How Railroads Price Impacts Their Operating Ratio

The railroads always strive to lower their Operating Ratio, which is costs divided by revenue. This important metric, monitored closely by Wall Street, measures their efficiency through both decreasing total operating costs and increasing total revenue. Many cost-cutting efforts are underway, including the streamlining efforts of Precision Scheduled Railroading (PSR). To maximize their total revenue, the railroads focus on a different metric as they set their individual rates.

Revenue-to-Variable-Cost Ratio (RVC)

The Revenue-to-Variable-Cost Ratio or RVC is one of the most important calculations in understanding rail pricing. RVCs can help you determine how the railroads compare rates, and consequently how they price. This ratio can be thought of as the inverse of the Operating Ratio, but for a single lane and it is simply the railroad’s revenue divided by the operating cost for that lane. As we’ll explain, railroads use this ratio to help them set individual rates for differing lanes and commodities. Understanding what the railroads are using internally can help you assess your rates and see how they compare to others in the industry.

In the example below, the total rail revenue (rate plus fuel surcharge) is $8,331.67 and the railroads variable cost is $4,061.79. That equates to a combined railroad margin of $4,244.72 with an RVC of 2.05.

RVCs and Competing Rates

Of course, when setting rates, carriers consider factors other than cost, including risk/liability, modal competition, and rail competition. They will estimate what the market will bear, and pricing managers often have a desired return for each commodity.

A railroad’s targeted profit level will often be based on what it currently obtains from other similar traffic. For example, if a railroad has existing rates for a given commodity that produce an RVC of 2.0, the carrier is likely to require that same return on a new rate request, especially if new traffic could displace existing business. However, when making offers, negotiating rates, or changing routes, railroads may seek to exceed this ratio in a strategy called margin-plus pricing.

Margin-Plus Pricing

The railroads will strive to protect existing operating margins. When negotiating a rate, the railroad will consider how the traffic will affect their entire portfolio. Is it totally new volume, or does it displace other business? If a carrier is moving a commodity in one lane, and you request a rate for a new lane that would take volume away from their current business, they are likely to quote a rate to provide an equal or greater margin than they are receiving. This can be viewed as margin-plus pricing. Other factors such as traffic patterns and equipment utilization may also come into play.

Benchmark Your Rates

RVCs provide quick and easy comparisons for railroads to determine rates, but they can also be comparison points for you. After you have used RVCs to understand your rates relative to the railroads’ costs, you can use them to benchmark your rail transportation costs relative to your competitors.

Rail rate benchmarking utilizes commodity-specific yardsticks for evaluating rates. Variances from those yardsticks can give you valuable insight into where you have the most leverage to minimize your overall rail spend. Favorable variances may indicate market share growth opportunities, while unfavorable variances highlight areas in need of greater management attention. You do not have to gather this information yourself, either. The rate request tools in Rail Command® and cost analysis in Rail Impact organize this process and enable quick rate estimates.

You can also use sample freight bill data to make comparisons. The railroads are required to submit an annual sampling of their freight bills to the STB. The STB offers a public file of the data with confidential information removed. Railroads may mask contract rates, but not tariff rates. This data can provide useful benchmarks to negotiate better rail freight transportation rates depending upon the commodity and market size.

Captive vs. Competitive Lanes

As you might expect, railroad RVCs tend to be higher when there is no competition in the lane. Unfortunately, over 70% of locations are served by only one carrier. It can be difficult to negotiate pricing in these situations. Once you have analyzed RVCs across your route, you will be able to see where your rail freight rates are out of line. If you are being significantly overcharged, it may be time to explore other options.

There are a few other options available, even in captive lanes. Consider using a transload facility to expand your options. Or, compare other modes, or intermodal transit, such as trucking or marine transport, where possible. Strategic investment in alternative routes can pay off in the long run.

