DC Velocity - December 2011

thoughtleaders JOHN G. LARKIN

QThere has been a rise in yard dwell times reported by the Class I railroads. Does that indicate the rails might not be able to efficiently handle any additional volume that might come their way?

ADwell times have risen some, but I think more due to weather issues than to capacity constraints. We have had some amazing weather this year, especially the heavy rains that led to unprecedented flooding.

I believe the railroads are much more capable than they have been historically in terms of coping with volume fluctuations. Railroads can digest another 10 to 15 percent more volume without any significant deterioration in service levels—assuming that other factors, such as weather conditions, remain unchanged.

mitigate the effects on carriers?

AI would say that about a third of the shippers under- stand the situation. They are collaborating with carriers to help them get more productivity out of their equipment. They are working with their vendors on product and packaging design with the goal of loading more product per 53-foot box or trailer. They are looking to take control of inbound loads in order to minimize systemwide empty miles.

The challenge is for carriers to somehow convince the other two-thirds of the shipper community that the world is changing.

QIt has been said the collective impact of CSA 2010, the new hours-of-service rule, the driver shortage, and tougher emissions standards is a supply chain problem, not just a trucker problem. Do you think shippers, receivers, and intermediaries grasp the severity of the problem and are thinking about ways to

QIn 34 years working in and covering the industry, what has been the most profound change you’ve seen?

AThe margins earned by the Class I railroads. We struggled at CSX in the 1980s to run below a 90-percent operating ratio. Now, carriers are targeting operating ratios of 65 percent or below. And the railroads have been able to generate these much improved margins while still charging half what they did at the time of deregulation. That is amazing to me. ;