'Precision railroading' helped railroads 'do well' in the eyes of logistics managers, report says

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E. Hunter Harrison, as Canadian Pacific CEO
E. Hunter Harrison, in this Canadian Pacific file photo, is credited with popularizing Precision Scheduled Railroading. Railroads that use the operations method are perceived as doing well according to a report from a logistics managers organization.
LOMBARD, Ill. — Precision Scheduled Railroading is helping to lift shippers opinions of railroads according to the recently released State of Logistics report of the Council of Supply Chain Management Professionals.

“Railroads did particularly well on intermodal as shippers sought alternatives to trucks,” according to the report's executive summary. “Rail productivity continued to improve as the Class I railroads that adopted ‘precision railroading’ principles achieved ever-lower operating ratios.”

With high demand and limited capacity, all logistics providers experienced a sellers’ market carried over from 2017 into the first half of 2018 and that contributed to overall business logistics costs increasing by 11.4% last year, CSCMP says. Rail costs showed a 12.9% increase.

Shippers complained of “what for most was the worst year in memory in terms of cost and capacity availability.”

Some shippers moving toward intermodal caused it to show the highest modal cost increase 2017 to 2018 at 28.7% which contributed to an overall transportation cost jump of 10.4 percent.

The sellers’ market began to weaken in the second half of 2018 “as capacity started to catch up with demand and the quarter-on-quarter pace of GDP growth began to slow,” according to the report.

U.S. import and export tariff tensions resulted in inventory buildups late in 2018 and made inventory carrying costs the largest increase in logistics costs at 14.8 percent. Ever-changing strategies and innovations by Amazon continue to disrupt some aspects of the logistics marketplace “and the discernible winner at this point is the consumer,” the group says.

The report is “optimistic,” regarding the economy but notes the current “longest-running period of economic growth in U.S. history” faces some economists predicting recession and “the longer the growth, the longer the period of pain.”

June marked the fifth month of U.S. carload and intermodal decline stemming from drops in manufacturing and housing and because of trade tensions, says the Association of American Railroads.
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