Bundled Pricing

Some shippers bundle their moves and ask railroads to bid on the entire package. Since rail rates are generally higher for captive locations and lower for competitive movements, it’s assumed that the overall railroad shipping rates will be lower. This also tends to simplify pricing, since it does not require analysis of individual lanes and moves. However, one railroad will probably control more of the route than another, and this carrier has the advantage in bundled pricing. Ultimately, the dominant carrier uses captive traffic to obtain more participation along competitive lanes. The largest railroads continuously drive up individual rates, while smaller carriers struggle to cover costs.

A more effective scenario is for shippers to use competitive traffic as leverage to secure better rail freight rates on their captive lanes. Evaluating current treatment by captive railroads can be a factor in determining which competing carriers provide the opportunity to bid on competitive lanes.

Another problem with bundling rates is that it enables rail carriers to include unreasonably high rail freight rates in the package. By separating and comparing individual railroad rates and possibly requiring them to be published in a tariff, the shipper retains the legal option to challenge them before the Surface Transportation Board.

Understanding railroad pricing can help you negotiate more effectively. In an environment with a significant amount of confidential contracts, comparing revenue-to-variable-cost ratios provides a way to evaluate rail rate reasonableness. Take a look at RSI’s Rail Impact software to understand RVCs and see where your rates rank.

Understanding Railroad Pricing and Reducing Rates

With an understanding of how railroads price, you can set up a strategy to better negotiate rail rates, and arrange alternatives where necessary. Data is a powerful tool in these negotiations. If your transportation costs are out of line, data can help you invoke strategies to reduce these costs. For example, assessing and reducing plant switching difficulties, and excessive demurrage or storage charges can be a helpful place to start. Assessing transloading options can also offer cost-saving alternatives. Railcar tracking software and proper fleet-sizing can also help reduce fees and delays. There are many options for reducing rail pricing and negotiating rates once you have a solid understanding of where your rates rank in comparison to others in your industry.

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No one likes to pay demurrage and storage charges. For some shippers, demurrage charges are merely a nuisance. For others, demurrage is a seven-figure annual expense. Many of our clients have found it to be a cost that can be reduced or eliminated with the proper focus and attention. This article offers a number of strategies rail shippers and receivers can employ to control and reduce demurrage. We’ve updated this post in 2022 to help refine your strategy.

Contents

1. Introduction
2. Steps to Control Demurrage
   1. Improve the flow of your cars
   2. Know the tariff rules
   3. Proper record keeping
   4. Analyze, find alternative solutions
   5. Optimize your fleet

Introduction

Let’s start by defining the three main terms you’ll see associated with demurrage charges and accessorial charges in general. While these are the technical definitions, in practice all three are commonly referred to as demurrage. This can lead to confusion because each has separate causes, rules, and penalties.

• Demurrage: A charge that compensates rail carriers when railroad owned railcars are detained by rail shippers. It serves as a penalty for undue railcar detention in order to encourage the efficient use of railcars in the rail network.
• Private Car Storage: A fee for privately owned railcars that have excessive use of railroad owned tracks.
• Customer detention: Also known as customer holding, this charge occurs when a customer detains a shipper’s cars for a longer period than agreed.

Each railroad has different demurrage and storage rules and regulations. Demurrage usually starts when the railcar is Constructively Placed by the railroad and ends when the railcar is ordered in or released by the industry. There are a number of free days given by each railroad; debit days are the number of days after those credits expire. Demurrage is generally calculated by subtracting free and debit days.

Steps to Reduce Demurrage

So, how can rail shippers reduce demurrage fees? Here are four steps:

1. Improve the management and flow of cars and align them with facility capacity.
2. Know the railroads’ rules and your options.
3. Maintain proper records, including daily rail orders and switching.
4. Track the root cause and find alternative solutions.

1. Improve the Flow of Your Cars

The first step to reduce demurrage is to keep your car inventory from exceeding your spot and storage capacity. Accurate railcar tracking and visibility is a key part of this process.

Download our free guide to railcar tracking options to learn what to look for in a railcar tracking system.

