I know someone else mentioned “The Box, How the Shipping Container Made the World Smaller and the World Economy Bigger”, by Marc Levinson, out here before. That’s why I ordered my copy through Amazon. It arrived yesterday and I finished it today. (278 pages)
Good *** book. If you are at all interested in understanding the economics of transportation - this is the 101 text. Levinson is an economist and he explains the “why” of the changes, similar to what Hilton (also an economist) does in his books.
Levinson starts by describing a voyage of the “Warrior”, a pre-container vessel sailing between the US and Europe in the 1950’s. This vessle was owned and operated by Waterman Steamship Corporation. It held 194,582 pieces of cargo. Each piece was hand stowed below decks in New York. Each piece was hand unloaded in Bremerhaven, Germany. The goods arrived in Brooklin in 1,156 different shipments with the first arriving on the dock over a month before the ship sailed. It took six days to load the ship and four days to unload it. The actual voyage was only 11.5% of the costs. Loading and unloading by hand were 36.8% of the costs.
The container changed all that. The US railroads tried to adopt the container domestically long before anyone thought to use it for ocean freight. Our Federal Government prevented that and stangeled the US economy in doing so.
But eventually, the container was a force too much to resist. The main barrier to international trade was not a tariff on imported goods, it was the cost of hand loading and unloading the ships. The container solved that problem and the “Global Supply Chain” was inevitable.
Levinson goes into things like the union’s fear that they would loose jobs to containerization. The longshoreman unions were very wrong. A prediction was that they would loose 30% of their jobs to containerization. In fact, they lost 75% of their jobs. But the workers who remain have much better working conditions a
I worked in the steamship industry before containerization & after. I will condense that book for you in a few words. Prior to containerization a ship would 1st sarrive in NY & ONLY unload then it would go to Philly/Baltimore/Norfolk where it would both load & unload then return to nY for loading. Enter containerization & a ship arrived in NY & was loaded & unloaded in a day which included the Philly containers. The ship would then proceed to Norfolk or Baltimore where the containers for those ports would be loaded & unloaded & the ship would then depart say for Japan. So a ship owner could get many more salings without building new vessels once containerization arrived[:p]
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QUOTE: Originally posted by greyhounds
I know someone else mentioned “The Box, How the Shipping Container Made the World Smaller and the World Economy Bigger”, by Marc Levinson, out here before. That’s why I ordered my copy through Amazon. It arrived yesterday and I finished it today. (278 pages)
Good *** book. If you are at all interested in understanding the economics of transportation - this is the 101 text. Levinson is an economist and he explains the “why” of the changes, similar to what Hilton (also an economist) does in his books.
Levinson starts by describing a voyage of the “Warrior”, a pre-container vessel sailing between the US and Europe in the 1950’s. This vessle was owned and operated by Waterman Steamship Corporation. It held 194,582 pieces of cargo. Each piece was hand stowed below decks in New York. Each piece was hand unloaded in Bremerhaven, Germany. The goods arrived in Brooklin in 1,156 different shipments with the first arriving on the dock over a month before the ship sailed. It took six days to load the ship and four days to unload it. The actual voyage was only 11.5% of the costs. Loading and unloading by hand were 36.8% of the costs.
The container changed all that. The US railroads tried to adopt the container domestically l
The evolution of containerization has nothing to do with relative bulk transportation efficiencies, but more on that later…
Ken, this highly subjective reasoning on your part is why you just don’t get it. The Montana wheat shipping debate has nothing to do with transportation efficiency improvements (which tend to be globally homogenous aka all wheat shippers are a benefactor of technology improvements), it is about a selective and astounding degree of rate discrimination.
For your argument to have any validity whatsoever, the opportunity to ship unit trains of 110 ton hoppers would have to be a special gift to Montana wheat growers, while other wheat growers both domestically and internationally would have to still be shipping 80 ton carloads.
But of course, that’s not the case. Those Nebraskan, Candadian, and Australian wheat shippers also have access to 110 ton unit trains economics, so Montana isn’t getting anything special with BNSF’s shipping methods.
But, Montana is being subjected to rates that are double and triple the rates being paid by Nebraskans, Canadians, and Australians. Ergo, Montana is thusly put at an ecomomic disadvantage for the world wheat markets soley at the discretion
Thanks for the book review. I watched NS 25A pass thru town today with 109 containers (a rather small lading for that train) and couldnt help but wonder…what are in those boxes?
