his observations are just that, he observed pricing structures and synthesized his observations. It was after the fact. But he explained what was being done. And that was my point, if you want to understand railroad pricing you’ll need to understand an explination of the Ramsey thing.
Conciously or not, that’s the way rail pricing is generally done. If you want to understand rail pricing, read up on Ramsey Pricing.
I’ll disagree that most railroad pricing managers haven’t heard of Ramsey Pricing. A good portion of these guys/gals are MBA’s and they’ve had graduate economics classes. The railroads, IMHO, would do well to make gosh darn sure any new hire MBA pricing analyst sat through some training on Ramsey pricing. He/she is going to be doing it and he/she will benifit from understanding the theory behind what they’re doing.
We all make economic decisions behaving (well most of us be
I kinda forgot to drive my point home in that NS was going to use two crews anyway (most of the time) and by splitting the work, they were able to provide better service for both the steel and all the other customers L41 worked as cars stuck on an outlawed train don’t get worked in the yard in time to catch the next manifest.
I’m not sure about who (L41 or another) services the Dreyfus bio-diesel plant right now. It still wasn’t operational the last time I went through there. It is situated at the intersection of the Marion Branch and the ex NKP, so they could bring a siding off either line. </
My gosh ! How long were those trains and the siding ? Do they do that often ? Can you get photos/ video ? I believe I’d rather see that than mainline steam ! I wonder what that sounded like on the scanner ? Did the crews realize that it was going to happen