Here are examples of railcar reports RSI’s customers use to manage demurrage:

• Demurrage and Detention Reporting. See when cars were shipped, constructively placed, actually placed, released, and days held. Charges are automatically calculated taking into account credit days and daily rates.
• Pipeline Reporting. Allows you to plan the arrival of inbound railcars both short and long term to avoid demurrage charges.
• Trace Reports. Various trace reports utilized to monitor the flow of railcars.
• Shipment Reporting. Track inbound shipment volume so that it can be kept within capacity.
• Transit Time Calculations. Accurate forecasting requires accurate estimates for shipping cycle times.
• Railcar Issue Logs. Document railroad performance issues so that you can share with your carrier and also have ready for disputing demurrage charges.

Of course, the best reporting in the world will only help if logistics staff have the time and attention to properly manage it. If not, you may want to consider outsourcing this rail logistics function.

In addition to needing visibility, staff will need to be able to control car movements. Controlling the inbound flow of cars usually includes coordinating the timing of shipments with other parties such as suppliers, as well as determining when to move cars to storage tracks or other locations.

You may also need to look at operational issues to improve car throughput!

If you utilize system cars, equipment ordering needs to be accurate and railcars need to be loaded/unloaded quickly. Excess equipment sitting in the yard will accumulate demurrage charges. Likewise, you also need to cancel requests for equipment not needed before they reach the serving yard or destination.

If you are charged customer detention from your suppliers, you also need to unload railcars quickly to avoid excess detention charges.

2. Know the Tariff Rules

A thorough understanding of the tariffs for each carrier you deal with is necessary for you to be able to effectively reduce demurrage charges. Charges are based on 24 hour periods and most railroads start the clock at 12:01 a.m. the day following placement. You also need to consider when the railroad’s crew services your facility. Take advantage of the clock by ordering or releasing cars at the earliest possible times to reduce chargeable days. Especially prior to a weekend.

Knowing your tariffs is also necessary for disputing demurrage invoices. Invoices from the railroads must be audited. Keeping accurate records can be a challenge for the railroads and charges are not always correct. There is a limited window that disputes need to be filed in and you need to follow the dispute process.

3. Proper Record Keeping

To dispute demurrage charges, you will need to keep records of the constructive placement date and time, order-in date and time, actual placement date and time, and release date and time. Be sure that you have a way to capture this information. You should also have a process for documenting railroad service issues such as delayed cars, switching failures, and cars ordered but not placed. An automated railcar tracking system is essential.

4. Analyze, Find Alternative Solutions

Besides the day-to-day work above, here are additional strategies that can fit certain situations to help you avoid demurrage charges:

• Optimize Your Rail Fleet.  In working with customers to understand the root cause of demurrage and storage charges, we often find that optimizing the rail fleet is the answer. More effective utilization, being able to reduce fleet size, and improving fleet balancing across locations can lead to efficiencies that result in lower demurrage and storage costs. Railcar tracking software is an important part of the solution.

• Use Private Equipment. If you are collecting demurrage on system railcars, leasing private railcars may be an option to avoid demurrage charges on railroad-controlled railcars.

• Review Railroad Spotting Instructions. You may need to review the railcar placement instructions you have in place with your railroad (open or closed gate, spot-on-arrival or keep me full). Spot-On-Arrival provides a free flow of inbound railcars but once capacity is met, railcars are Constructively Placed. The customer is then responsible for ordering in the oldest Constructively Placed railcar. If the carrier provides Keep Me Full logic, the customer is not required to order railcars once they are Constructively Placed.

If there have been any changes to your track capacity, make sure your serving carrier has updated their records.

• Develop External Storage Capacity. Leasing nearby tracks may be a lower cost alternative to the railroad private car storage rate.

• Expand Plant Capacity. Is adding or reconfiguring track within your facility an option for increasing storage or adding efficiency? Perhaps investing in additional equipment or resources can reduce the time required to load or unload cars.

• Negotiate a Private Agreement. In some situations, a private demurrage agreement with the railroad can provide more flexibility and reduced cost.

