As one of the oldest “heavy” industries in the United States, railroads have been at the vanguard of how the private sector and government interface. The Interstate Commerce Act of 1887 created the Interstate Commerce Commission (ICC) to regulate railroads as common carriers by eliminating rate discrimination and ensuring fair rates. The legislation, which arose from public outcry against perceived monopolistic practices, specifically demanded that railroad rates be “reasonable and just.”1
This regulatory regime remained in place until the deregulation initiatives of the late 1970s. The Staggers Rail Act of 1980 reduced the ICC’s authority by allowing railroads to set rates more freely and become more competitive with the trucking industry. Congress abolished the ICC in 1995, and many of its remaining functions were transferred to a new agency, the Surface Transportation Board (STB).
Most of the STB’s impact has been in the area of its review of railroad mergers. However, this function has been mostly dormant since the agency turned down the proposed BNSF-Canadian National (CN) merger in 2001. Nonetheless, this responsibility is back in public view with the proposed acquisition of Kansas City Southern (KCS) by both CN and Canadian Pacific Railway (CP).
The history of regulating railroad mergers in the U.S. is fraught. Following rail deregulation in 1980, the ICC oversaw a rapid series of end-to-end mergers. After the ICC was “sunset” in 1995, the STB approved a series of ever larger and more disastrous railroad mergers.
Those mergers led to horrendous rail-service meltdowns. In the face of rising shipper opprobrium, the STB and the rail industry reached agreement on publishing a very limited set of service metrics. As shown in Figure 1, most of the STB’s current metrics apply to traditional carload service, and only a few specifically or meaningfully apply to intermodal. Yet intermodal is increasingly important: Not only does this segment represent half of all U.S. rail volume today (Figure 2), but it also is growing, while other commodities, especially coal, are declining.
[Figure 1] Current Surface Transportation Board metrics
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[Figure 2] Intermodal's importance
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There are several problems with the current metrics. For one thing, two of the major intermodal metrics, intermodal train speed and intermodal cars on a railroad, are distinctions without differences. The standard deviations just are not statistically significant, nor are they necessarily correlated to service.2 For another, the STB’s measure of “trains holding” and “cars not moving in 48+ hours” are essentially numbers without context, because each railroad’s results differ widely from the others due to differences in geography, traffic mix, and operating parameters.
Finally, consider that intermodal service—like its competitor over-the-road trucking—is about door-to-door transportation. In the standard intermodal sequence (Figure 3) there are many different pieces that “make intermodal look like truck,” from the time a box is picked up until it is delivered. But the current STB data focuses solely on a broad, high-level assessment of rail activity. The components highlighted in orange in Figure 3 are the critical pieces of intermodal service that go unmeasured today. Most are terminal-related, involving either the intermodal ramp or train-to-train connectivity. These and other metrics I propose the STB adopt are discussed below.
[Figure 3] Typical intermodal sequence
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Think about the current metrics in terms of passenger flight. On-time performance does not matter if the first flight in a series is delayed; a missed connection requires rescheduling of all subsequent segments. The same applies in intermodal transportation. Analysis of train performance must always consider the possible existence of connecting legs. It also does not matter that the flight departure or arrival times were correct if you sat for three hours waiting to deplane. Schedule compliance only matters if all legs perform on time.
In other words, any assessment of intermodal service reliability is only meaningful when measured end-to-end. It is about the overall trip, not the segments. Returning to the air travel analogy, you do not care how fast an airline’s planes were flying, how many planes are parked, or how many planes are in the airline’s fleet. Trip-plan compliance is essential. Other metrics are extraneous or meaningless.
The entire intermodal system currently finds itself in gridlock, with no clear measurements as to how and why this occurred. It is time for the STB to ensure that stakeholders are provided with meaningful, transparent, and granular metrics.
Rather than continual acquiescence to what railroads are willing to provide, the STB needs to mandate that they provide the information the public requires. This means comprehensively addressing the entire intermodal itinerary, not just portions of the rail linehaul.
The following describes five areas that are not currently being measured. I believe they should be, and I propose a set of metrics and key performance indicators (KPIs) for each (summarized in Figure 4), with a brief description of some associated issues or considerations to keep in mind.
[Figure 4] Suggested intermodal metrics
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1. INITIATION OF INTERMODAL SHIPMENTS
Without the right conditions in place, intermodal shipments will be destined to fail even before their movement commences. The following metrics will measure the existence of some necessary prerequisites for an intermodal move:
There are some issues that need to considered. Different shippers may have different contractual commitments, so measuring the impact of the metrics introduced here without commercial context may prove problematic. There is also the challenge of how to count “multiple declinations”; for example, if a shipper has one shipment that is rejected on five consecutive days, does that count as one failure or five?
