Wasn't it just the other day, meaning within the last couple of years, that many of the Class 1s coupled their hopes and dreams of a promised land, where ever more is always done with ever less, to the star of PSR, Precision Schedule Railroading ( not trademarked as far as I can determine)?
Wasn't it only yesterday that the (almost) entire industry was embracing the ghost of Hunter Harrison and promising better service, better asset utililzation, better returns on investment, better performance, through the miracle of rigorous deconstruction and then reconstruction of the industry's car handling, train make-up, and schedules of service?
Sure it was. So I was a little surprised when a friend directed my attention to this press release:
CF Industries Holdings, Inc. (NYSE: CF), a leading global manufacturer of hydrogen and nitrogen products, today informed customers it serves by Union Pacific rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season and that it would be unable to accept new rail sales involving Union Pacific for the foreseeable future.
The Company understands that it is one of only 30 companies to face these restrictions.
“The timing of this action by Union Pacific could not come at a worse time for farmers,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “Not only will fertilizer be delayed by these shipping restrictions, but additional fertilizer needed to complete spring applications may be unable to reach farmers at all. By placing this arbitrary restriction on just a handful of shippers, Union Pacific is jeopardizing farmers’ harvests and increasing the cost of food for consumers.”
On Friday, April 8, 2022, Union Pacific informed CF Industries without advance notice that it was mandating certain shippers to reduce the volume of private cars on its railroad effective immediately. The Company was told to reduce its shipments by nearly 20%. CF Industries believes it will still be able to fulfill delivery of product already contracted for rail shipment to Union Pacific destinations, albeit with likely delays. However, because Union Pacific has told the Company that noncompliance will result in the embargo of its facilities by the railroad, CF Industries may not have available shipping capacity to take new rail orders involving Union Pacific rail lines to meet late season demand for fertilizer.
I was taught that every financial decision was an operating decision, and every operating decision was a financial decision. So refusing customary shipments from customary customers cannot make financial sense unless it makes operating sense. And if it makes operating sense, there's something very, very wrong with the operation.
It's not just the UP, although UP has initiated the most dramatic respone.
Sure traffic has recovered since 2020 and remains a bit above 2021, but carloads have declined for eight weeks running.
Sure, cars on system are more than cars on system in 2020, but still six percent less the number of cars on system in April 2019.
Sure, dwell times are up, but....but nothing. I don't know about you, but I was never successful trying to "explain" an increase in elapsed time to the division superintendent or the regional superintendent that didn't boil down to operatiing inefficiency
Sure, average train speeds are down. If dwell times are increasing, cars on system are increasing, while car loads are declining, then average train speeds have to be declining as both a cause and effect.
Calculating system or network capacity on a railroad is a funny thing; funny in the sense of weird. The calculation is always an approximation as capacity itself has an elasticity which is subject to and varies with the skill brought to bear in the execution of the operating plan.
Clearly, however, the current deterioration in performance measures is not a result of a lack of actual physical capacity. It may be the result of effective capacity. The difference? Say you own the Burlington (Vermont) Nyack (New York) Scranton (Pennsylvania) Freehold (New Jersey) Railroad. You require 400 locomotives to be available for daily service. You are required to have your locomotives inspected once every 90 days, whcih means five a day go in to inspection, and it takes 2 days to inspect and repair each locomotive. Now you need 415 locomotives to provide your daily service, to meet the needs of your customers, including your customer known as the Feds. If you don't have those 15 additional locomotives you have reduced your effective capacity below you service requirement.
Wait there's more. Each locomotive is an asset the turns; that rotates; that cycles. Now locomotives A, B, C are always set up to handle train 123 from Burlington to Freehold. The trip of 340 miles is scheduled for 17 hours, after which locomotive A,B,C are scheduled for a pit time of 3 hours for refueling, before being dispatched again on train 321, the return to Burlington, scheduled to depart 5 hours after 123's arrival.
Both ends of the cycle then are covered, in theory by a single set of locomotives A, B, C. Until they're not. Until 123 is dispatched late, or its average train speed drops, or the train experiences an enroute failure of equipment, and shows up late.
How late? Let's say 3 hours late. Now what? Do you skip the 3 hour pit time? It's better to be lucky than good, but don't count on it. Do you compress that time? Do you hold 321 for power until the fueling and servicing is completed? Or do you decide to make a substitution and run a different set of locomotives on 321, using just a pair of locomotives and reducing the weight of the train, the number of cars, to accommodate the reduction in horsepower?
We can and should do the same exercise with crews. I remember one of the least enjoyable parts of my previous employment was trying to run 7 day a week service with a work force that essentially, given the average vacation time, holidays, personal days, mandatory training and training refresher days, worked on average 4.25 days each week.
The point of all this is that a railroad's efficiency in asset utilization to meet the service requirements is dependent on (please don't scream) maintaining sufficient ready reserves.
WTF? Wasn't PSR supposed to solve all these petty problems?
Maybe, but it's pretty hard to say since nobody really knows what PSR is, other than something that makes a few people very rich. Maybe it's more than advertising, but.... maybe it's less.
Maybe by running significantly longer trains we reduce train speeds such that crew and equipment can no longer satisfy service cycles.
Maybe by imposing rapid and deep cuts to operating personnel, we deplete the ability of the railroad as a system to access the individual and collective accumulated knowledge that makes a schedule, an operating plan, executable.
Maybe in reducing our ready reserves by "laying up" locomotives and crews, along with lengthening trains and increasing train weights, maybe we've gone from being "nimble" to being rigid.
Maybe PSR jeopardizes efficient asset utilization.
Maybe like the Holy Roman Empire, PSR is thrice mis-named, neither being precise, protecting a schedule, nor having much to do with railroading where every financial decision has to be reconciled with the needs of service.
You think?
David Schanoes 4.24.22
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Tallahassee Lassie
Freddy Cannon
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Somewhere someone is laughing
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