• When It Is the Railroad’s Fault. A shipper should not be required to compensate a railroad for a delay in returning the asset when the rail carrier’s performance is the reason for the delay. However, railroad tariffs assign demurrage charges regardless of which party is at fault for delay. In practice, railroads may provide relief if you can clearly prove their car handling caused the delay.

If demurrage charges are the result of a railroad missing a scheduled switch, you should be able to get a switch fail credit. Another complaint rail customers have is the bunching of railcars (railcar deliveries that are not reasonably timed or spaced). This can be a difficult issue to resolve. Some carriers refuse to provide relief for bunching, while others have guidelines in their tariff for when they will provide credit.

5. Optimize Your Fleet Size

In an effort to keep shipments on-schedule, many rail shippers increase their railcar fleets so they can have plenty of railcars on-hand when needed. However, increasing your fleet size too much can increase demurrage charges. If your plant is frequently full of empty railcars, empty railcars are stacked up outside your gate, or railcars frequently accumulate outside your customer’s facilities, it’s likely that your fleet is too large. Optimizing your fleet size and coordinating movements can help you reduce demurrage.

RSI’s Railcar Tracking & Management Software offers a Fleet Sizing Model to help you determine how many railcars you need based on actual transit times and shipping volume. This interactive tool allows you to adjust variables to determine how they affect the number of railcars you need. If your fleet today has too many railcars, the number of days that each railcar sits at your plant is likely exaggerated. If your actual transit data reflects that it takes your plant an average of 10 days to throughput a car, but you know that your plant can do it in 4 days, you can make that adjustment in the Fleet Sizing Model. You can also adjust for other factors, like seasonality and railcar maintenance requirements.

The software will also show you the effects that your shipper’s policies are having on your demurrage charges. It is important that you understand the transit time to ensure your supplier is not shipping too early. If they are, cars are likely arriving at your plant before you are ready for the material, causing you to incur demurrage charges.

The world we are living in today has resulted in fewer railcars moving on the rail network, and in most cases, reduced transit times. Now, more than ever, it is crucial to assess the impact reduced transit times are having on your fleet size. Optimizing your railcar fleet size means fewer empty railcars sitting on the tracks, thus lowering demurrage charges.

Demurrage charges are subject to Surface Transportation Board (STB) regulation under 49 U.S.C. 10702, which requires railroads to establish reasonable rates and transportation-related rules and practices. Demurrage cases are rare because carriers and shippers generally resolve these issues on their own. If a demurrage case should persist, shippers may follow the STB’s alternative dispute resolution process.

If your company is incurring significant rail demurrage charges, you have an opportunity to eliminate or reduce those costs. The complexities of shipping or receiving multiple products for multiple customers is difficult without an automated process. However, with the right tools and attention, you can achieve significant savings in a short period of time. Contact us if you would like to discuss how we may be able to help.

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5 Tips for Effectively Negotiating Rail Freight Rates

1. Understand How Freight Rates Are Set

In setting rail rates, the railroads mark up their costs by varying ratios, dependent on commodity. Insight into this pricing behavior provides the framework for analyzing rates – yours or your competitors’.

Revenue-to-Variable-Cost Ratio

The most important ratio in understanding how rates are set is the Revenue-to-Variable-Cost ratio. The RVC is simply the railroad’s revenue divided by the operating cost for a lane. This ratio can be considered an inverse Operating Ratio, but for a single lane. Railroads seek to increase their RVCs when negotiating freight rates. Access to this data can give you a starting point and a frame of reference for your own rates. This can show you whether your rates make sense for your commodity, or whether you may have an opportunity to negotiate rail freight rates.

Tariff vs Contract

If you find that your RVC ratio is inordinately high, this doesn’t necessarily mean the railroad will negotiate. There are two other important aspects of rate freight rate structures: tariff vs contract pricing, and competitive vs captive lanes. Tariffs are public rates, so they are easy to compare. Contract rates are confidential, so you’ll need more data to know if your contract rates make sense. While contracts are prevalent for some commodities, the railroads have shifted back to tariffs for others. In 2014, approximately 76% of freight moved under privately negotiated contract rates.
Finally, you have options in competitive lanes, but in a captive lane, the origin and/or destination are served by only one carrier. Obviously, when there is no competition, you are at a disadvantage when negotiating rail freight rates. However, there are some tips that can help, which we will discuss later in the post.