Looks like it is time again to ramp up the Montana grain debate.
It is pretty simple actually, when you have competition, there are competitive rates. Montana has no river transport (at least that I can think of), very little rail transportation competition, and trucks dont compete well.
Dave, you are stretching the facts again…where are the freight charges 3x for comparable haul? Justify 50% of revenue going for transportation costs…perhaps I am wrong, but I think we did the math last time.
I have offered the simple solution to this…and no one takes it seriously.
Well Ed, we could always load the wheat into international containers. [:D]
Hmmmm, a covered hopper container. Maybe I should post this on the Model Railroader side of the forum and see if we have any takers to scratchbuild or kitbash one of these.
Ed: Try the R/VC ratio. I think you did agree in other threads that R/VC rates for captive shippers can be as high as 300% to 400% R/VC, while rates for shippers with realistic competitive options can be as low as 100% R/VC.
Let’s see - 3 x 100% is 300%. 4 x 100% is 400%.
So why degrade this discussion by accusing me of stretching the facts, when the facts as you agreed to in other threads are plain as day?
To be honest, I think Ken has a thing for rehashing the Montana wheat rate discussion time and time again, since there is no reasonable connection between the development of containerization and long standing bulk shipping methods coupled with rate discrimination. He could have just as easily posted something about light rail and somehow found a way to drag the Montana wheat subject into the discussion.
Tom - For the record, CN did try to develop a grain shipping container a while back. It didn’t work out very well. For starters, if you’re gonna ship grain in containers, just use a regular ISO container. No need for a fancy hopper-style container.
Just Yahoo Search “grain container” and you’ll likely find it.
And yes, I did order the book through the JOC website, so it should be here in a few weeks hopefully.
“Degrading”? That is a term that has never been associated with me on this forum. Am I “degrading” because I ask questions?
R/VC (180%) is the law. I acknowledge that. I dont think I have ever agreed that there are cases in which it is up to 300%.
Actually, it would be interesting to get ahold of the numbers for determining the R/VC data…and not the general numbers from the annual report, but specific numbers that apply for each shipment.
I know the STB has made it difficult to try a case, so we dont have to discuss that. But to say the Montana farmers are paying “triple the rate” when comparing R/VC which you havent even made a case for, is not valid. You are comparing apples to oranges, no make that Montana wheat to Illinois wheat, which I was taught cannot be compared.
By the way, how many bushels does a covered hopper handle? Refresh my memory. I know the weight limits, but not the bushels.
It sure would be something if they could load those containers with grain, that would go a long way in reducing the costs.
Some shippers do load grain onto export-bound containers for certain proprietary grain types, and of course most pre-bagged grains and pulses go by container for export. But containerization cannot come close to the inherent low cost structures of bulk commodity methods.
As for cases where R/VC is 300% or higher, go the the CURE website:
They should have all the documentation you need. BTW, haven’t you accessed the CURE website before?
Then add to the mix the relative rates being paid by Canadian and Australian grain shippers for export, and compare that to the rates being paid by US captive grain shippers. Add to that the loss of carload service which has forced longer trucking hauls from farm to shuttle facility. Take the total transportation costs of captive Montana farmers compared to the total transport costs paid by their competitors. No, 3 to 1 and 4 to 1 rate ratios is not out of the question.
I have accessed CURE before and found it an interesting site.
My guess is that VC data is going to apply to each and every shipment and that the carriers dont make that information available. I dont think I would. In fact in my line of work, I keep my costs close to the vest.
Any idea of how many bushels of wheat in a hopper car?
No, there are just a lot of similarities between the extra, super-dooper, large container ships and ports dropping the transportation costs to near zero and the shuttle train efficiencies the BNSF wants to bring to Montana.
Remember, the BNSF charges $66,000 LESS to move 110 cars of wheat in a shuttle train from Montana to the export elevator in Portland than they do if those cars are shipped 25 at a time. The railroad can do this because the terminal costs are much lower on the shuttle trains and equipment utilization is much greater.
It’s the same with a container ship. Terminal costs are lower
You are right, any business is very guarded when it comes to its profit margins. If I saw a Class I railroad’s margins segmented by major commodities (ie. over $1 million per year) I would not expect to see any commodity with a rev/long run varible cost (lrvc) ration over 2.75.
