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New Competition From Trains?

June 21, 2000

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Although far behind, it seems the railroad industry may soon challenge truckers in the science of hauling freight. The Wall Street Journal recently published an article focusing on E. Hunter Harrison and his discovery of an innovative way to run a railroad. Actually, it’s not that ingenious, but it is making sense in today's competitive freight hauling environment.
Harrison, the executive vice president and chief operating officer of Canadian National Railway Co., is attempting to bring old railroads back to life by creating a freight delivery schedule that is not only precise, but is monitored through every step.
"This isn’t a quality program or e-commerce but a basic change in how to run a railroad," said Harrison. "We follow it religiously."
According to the Wall Street Journal, North American railroads could be a more potent force in the economy if they followed the same routine. Railroads are a low-cost method of transportation for many goods, but customers are still turning to trucks for reliable service more often.

"If customers were more comfortable with railroad service, they would tend to choose rail over truck," said Harvey Levine, a transportation economist in Rockville, Md. "That would benefit the economy in the form of lower prices for consumer goods, less congestion on our nation’s highways and greater fuel efficiency."

A few railroads are already following Canadian National’s lead, reports the WSJ. Union Pacific Corp. has been guaranteeing that perishable shipments from California will reach New York in eight days. Norfolk Southern Corp. soon be able to track on-time performance of each freight car by early next year.
Harrison’s customers say his efforts are beginning to pay off, according to the WSJ. Shipments of chemicals, lumber, paper, food products and other merchandise freight account for more than half the company’s traffic. Canadian National now delivers chemical shipments 90% on time, compared with 67% for the rest of the railroad industry, said Larry Landuyt, rail team leader of DuPont Co., Wilmington, Del.
Still, Canadian National’s on time performance falls short of what the railroads’ chief competitors, the truckers, are able to pull off — delivering goods 98% on time.
"In our industry, providing a 90% on time level of service would get us a one way ticket out the door," said David Gibbs, executive vice president of Celadon, an Indianapolis-based trucking company.
The WSJ also reported that railroads are afraid that operating to a schedule will drive up costs or be underminded by random events, such as storms or mechanical breakdowns, and other railroads are still busy recovering from post-merger service breakdowns.
The science of hauling freight seems to have begun overhauling the railroads, and that can only mean more competition for North American truckers.

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