2. Identify Opportunities

With knowledge about how rail freight rate structures work, the next step is finding the best opportunities for improving your rates. In-depth data about rail rates across distances and commodities can help you benchmark your rates. With these estimates, you’ll know where to start negotiating rail freight rates.
Data visibility will not only help to show you where your rates are excessively high, but also where you rank compared to competitors. The following chart shows publicly available market data with rate spreads. Rail Impact software can show you how to interpret that data and compare your rates based on RVC ratios. By evaluating outliers, you may identify opportunities for negotiation.

3. Evaluate Your Options

It’s difficult to negotiate with few options. Having a full understanding of all the options available to you will give you a stronger negotiating position. In many cases, this is easier said than done. Approximately 70% of rail served locations are served by a single carrier. However, even if you are working on a captive route, you do have options. Consider the following:

Alternative routes. If your rates are very high compared to competitors, you may be able to negotiate a lower rate even across longer distances.

Alternative modes. Rail shipping is generally cheaper than shipping by truck, but it can be a good idea to get an estimate. If your rates are very high and your rail carrier won’t negotiate, this can give you more options.

Transloading. Transloading can help you move to other routes and widen your options. Finding transload facilities available to you can give you a negotiating position.

4. Manage Your Operations Efficiently

As you might expect, rail freight rates will be higher for shippers who consistently incur excessive accessorial charges, finance charges, and don’t resolve fleet management issues. When fleet management or payment issues create problems for the rail carrier, the carrier has little incentive to negotiate lower freight rates.

Alternatively, customers who make payments on-time, maintain a high-quality fleet, manage railcars in a timely manner, and conduct operations efficiently, will have a better negotiating position. If you’ve had management problems in the past, consider making storage or capital improvements to improve your process. Use a railcar tracking system, so you know when problems occur, and how to resolve them. If you’ve managed your fleet effectively for a number of years, use this in your negotiations. Highlight your attributes as an ideal railroad customer.

5. Utilize Data

Data is your biggest asset when negotiating rail freight rates. This can help you make a strong, well-supported business case. Pricing data, including tariff rates, contract rate data, and RVCs, will give insight into which of your rail freight rates may be out of line. This will also give you a reasonable starting point for your negotiations. Include data about your operations as well. Showing that you have not incurred excessive charges or fees will remind your carrier that you are a good customer that they want to keep. Finally, if you have data about other options available to you, you can show that you have the power to take your business elsewhere.

RSI’s Rail Impact software makes it easy to understand railroad pricing by commodity, to evaluate the “reasonable rates” in any given lane, as well as to determine your railroad’s market share. In addition, there is access to valuable information, training, and support to enable you to be more effective in your rate negotiations.

The post 5 Tips for Effectively Negotiating Rail Freight Rates appeared first on RSI Logistics.

On September 30th, the Surface Transportation Board (STB) released proposals for modifying the reporting of rail service data and the methodology for calculating the rail industry’s cost of capital.

Proposed Change #1 – Cars Held Reporting for Chemicals & Plastics

One of the service data metrics that the STB requires Class I railroads to report is Cars Held.  Total Cars Held is the average number of cars in revenue service that have not moved for 48+ hours, based on daily snapshots throughout the week. The data includes both loaded and empty moves for all car types. It does not include cars placed at a customer facility, in constructive placement, placed for interchange to another carrier, in bad order status, in storage, or operating in railroad service.

Class I railroads report this information to the STB on a weekly basis. Only U.S. operations are included for the Canadian railways. Prior to March 29, 2017, the carriers reported the weekly number of cars instead of the daily average.

Source:  STB data on RSI website

Railroads report this data for all manifest carloads without any differentiation between commodities.  The new STB proposed amendment stipulates that Chemicals and Plastic carloads be reported on separately from the current aggregate data.

