IMPORTANT UPDATES

This week, there are two major transportation events that deserve mention. One involves the long road to ELD implementation, and the other a perceived serious breakdown in rail service on a major eastern railroad.

ELDs REDUX

In our last blog, we mentioned that Representative Brian Babin (R-Texas) was not giving up easily and had proposed legislation that would delay the ELD mandate for two years beyond its current effective date of December 18, 2017. He gained a fair amount of support, and a House committee voted to send the bill to the floor as an amendment to the must – pass funding bill. The full house however, rejected the proposed amendment; and it now appears that ELDs will be required on all vehicles model year 2000 or newer, that operate in interstate commerce.

The Federal Motor Carrier Safety Administration estimates that the ELD program will generate $2.4 billion in annual savings from reduced paperwork and increased efficiency. Some industry experts however, are predicting a short term negative effect. The general consensus is that we will experience about a 3.7% loss in trucking capacity as drivers are forced to be more honest about their on – duty time. Even Schneider National, one of the more efficient truckload carriers, switched to ELDs in 2010, and experienced a 4% loss in productivity. Lower capacity will no doubt lead to higher spot rates, and estimates on these increases run as high as 20%. Once the initial shock is over however, almost everyone but the Owner – Operator Independent Drivers Association (OOIDA) believes ELDs will result in significant savings.

PRECISION SCHEDULED RAILROADING

If you are a CSX rail shipper, you may have bigger worries than ELDs. As new CEO Hunter Harrison attempts to install his Precision Scheduled Railroading technique at this major eastern railroad, the road has been much rockier than when he implemented this unique (to the railroads) management style, first at the Canadian National, and later at the Canadian Pacific.

Exactly, what is precision scheduled railroading? According to a CP white paper it is a “philosophy of constant monitoring and optimization of every asset throughout the entire organization.” It is built on five foundations – “improving customer service, controlling costs, optimizing asset utilization, operating safely, and valuing and developing employees.” One of its hallmarks is scheduled train departures. In the past, railroads have held their trains until they are completely full. Under Harrison’s operating principles, trains leave at a scheduled time regardless. It is not unlike Amtrak or a scheduled airline. They leave whether they are full or not.

Both the CN and the CP saw train speed, fuel utilization, and earnings increase significantly; but at CSX, the implementation task has been difficult. The most serious issue there has been the deterioration in service for many CSX customers. A coalition of shippers has filed a complaint with the Surface Transportation Board (STB), as well as appropriate Congressional committee members.  STB has insisted on weekly conference calls with CSX and had docketed a public listening session to learn more about the complaints. Unfortunately, Hurricane Irma interfered with those plans, and the hearing has yet to be rescheduled. In the meantime, Mr. Harrison is adamant that he will succeed in bringing the same positive outcome to CSX as he did to CN and CP.

Written By: Clifford F. Lynch