In spite of CSX pledge, intermodal shippers say service woes persist

This article by Reynolds Hutchins originally published on JOC.com.

Despite assurances from CSX CEO E. Hunter Harrison that the railroad has overcome service disruptions due to ongoing operational overhauls, domestic shippers say there has been no change, and tweaks to service metric reporting muddle performance visibility.

CSX customers have told JOC.com they are moving cargo away from the railroad, incorporating trucks into their operations to avoid days-long dwell times at Southeast terminals, slower trains, and unresponsive customer service representatives. Those rail-to-road conversions are all the more significant as they come amid warnings that increased freight demand and looming federal regulations are tightening truck capacity. Tighter capacity on the highways should be giving railroads a unique opportunity to accelerate, not lose, intermodal business.

"The railroad is now returning to a normal operating rhythm, and our performance metrics are improving," Harrison said in a statement on Sept. 6. "Fluidity in our terminals largely has been restored and we are appropriately resourced to continue making progress. Car dwell has improved from week to week for the last five weeks, and system-wide velocity is increasing."

The service complaints are by and large from the domestic shipping community. International shippers who move goods in 20-foot and 40-foot ocean containers, have not reported the same level, if any, major service challenges. The National Retail Federation told JOC.com that its members reported no issues among its roughly 18,000 member companies.

Domestic intermodal shippers, though, say their shipments of 53-foot containers and trailers are being roiled. A cross-section of a half-dozen domestic shippers have reported everything from "dwell times lasting weeks" to customer service issues. In one instance, a trade group representative relayed to JOC.com, "A shipper asked for space for 12 boxes on a Tuesday. CSX came back and said they could give them 24 on a Wednesday. That just doesn't work."

CSX called the claims "very unlikely." Even though major shippers such as parcel giant UPS and fast food giant McDonald's have started moving more domestic cargo via truck due to service disruptions, Harrison has said service disruptions those companies have cited in their departures have largely been resolved.

CSX reported modest intermodal volume gains in August, but CSX intermodal volume in September has started to gradually decline, falling roughly 5 percent in the first two weeks of September. Intermodal volume for the month of August was up roughly 6.3 percent and year to date, through Sept. 16, CSX intermodal volume was up 2 percent. CSX's archrival Norfolk Southern Railway's volume has been healthier, reporting year-over-year gains of roughly 1.1 percent in the first two weeks of September, traffic up 3.5 percent for the month of August, and up 4.6 percent year to date. Total weekly US intermodal traffic, according to the Association of American Railroads (AAR), was up 2.3 percent in the first two weeks of the month, 3.4 percent in August, and 3.7 percent year to date.

Service disruptions began in March when Harrison, who had just been named CEO at the start of the year, began to implement his "precision railroading" business strategy, thinning operations to cut costs and ultimately improve the company's operating ratio, an indicator of profitability.

In July, Harrison apologized to customers saying the changes prompted some temporary service disruptions and even admitted some mistakes had been made in the rollout of precision railroading. CSX has maintained since early September, though, that service has improved.

"As our service metrics demonstrate, CSX's performance is rapidly being restored to normal levels," Rob Doolittle, a CSX spokesperson, told JOC.com on Friday.

Some shippers, however, have disagreed. Cargo owners speaking under the condition of anonymity with JOC.com said there have been no major changes to service, good or bad.

"I have not heard anything lately pro or con," Larry Gross, a senior transportation analyst at FTR Associates, told JOC.com.

"I am sort of hearing both," intermodal rail analyst Tony Hatch told JOC.com said, "recovery and not-so-much."

A public listening session with US federal rail regulators on the Surface Transportation Board (STB) is scheduled for Oct. 11, when shippers hope to set the record straight. Until then, however, it remains difficult to gauge whether CSX service has changed at all. Not only have a series of natural disasters thrown off US supply chains on the East Coast, but CSX has admittedly changed how it calculates and reports its service metrics.

On Aug. 23, CSX stopped reporting service metrics to the AAR, the largest US rail lobby and trade group. Going forward, CSX said it will report performance metrics on its own website using its own methodology. In effect, historical comparisons are now more challenging to make.

Until mid-August, when CSX was still reporting to the AAR and by the AAR standard that every major railroad prescribes to, average intermodal train speeds at CSX had dropped roughly 10 percent year over year. Train speeds the week of Aug. 12 were down to 25.4 miles per hour, running at 90 percent of the speed NS trains were running. In the same time, terminal dwell time at CSX facilities increased from 25 to 30 hours. Average terminal dwell times at NS terminals have changed even less at roughly 24 hours.

According to the latest metrics reported on CSX's website, system-wide train velocity has increased by 15 percent, to 15 miles per hour since the peak of our service issues in July, equal to performance in the same week last year. Terminal dwell times systemwide have decreased by about 15 percent, to 11.2 hours, since the peak in July. Customer inquiries (the daily average log volume) for the week ending Sept. 15 was 330, not all of which are related to delayed cars or shipments. In the same week, CSX had 138,634 cars online.

As the CSX-reported metrics have improved, Harrison has celebrated the new numbers and said he is confident "many of the challenges we and our customers have recently faced are behind us."

It is immediately clear, however, that those new metrics are not comparable to the prior metrics reported in the weeks or years prior. According to the new metrics, train speed has increased to 15 miles per hour. According to the old metrics, train speeds were already down to 25.4 miles per hour.

CSX maintains that the new reporting methods are more accurate and that the AAR standardized methods that the industry has relied on for years have been flawed. For instance, CSX has said train speeds under the AAR method were calculated as line of road miles traveled per hour. The new CSX velocity metrics include total miles traveled per hour, including intermediate dwell of trains. The new metric includes the full trip of a train and gives the railway the ability to diagnose an overall "speed profile." It also effectively makes the speeds reported using the new formula lower than the speeds the old formula produced.

"These revised service metrics give us a more accurate understanding of how we are performing and where there are additional opportunities for improvement," Harrison said in a statement. "That clarity is essential to achieving our highest potential performance, which will benefit our customers, our employees, and our shareholders."

The STB has been requiring CSX send weekly updates to the board since Aug. 21. Whether regulators will agree with Harrison's assessment at the upcoming Oct. 11 listening session remains to be seen.