Why is this change being proposed?  The STB received a petition from the American Chemistry Council (ACC).  According to the ACC, “STB members believe that reporting chemical and plastics traffic data would help the board and stakeholders to better detect and mitigate emerging service issues affecting chemicals and plastics shipments”.

During the CSXT’s rollout of their Precision Scheduled Railroading (PSR) in late 2017, the ACC shared that, “service disruptions have serious economic consequences. Companies whose businesses are built around rail service have been forced to send emergency truck shipments, increasing costs for both the shipper and customer. For many more companies, even this flawed option isn’t available. Delays have led to rail car shortages and forced some companies to consider adding cars to their fleet. This is the exact opposite of the benefits that CSX promised to deliver with its ‘precision railroading’ model”.  While the CSXT has made significant improvements since 2017, other carriers such as the Norfolk Southern and Union Pacific are in the middle stages of their respective transformations.

We are anticipating and encourage rail shippers in other industries to take the ACC’s lead, and request that the STB provide a breakdown on a more granular level like its current “Weekly Cars by Commodity” report.  In this report, industries are classified as: Chemicals, Coal, Food & Farm Products (excludes Grain), Forest Products, Grain, Metallic Ores & Metals, Motor Vehicles & Parts, Nonmetallic Minerals, and Petroleum & Petroleum Products.  The Class I railroads can report on Cars Held by commodity groups, so there should not be an issue in the their agreeing to this change.

Comments on the proposed rule are due Dec. 6, with replies due Jan. 6, 2020.

Proposed Change #2 – Rail Carrier Cost of Capital

The second change proposal presented by the STB involves the inclusion of an additional model to determine the rail industry’s cost of capital.  On an annual basis the STB calculates it based on a weighted average of the cost of debt and cost equity.  Key components of this methodology involve two existing models: Morningstar/Multi-Stage Discounted Cash Model and the Capital Asset Pricing Model.

The STB has proposed including the Step MSDCF model. The STB believes that including this new model in addition to the previously mentioned will “enhance the robustness of the resulting cost-of-equity estimates.”  This is especially the case whereby various railroads are making significant modification to their operational plan.

Comments on that proposed rule-making are due Nov. 5, with replies due Dec. 4.

Metric Reporting Information

To assist rail shippers in determining rail carriers trends and tendencies, RSI Logistics maintains a series of railroad statistics and information that can help you be more informed.  These performance charts are an example of the type of reporting that is included in our railcar management software. These charts can be filtered on the fly and downloaded in various formats. Based on your business, RSI can monitor specific events and trends and provide you with up-to-date railcar tracking information.  If interested in learning more about RSI’s proactive monitoring and railcar tracking services, please contact us.

The post STB Proposed Rule Changes – Rail Service Metrics, Cost of Capital appeared first on RSI Logistics.

Small rail shippers usually start out manually creating reports and keeping their data in spreadsheets. They use the free tracking data from railroad websites or Steelroads. That may work if you have just a handful of rail cars and shipments. However, if you have a significant rail freight spend and investment in rail cars, more advanced reporting is necessary to make the most effective use of your resources. Once a shipper has more than a few hundred shipments per year to manage, they need to know more than just the latest car location message for their cars.

So, what type of metrics do you need to manage your rail shipping?

While key performance indicators and other metrics have to be customized for each individual company, all shippers usually need reporting that will:

• Assist in the daily proactive management of rail shipments by identifying problem cars so that action can be taken to minimize and delays and keep assets moving.
• Communicate shipping information and reliable ETAs so that customers or other facilities can plan for the receiving of inbound materials or empty cars.
• Fleet visibility so that the correct number and type of cars are in the right place.
• Identify areas that need improvement. For example locations with slow turnaround times, customers holding cars or causing car damage, etc.
• Reporting of inventory, freight, and asset costs.

Here are examples of specific reports that are used to meet these needs.

