I haven’t operated a railroad since I got a Lionel train set for Christmas decades ago, but even I can see that something is wrong. Railroads in North America are struggling to keep trains moving. Shippers are furious over delays. Workers are unhappy about inflexible leave policies. Congress had to impose a labor agreement to prevent a nationwide rail shutdown, which might have started today.
You may have heard or read that a root cause of the problems is something called precision scheduled railroading. That’s not entirely true. In concept, precision scheduled railroading has the potential to benefit not just railroads but shippers and workers as well. Its first principle is to stick to a schedule for delivering freight, the way passenger trains stick to a schedule for delivering people. In short, “Do what you say you’re going to do.”
The real problem is that railroads have used the buzz phrase of precision scheduled railroading as a cover for a long series of ill-advised cost-cutting measures that make scheduling for shippers and workers less precise, not more. The solution therefore is not to ditch precision scheduled railroading, but to do it right.
I even got a prominent labor leader to agree that precision scheduled railroading is a good concept. “If you take the stated goals of P.S.R. from the corporate side, it sounds great,” said Greg Regan, president of the Transportation Trades Department of the AFL-CIO. “But the lived experience for our unions has been fewer people, more work, less redundancy and frankly less equipment.”
According to a great article on trains.com that ran earlier this year, a young railroad employee named Hunter Harrison got the idea for precision scheduled railroading when he was working in the tower of a rail yard in Memphis in the late 1960s. An executive stopped by, pointed to tracks filled with idle freight cars, and asked: “Young man, what do you see out there?”
According to the article, Harrison responded, “Well, I see a lot of business, sir.” To which the executive said, “Well I don’t. I see a hell of a lot of delayed traffic with all those cars just sitting there.”
To solve that problem, Harrison developed precision scheduled railroading. He implemented it at Illinois Central Railroad, where he was chief executive for five years in the 1990s. Then, like Johnny Appleseed, he spread the idea to other railroads during stints at Canadian National, Canadian Pacific and CSX. After his death in 2017 at age 73, Union Pacific, Norfolk Southern and Kansas City Southern adopted the practice. BNSF Railway, the biggest, which is owned by Warren Buffett’s Berkshire Hathaway, has not. Harrison’s influential 2005 book, “How We Work and Why: Running a Precision Railroad,” is out of print, but you can get a used copy in acceptable condition on Amazon.com for $499.99.
The age-old challenge for railroads is that one long train is cheaper to operate than two or three short ones, but holding cars until long trains can be assembled makes service slow and unpredictable. Harrison’s system tries to speed the building of trains by mixing different kinds of freight — intermodal containers, bulk commodities and merchandise — instead of waiting to put together single-purpose trains. Another key is to stick to a schedule to prevent bottlenecks from forming on the tracks and in terminals. “Instead of waiting to build longer trains, trains keep moving on schedule, regardless of train length,” Richard Lanyi of Lanyi Rail Solutions in Edmonton, Alberta, wrote in an email.
Harrison’s system allowed railroads to reduce their operating ratios, defined as operating expenses as a percentage of revenue. But railroads got so focused on reducing their operating ratios that they forgot that customer service was principle No. 1. Today the Rail Customer Coalition — made up of the railroads’ customers — describes precision scheduled railroading as a matter of fewer employees, less capital spending, cuts to customer service and a shift of costs onto customers.
Problems were already apparent five years ago. “If I don’t accomplish anything else today, I want to apologize to our valued shippers,” Harrison told a listening session of the Surface Transportation Board in October 2017, two months before his death, according to the news website Supply Chain Dive. He rejected criticism of the system he evangelized for, though. “Whatever problems we had, we had internally,” he said. “We’ve made some mistakes. This is not a failure of precision scheduled railroading.”
Railroad managers seem to understand that their cost-cutting went too far — that instead of doing more with less, they ended up doing less with less. They have reopened some closed rail yards and attempted to hire back workers they furloughed early in the Covid pandemic in the spring of 2020. But many of the furloughed workers have permanently retired or found other jobs. “The normal model” for recalling employees “didn’t work as it had in the past,” said Zak Andersen, a spokesman for Burlington Northern Santa Fe. “That’s what impacted service.”
Still strapped for workers, the railroads have vigorously resisted the unions’ demand for seven days of paid sick leave. That was the issue that almost resulted in a strike. Unfortunately for the railroads, rail workers’ failure to get the sick leave they wanted makes them all the more likely to quit and find some other job. So the railroads’ short-term fix could be a long-term blunder.
The conflict between management and labor looks like two freight trains headed toward each other on the same track. This is not precision scheduled railroading.
The Readers Write
Regarding your newsletter on the lawsuit by Epic Games against Apple over the App Store: If Epic were operating anywhere else in the retail marketplace, it would be charged an upfront slotting fee, a demand of a minimum sales velocity, periodic promotional funds and at least a 30 percent sales margin. There simply is not another platform that allows a company such a high level of distribution and sales efficiencies as the App Store.
Quote of the Day
“We are relying on 19th-century institutions using 20th-century tools to address 21st-century problems.”
— Ann Mei Chang, “Lean Impact: How to Innovate for Radically Greater Social Good” (2018)
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