Wallace made his comments from the same stage where BNSF Railway Executive Chairman Matt Rose had questioned the operating concept 24 hours earlier.
Wallace, the railroad’s executive vice president of sales and marketing, has helped enact Precision Scheduled Railroading at Canadian Pacific and Canadian National prior to joining CSX as part of the late Hunter Harrison’s management team. He painted a picture of a dysfunctional organization prior to the implementation of scheduled railroading (he stayed away from the use of the word “precision”), and ticked off a series of metrics showing dramatic improvement.
“The transition has necessitated a sea change in the corporate culture,” Wallace says. “CSX was formed from a large number of predecessor railroads that never came together to form one cohesive organization, either from an operational or a cultural perspective. We were extremely, extremely top-heavy.”
The railroad he joined, Wallace said, had some 155 vice presidents or assistant vice presidents at its Jacksonville, Fla., headquarters.
“It was a bureaucratic environment if ever there was one. No one seemed to want to accept responsibility or accountability. … It was an organization that was ripe for disruptive change,” he says.
From a customer perspective, he says, the railroad had attempted “to be all things to all people, and that approach oftentimes led to bad service and disappointed customers. A prime example of that was our intermodal business.”
CSX dropped intermodal service on a number of routes in 2018 and at the start of this year [See “CSX to cull more intermodal routes in January,” Trains News Wire, Oct. 8, 2018].
“Our new approach,” Wallace says, “focuses on regions and destinations where our shippers want to go, and where we can realistically and efficiently serve them.”
As part of the changes, he noted, CSX has:
— Cut its number of hump yards from 12 to five;
— Consolidated nine dispatching centers in a single facility in Jacksonville;
— Halved its locomotive shops from 10 to five, while decreasing online failures by 27 percent;
— Stored 1,000 locomotives and taken 22,000 railcars out of the system.
The results, as announced by the railroad on Wednesday, are record earnings and a record-low operating ratio of 60.3 percent. Along with that, he said, “the quality of the product we provide our customers is the best it has been in the history of the company,” citing a 17-percent increase in train velocity, a 13-percent decrease in terminal dwell, a 10-percent decrease in cars on line, and a 21-percent increase in locomotive miles per day.
“We are doing more with fewer assets and manpower while delivering improved service to our customers.”
The results, he said, have shown “that scheduled railroading can work on a scale that naysayers said was not possible.
“Some have expressed doubts about its benefits,” Wallace said. “… And that’s OK. We respect everyone’s opinion. We may tend to disagree. In my opinion, little can be argued about the results it has produced over the long term.”
As part of its implementation of scheduled railroading, Wallace says, the railroad has created trip plans for the start-to-finish transit of every freight car. At the start of 2018, the success rate in delivering cars according to these plans was about 60 percent. By the end of the year, it was about 85 percent, he said. The goal is 95 percent. While CSX currently tracks the figure internally, its goal is to make information available to customers within the first half of 2019.
Spin,spin,spin thats all this is.There is nothing new under the sun.He could make a living doing the same thing for Charles Schumer & Nancy Pelosi
All sounds well and good until reality sets in.
Maintaining a consistently low OR quarter to quarter over a matter of years is a worthy goal, but attaining isolated, unsustainable, record-low “trophy” ORs at all costs is reckless and short-sighted. Not news, but it’s worth saying again.
@Alex Christmas: “17% increase in velocity and 10% decrease in cars online are huge gains”
What was the baseline? Pre-Harrison, September 1, 2017, January 1, 2018, last month when???
Harrison pulled of PSR in Canada because of the virual absence of federal regulation; CN and CP’s lines in the US are bit players.
With all the lemmings marching for the PSR cliff, it hopefully will not be long before regulation is imposed to insure that railroads are common carriers operating for the public good.
Serving every customer is what common carrier status is all about. Lose the customer service imperative, and invite re-regulation. It has happened before.