Railcar Shipments and Cars In Transit

Trace reporting with the current location and recent movement history of each railcar in the fleet. Automatic monitoring and alerting of jeopardized shipments.

Transit and Cycle Times

If you have a private fleet, you will want to be able to track and measure the performance of your railcars over the whole shipment cycle. This includes turn time at origin and destination, and loaded and empty transit times. You will want to monitor this performance over time by location and also measure variability. These metrics are useful for forecasting delivery times, understanding fleet sizing requirements, and calculating asset costs by lane.

On-Time Performance and Costs

Shippers usually require freight volume reports by location, customer, and product. On-Time Reports can be an important customer service metric for knowing if your customers are receiving product within anticipated delivery windows.

Pipeline Reports

Having an accurate count and ETAs of cars at various stages (e.g. loaded to customer, empty returns) is important operationally.

Detention & Demurrage

Detention and demurrage charges are a significant cost for most shippers.  In 2018 the 4 largest railroads collected a total of over $1.2 billion in accessorial fees. To control demurrage, shippers need to track the rail cars and locations at risk for accruing demurrage. In addition, many shippers need to be able to calculate and charge their customers for railcar detention.

Identify Delays and Opportunities

Almost all shippers have certain problem areas. Maybe it’s congestion at facility, or certain customers that don’t unload and release cars in a timely manner. There is a need for reporting that will help identify these problem areas and monitor trends over time.

Railcar Tracking and Performance Measurement for Your Business

Rail shippers come from a range of industries and each shipper has unique reporting needs. At RSI we have worked hard over the past 20 years to build a system that is both flexible and robust in order to meet the needs of a variety of rail shippers. Contact us to learn how our reporting and services may be able to help you improve the management of your rail transportation.

The post Railcar Tracking Metrics for Shippers appeared first on RSI Logistics.

Total volume was up in March and the YTD volume is about even with what it was last year. The chart below represents the sum of carloads originated and received from connecting railroads as reported by the AAR. Most of the increases are in sand, metals, and chemicals.

CSX and NS Railcar Tracking Reports

The daily average number of loaded and empty cars not moving for more than 48 hours is about the same.

CSX’s velocity has improved and delays have been greatly reduced. After struggling toward the end of 2017, the NS has improved in recent months. However, they are still experiencing far more train delays.

CSX has won back the volume they gave up in the late summer and fall.

UP and BNSF Railcar Tracking Reports

Volumes have remained similar, with the BN gaining an edge.

The UP has been experiencing relatively more delayed trains and cars held this year. BN’s performance has been very good considering their volumes have increased and parts of Montana experienced the heaviest snowfall in 70 years.

Railcar Tracking Reports for CP, CN, and KCS (U.S.)

Service issues have been more pronounced on the CP.

All of these railroad metric reports are currently available for free. Click here to filter and download your own reports.

STB Requests Service Outlook from Class I Railroads.

On March 16, 2018, the Surface Transportation Board (STB) requested that all Class I railroads provide their service outlook plans in the near term and for the remainder of 2018 due to increased concerns over deteriorating service. A brief summary of each railroad’s response is below, along with links to the letters from each carrier.

BNSF response:

• Noted that their total volume represents a historic high level for this time of year while year-over-year Q1 dwell is 7% lower vs.2017.
• Locomotives:  Over the past five years, BNSF has purchased over 1,300 locomotives. BNSF has ~ 7,300 locomotives in service, with 701 additional units in storage that can be mobilized if necessary.
• Staff:  expect to hire 2000 employees company-wide in 2018.

UP response:

• Locomotives:  5,700 in service with 300 in storage. Returning to service at a rate of 25 per week. Acquiring 56 in 2018.
• Staff:  hiring 2,100 TE&Y employees in 2018 with 200/mo. graduating training between March and July.

CSX response:

• Locomotives:  2,900 in service with 600 in storage.
• Staff:  50 new trainmasters this spring. A total of 900 employee are on furlough.
• Expect growth to be generally flat with last year.

