Sameh Famhy, who was senior vice president of engineering, mechanical and supply management at CN from 2006 to 2013, began working with KCS in December. He previously was a consultant at CSX Transportation, which also adopted the operating model of former CN CEO E. Hunter Harrison.
“We are in the very early stages in our work and understanding how PSR principles will apply,” CEO Patrick Ottensmeyer said on the KCS fourth-quarter earnings call on Friday.
KCS is not taking a Harrison-style implementation of PSR, which brought major and disruptive change to CN, Canadian Pacific, and CSX.
Instead, KCS will take an incremental approach. Cultural shock and major changes are not necessary because KCS is not a back-of-the-pack performer, Ottensmeyer explains.
KCS will not cut capital expenses, expects its employee headcount to continue to rise as cross-border traffic grows, and doesn’t envision paring its intermodal service. It also will continue to receive 50 new locomotives this year from General Electric, with the first units scheduled to arrive later this month.
But KCS will focus on making its operations more efficient and reliable after a year in which service suffered, partly due to congestion on Union Pacific trackage-rights routes across South Texas. KCS also choked on cross-border volume growth, although service is now returning to normal.
“We’ve got to get a more consistent service product,” Chief Operating Officer Jeff Songer says.
KCS will initially focus on reducing train starts, particularly by combining intermodal and merchandise traffic, Songer says.
Already the railroad has combined trains in Mexico, resulting in 28 fewer train starts per week, as well as between Kansas City and St. Louis, reducing train starts by eight per week, Songer says.
Combined, these initiatives will reduce labor costs by $2 million per year while also saving fuel and reducing the number of locomotives needed to move the same amount of traffic, he says.
Shifting to Precision Scheduled Railroading ultimately will mean KCS will need fewer locomotives, Songer says. It has returned 25 locomotives it leased last year and is storing 20 more units.
The new GE units will help KCS handle rising unit-train shipments of refined products to Mexico and will help improve the reliability of the fleet as older units are retired, Songer says.
Ottensmeyer says coordination between KCS and UP — its largest interchange partner, which also is shifting to a PSR-based operating plan — will be enhanced because Famhy and new UP Chief Operating Officer Jim Vena worked closely together at CN.
Songer said he was excited about the prospect of streamlined operations through the Houston terminal, where KCS operates over UP in one of the most complicated and congested areas of the national rail network.
Analysts asked KCS executives if they had seen any disruption to interchange with UP or Norfolk Southern, both of which are currently implementing new operating plans. KCS has not seen disruption or improvements.
But Ottensmeyer says it’s likely that PSR will benefit interchange as the railroads’ service becomes more reliable.
Note to Ed Fielding: The track is much better now than in that era, and the advent of distributed power will also aid in train handling and, for want of a better term, slack management. Already, most of the southbound trains run with DPU’s on the Heavener Sub, which as all of you know, is quite hilly. Not as many of the northbounds have them, though such trains as the oil trains and some coal trains leave the power on both ends for their northbound empty moves. I saw a northbound merchandise train in Decatur Ark yesterday that had three units up front, a pair of GE’s and an SD 70M(KCS 4766/PRLX 648/KCS 3924), 107 cars and no DPU. It had a lot of loads, so the lack of a DPU was a little surprising, but not totally unheard of. They’ve been doing this for at least ten years, and so far haven’t dumped too many cars along the way.
Current KCS management has failed to read their own history! They need to remember what happened when Deramus III ran his “super-freights” and a number ended up all over the Ark. & Missouri landscape. EHH was part of the Gaskins bunch that the BN board got rid of when they realized that pulling track up & abandonment was the main way his mgmt. survivors make money.
What is OT5?
The railroad like FedEx & UPS are nickle and diming all to death. Especially every time they drop the divisor number for DIM [dimensional weight, L X H X W] weighting a package. DIM weighting originally applied to air packages only and the divisor was 196, now DIM weights apply to both air and ground and the divisor 139. Plus you pay for residential and “out of area” zip codes an extra fee. I think the RR’s learned from FedEx & UPS how to collect extra dollars and penalize the small guy that doesn’t have the negotiating power a large company/shipper has. I doubt Amazon pays the extra fees I do to ship.
Seems like every former CN person is now a PSR expert. Makes me wonder when we’re gonna see a Newswire piece advising that the former attendant in the executive washroom at CN HQ during Hunter’s tenure is now consulting with a Class 1 as a PSR expert?
It will be interesting to see how many months before KCS starts rolling out the nickel and diming of their customers. Inter and intra terminal switching will be increased; demurrage and storage charges will be jacked up and failure to have OT5 on every car in your fleet at every plant site from which you ship will be another penalty. Customers will be forced to adjust their loading and shipping schedules to accommodate service changes the railroad insists will improve service and rates will begin taking increases two and three times those applied in recent years. Modifications to internal routing protocols will result in circuitous routes that increase empty miles leading to higher empty mileage penalties on a customer’s private fleet. Headcount reductions will make it impossible to find anyone left with enough knowledge to resolve a problem and money that should be put back into the railroad will instead be spent on share buybacks.
It’s not much of a stretch to say one of the most abused demographics in American business right now is the lowly rail customer. And as a 40 year rail shipper; I will tell you I am so damn sick and tired of this PSR nonsense that retirement is looking more and more attractive everyday.
Slash-and-burn. PSR executives are all smoking the same stuff handed out by Wall Street analysts.
60 years ago: Railroads say shift to hump yards and unit trains will help improve service, reduce costs.