UNLESS YOU’RE A RAIL SHIPPER, YOU’VE PROBABLY PAID LITtle attention to recent charges concerning deteriorating service from
the Jacksonville, Fla.-based railroad CSX Transportation. But the protests are about to become harder to ignore. Since early July, shippers
have complained about increased transit times, unreliable switching
operations, and inefficient car routings. And now they’re taking their
case to Washington.
To understand what’s happening over at CSX, it helps to know a
little bit about about the rail industry and E. Hunter Harrison, CSX
Corp.’s new president and CEO. Harrison decamped to CSX in March,
after nearly five years running Canadian Pacific (CP) and before that,
Canadian National (CN). During his tenure at
Canada’s two top railroads, he earned a reputation
as a turnaround artist, reviving both rails’ flagging
fortunes by implementing his “precision scheduled
railroading” operating model. Since arriving at CSX,
he has moved quickly to apply the same model. But
this time, it’s not going so well.
Exactly what is precision scheduled railroading?
According to a CP white paper, it is a “
philosophy of constant monitoring and optimization of
every asset throughout the entire organization.” It
is built on five foundations: “improving customer
service, controlling costs, optimizing asset utilization, operating safely, and valuing and developing
employees.” One of its hallmarks is scheduled train departures. In the
past, railroads held their trains until they were completely full. Under
the precision railroading model, trains leave at a scheduled time even
if they still have capacity available. In that regard, the railroad is not
unlike Amtrak or a scheduled airline.
At CP and CN, Harrison’s model proved quite successful, yielding
significant improvements in asset utilization, customer service, and
financial performance. Between 2012 and 2016, CP’s average train
speed rose 31 percent, train length grew 21 percent, and fuel efficiency
jumped 15 percent. Earnings per share skyrocketed 133 percent. There
were similar improvements at CN.
With respect to asset utilization and profitability, CSX appears to
be on the same trajectory. The company has already eliminated 900
locomotives and 2,399 employees. Second-quarter earnings were up
$65 million over the same quarter last year.
But changes of this magnitude can be painful, and this has been no
exception. The job cuts have earned Harrison no friends among labor,
and the conversion to precision railroading has sparked widespread
BY CLIFFORD F. LYNCH fastlane
Precision is not easy
criticism of what some have called a “take no
prisoners” management style.
Then there’s the deterioration in service
experienced by many of CSX’s customers. A
coalition of shippers has filed a complaint
with the Surface Transportation Board (STB),
which, in turn, urged Congress to look into the
matter. As an interim step, STB has insisted on
weekly conference calls with CSX and, as this
issue went to press, was looking to schedule a
public listening session to learn more about the
complaints. Unfortunately,
right now, the STB is short
two members, and the three
who are in place are not considered to be overly sympathetic to the rail industry.
I can only imagine the difficulty in changing the way
a railroad has operated for
My hope is that the STB will not turn this
into a regulatory circus, and will instead give
Harrison and his management team the latitude they need to resolve service issues without
having to abandon the precision scheduled
railroading program. While more pain is probably yet to come, I am still optimistic about its
prospects for long-term success.
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider
of logistics management advisory services, and author of Logistics
Outsourcing – A Management Guide and co-author of The Role of
Transportation in the Supply Chain. He can be reached at cliff@
cflynch.com.