I know you dealt with this sort of stuff (R/VC) in your career. I did similiar type work in the LTL trucking industry during the 80’s. Back then we had anti trust immunity and would have General Rate Committee meetings to look at the costs and then hike the rates (all done legally).
Do you have any insight as to the cost structure of railroads?
I spent quite a bit of time this weekend going over the BNSF stuff, but it is very basic. The class1 annual report to the STB is a little more detailed, but still vague.
I am curious as to the cost components of the fixed and variable costs.
My costing question at work was to determine how much our costs would go up if we took on a new piece of traffic. My view was from a marketing standpoint not from a operating or finance standpoint
Let’s suppose Shell Oil wants to run a crude oil train from Seco to Wilmington, CA. The fuel to move the loads and empties is fully varible with the traffic. If you take on the traffic the fuel bill will go up. On the other hand the cost of my salary did not vary if we got the Shell business. That cost would not be charged to the movement. Shell took care of the car costs so that came off the SP’s books but was an important element in the total physical distribution package.
The difficult part is allocating costs in the grey areas. This is where you need very good cost accountants. I would make sense to say locomotive costs would be varible with the traffic but what if you have a bunch of extra locomotives sitting around? A lot of track maintance costs vary with the level of traffic but it is not 100% of the costs. A new train will cause new crew starts but in the 1980s you had a lot of crews collecting gaurentees if the did not work while today you would need to hire and train new crews. Generally the mostly varible costs are fuel, crew wages, maintance of equipment and maintance of track. As you get into other costs they vary over much longer periods of time or are fixed costs.
The costs will also vary with the length of time for the movement. If you have a movement that will last ninty days the costs are often much lower than ones that last five years. Senior management takes on a critical role in this area. At one extreme is a mangement that knows there will be a merger in a few months and they will not have a postion with the new company. They may be willing take on very, very low margin traffic just to bring the cash in the door and so they can meet their merger convenants. They will say to themselves we have doen such a great job running this railroad [:)] t
Railroad variable cost data is reported to the STB by the railroads as a matter of law. 49 U.S.C. 11161, et. seq.
Under the Uniform Rail Costing System (URCS), the STB compiles data provided by Class 1 railroads under the Uniform System of Accounts (USOA), a Board-prescribed accounting system.
The URCS is divided into three steps. Step I is the collection of data. With this data, certain studies are undertaken including Variability Studies, Switching Studies, and others. Step 2 develops system average variable unit costs based from the data and studies. Step 3 is the input of the annual data developed from Steps 1 and 2 into a Rail Cost Program which then permits easy access to system average variable and total costs of a shipment.
There is not substantial variation in such costs on a train by train basis. Looking through studies on the matter, it is difficult to find data that shows more than 5% variation in costs of train operation over a given distance if the cycle time is the same. The variation in the “costs of operating a train” are almost entirely tied to the cycle time of the equipment involved, the type of equipment involved, fuel costs, and locomotive type.
The UCRS is recognized as a reliable system for calculating variable and total costs of service . According to the STB: "URCS is used by the STB for a variety of statutory and non statutory functions. URCS is statutorily required for making the jurisdictional determination in railroad maximum rate reasonableness proceedings. URCS is also used to develop variable costs for making cost determinations in abandonment proceedings
Well notwithstanding it is only five letters long, “never” is a pretty big word, however, it is true that by the time the data is collected and published, at least a quarter has passed, if not a year by the time of the annual update. However, the data is collected by the railroads, and since it represents operating data essential to such decisions, I doubt that railroads “never” rely on operating data to make business decisions. The only difference is the “real time” nature of the decision making process and the use of such data, and the reporting lag which may, or may not, make the reporting of such data different than real time because of supply, cost, inflation changes.
Of course, even on railroads, there is no such thing as real time cost data, since vendor billing cycles are rarely provided “real time.” The only conclusion that can be derived is that railroad current data is more timely, not necessarily more accurate, than URCS data although I would expect it to be more accurate for any current application. URCS, representing historical data, is more accurate than a wild guess and of course, for the time frame actually involved, represents something resembling perfect data compared to alternative information that might be available, since of course the URCS data comes from the railroads themselves.