NS response:

• Acknowledge service issues and state a strong commitment to improve. Year-over-year velocity: Q1 2018 speed is down 16% vs. Q1 2017. Year-over-year: Q1 2018 dwell is 21% higher vs. Q1 2017
• Locomotives:  have brought 100 locomotives out of storage and are leasing an additional 90. Increasing the power of some existing engines.
• Staff:  In 2017 hired 1,100 conductor trainees and will hire approximately 1,400 more in 2018. Temporarily transferring crew to trouble spots.
• Improve capacity by resuming through freight operations on their Central Georgia route. Operating plan improvements such as clean sheeting in certain locations.

CN’s response:

• Locomotives:  130 leased in Q1 2018. A contract to purchase 200, the first of which will start arriving this summer.
• Staff:  400 conductors added in Q1 2018, expect to hire 2,000 employees company-wide in 2018.

CP Response:

• Locomotives:  1068 locomotives in service (a 9% increase over 2017). An additional 100 will be added by September.
• Staff:  Adding 1,180 US train and engine employees, net of attrition, by Q4 2018.

Need More Information?

RSI maintains a series of railroad statistics and information that can help you be more informed.  These performance charts are an example of the type of reporting that is included in our railcar management software. Notice that these charts can be filtered on the fly and downloaded in various formats. Based on your business, RSI can monitor specific events and trends and provide you with up-to-date railcar tracking information.  If interested in learning more about RSI’s proactive monitoring and railcar tracking services, please contact us.

The post Tracking Railroad Performance Metrics appeared first on RSI Logistics.

The optimal level of shipment monitoring can be determined by considering three things:

1. The impact of railroad services problems on your business.
2. The difference you are able to make by proactively managing and expediting rail shipments.
3. The cost of managing and expediting rail shipments.

Railroad Service Issues

We find that on average 15% of rail shipments experience delays in transit and even more experience delays at origin or destination. This will vary depending on the location, railroad, seasonal factors, equipment type, and commodity. A sampling of railroad performance reports can be viewed here. Rail service problems cost rail shippers significant expense including:

• Cost of inventory including carrying cost and inventory loss.
• Asset costs.
• Tangible service costs including plant disruptions, expedited deliveries and intangible service costs including impact on customer relationships.
• Demurrage or customer holding charges.

Transit Variability

The unpredictable nature of rail service is a challenge for shippers to manage. Here is a scatter diagram from RSInet showing typical transit times for a rail lane:

Fleet planning, management, and the forecasting ETAs are difficult when the transit time ranges between 2 weeks and 1 month. Utilizing a system that provides better visibility and reporting is a first step in making those tasks easier.

Making A Difference

Does proactively managing and expediting your railcars improve transit times? We conducted a 3 month study for a shipper which provided the following data:

• 18% of shipments were identified as delayed.
• 20% of the delayed shipments were classified as requiring expediting according to our normal process (opening a service log with the railroad and making follow up calls as necessary).
• In comparing expedited to a control group of non-expedited cars, the transit time of the expedited cars was on average of 1.8 days shorter.

If you apply this to a firm shipping 250 cars per month, the impact of proactively monitoring rail shipment tracking of the cars in transit would be gaining 16 car days, or about an additional turn per year. So on that basis alone you may find that there is justification for making the effort to keep your cars moving. However, that’s just one aspect.

In most cases the arrival of loaded or empty railcars has to be coordinated with internal or external supply chain customers. Communicating accurate information up and down the supply chain can be critical. Proactively tracking and expediting railcar shipments provides a strategy for mitigating the unpredictable nature of rail shipping.

Improving tactical day-to-day rail operations is a critical foundation for improving overall rail logistics. It enables more accurate and leaner fleet sizing resulting in better asset management and lower accessorial charges. Eliminating or controlling the constant flow of small problems associated with day-to-day rail shipping allows transportation managers to focus on the right issues and improve the service they provide to internal and external customers.

Delays and variability are an inherent part of rail transportation. They significantly impact firms that rely on rail transportation. However, there are steps shippers can make to maximize the performance of their rail transportation.

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