The only comment here that makes sense is that of Alex Christmas. All the rest come from “I know everything about railroading” railfans or greedy union workers who feel threatened that there oversized paychecks may be threatened. Charles Landy I’m ashamed of you. Most of your posts are spot on but the one here is clearly wrong.
What’s old is new again; this was the title of a book about the turnaround of Continental Airlines published about 20 years ago (and I believe the phrase predates that, also):
https://www.amazon.com/Worst-First-Continentals-Remarkable-Comeback/dp/0471248355/ref=sr_1_1?crid=1OGQOSI6M7BDY&keywords=worst+to+first&qid=1547827611&sprefix=worst+to+fir%2Caps%2C157&sr=8-1
Sadly, much more than an operating margin matters. I would much rather invest in a growing business with a higher operating margin that’s planning to be an even more important component of the American transportation network in the future, than a declining one satisfied with continuing to grow smaller, with poor employee morale, angry customers, deferred maintenance, and most of all a failure to invest in the network for the long-term since the focus is squarely on the next quarter.
Witness the Interstate 81 corridor. Previous management saw all that truck traffic as a medium term opportunity and were spending money to capture a significant slice of the pie even though they knew it would take a good few years to get the market to respond. Yet in comes Harrison just as things like the St. Lawrence Subdivision were getting in shape, he said no thanks since the business wasn’t there right then and now, and stopped it and even put some of the line segments on the market.
I don’t know any more than any one else but I’m more realistic. The number one job of management is to make money for the owners (stockholders in this case) and lowering the operating ratio is one of the best ways to do so. Trying to serve every single customer that wants service is a true path to oblivion.
Of course, you certainly know better than all of us mr McGuire.
Compare with Alfred Pearlman and L. Stanley Crane?
As usual it’s popular to go after the results of “Precision Scheduled Railroading”, but a 17% increase in velocity and 10% decrease in cars online are huge gains, let alone the nearly 10-point drop in operating ratio. Add to that 1000 fewer capital-intensive locomotives, and it’s easy to see how the once-laggard is now a leader in getting the most out of its assets for a decent return on its capital for shareholders, while also delivering decent service to its customers.
Not all is perfect, but it’s an uphill climb for anybody who wants to seriously contend that it’s worse than before.
Wallace’s personal wealth is directly dependent upon juicing the share price with slash-and-burn PSR policies and incurring long term debt for share buy-backs. He is a salesman and is selling PSR snake oil. Hopefully this PSR madness results in regulating these monopolies for the public’s good.
LOL@CSX Management. Operating ratio is just one measure of railroad efficiency and I do partially agree with Mr, Rose of BNSF on this, if you see a railroad executive running around tauting a low operating ratio as a major measure of success they need to have their head examined. What about customer satisfaction and not just bulk customer satisfaction I mean customer satisfaction across the board, diversity of market segments served?, utilitzation of equipment to include both locomotives and the turns / utilization of it’s freight car fleet, average speed across the rail network, network fluidity. Best of all and my favorite measure, idle capacity available for future traffic increases.
I’m proud to say I didn’t even read this company’s nonsense and spin. It amazes me any of their trains even move.
“In my opinion, little can be argued about the results it has produced over the long term.”
Long term, there is only one possible result for PSR: your railroad going out of business, because you’re not replacing traffic you lose (unavoidable, no matter how good you are) by new traffic. Precision Railroading does not allow new business to be captured, because this would always create an “imbalance” in the existing, so-called optimal traffic patterns. And disinvestment in your physical plant meant to “right-size” it to your current traffic patterns have simply made your railroad unable to move new business.
PSR is exactly why railroading is an industry that has no future. It doesn’t want one.
What a disgrace! CSX is a mess. Sorry but let’s see if anyone from the current management team is still with the company in 5 years. Anyone can fire employees, close yards, defer maintenance and alienate customers to lower the operating ratio but they will not survive.