Finally, there is the issue of whether a railroad has the ability to track this information within its terminal operating system (TOS). Although such capabilities have been available for 20+ years, some railroads have been laggards in their TOS development.4 In those cases, I suggest that railroads reply “unable to answer.” I believe that the desire to avoid having to publicly say “we don’t know” would provide an incentive to remedy those information shortcomings.
2. ENROUTE RAIL MOVEMENT
Once an intermodal shipment has successfully departed from the point of origin, the next potential sources of failure arise while it is moving to its planned destination. These metrics will identify the root causes of failures that occur during this movement:
The issues associated with these proposed metrics are similar to those discussed under “Initiation of Intermodal Shipments.” Some railroads may lack the information technology (IT) capability to measure these events, while some still do not even record them. “Unable to answer” would be the appropriate response.
3. DESTINATION TERMINAL PERFORMANCE
While all aspects of intermodal transit are important—and require measurement—the destination terminal performance has an enormous impact on the customer’s assessment of intermodal reliability. As the closest point to delivery, it has the least amount of time available for remedial action. (Think back to the air travel example, where a plane landed on time, but passengers sat on board for three hours before they could deplane.) Thus, the following metrics are particularly important to customers:
Again, some railroads will lack the IT capability to measure these statistics. However, I suspect that some may simply not want to advise the results. Rather than eliminating a metric that is not supported unanimously, I would suggest railroads be allowed to reply, “unwilling to answer,” and then respond to the marketplace’s reaction.
4. TERMINAL HEALTH
Some current STB metrics assess the general state of the system by looking at the operating performance, or “health,” of specific, major carload yards, because a misfunctioning network node can quickly poison the entire network. We need to do the same for major intermodal terminals.
These metrics are not associated with specific components of an intermodal trip; rather, they look at how a specific terminal node is performing across all units entering, departing, and residing in it. Just as an airline passenger may switch routes to avoid bad weather or a poorly performing airport, intermodal shippers frequently have the opportunity to route around afflicted terminals. These terminal health metrics would provide the transparency necessary to assist this decision making:
Once again, railroads’ inability or reluctance to report will be the primary roadblock to providing this data. There may also be some valid reluctance to publish numbers that are perceived as unfavorable but are a realistic reflection of customer mix at a particular location.
5. OVERALL SYSTEM HEALTH
Just as we would measure the health of specific terminal operations based on changes in shipment and equipment fluidity and velocity, we need to look at overall system health by applying similar benchmarks to an individual railroad’s intermodal network. Current STB carload metrics include several metrics of this type, so the following would simply expand the concept to intermodal:
Once again, railroads’ potential reluctance to provide information that may not paint a positive picture could constrain the adoption of these proposed metrics. An additional complicating factor is that some railroads handle ramp operations themselves, while others outsource to third parties, making it more difficult to collect the necessary data.
As suggested by the potential issues associated with each of the five proposed metrics areas, there are two especially significant factors that could make railroads hesitant to adopt these measurements. First, rather than admit that they are “unable to answer”—or perhaps “unwilling to answer”—some railroads may maintain that this information is “too complex” to capture. That is just not the case with today’s technology.8 And second, there will always be reluctance to “look under the rocks”—an exercise that may reveal and require acknowledgement of weakness. However, railroads should recognize that this would also be an opportunity to highlight their successes and positive achievements.
Performance, range are both essential
For their full benefits to be achieved, metrics must reflect both performances and the range of results. Shippers need to know more than just whether specific levels were achieved. They also need to know “how wide the fairway is.” Are outliers clustered close to the target, or are calamitous outcomes frequent?
Railroads frequently report on a single threshold outcome (for example, 90% arrive within six hours of schedule). But this can paint an incomplete picture. How disparate is the remaining 10%? Is it spread over the next few hours—or the next three days? A more statistically robust basis, showing mean and quartile breakdown, is recommended to complement threshold analysis, as shown in Figure 5.
[Figure 5] Metrics must reflect performance and range
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Current STB metrics are available for download and analysis. However, they are time series of single, absolute key performance indicators. Today, the analytical standard is to have data available for “slicing and dicing” along multidimensional data sources. This means that, instead of reporting a single average, data should be deliverable as a matrix of performance and range for a specified time period.
This is no longer a technical issue because large datasets are routinely provided by the public sector. Yes, the envisioned scope of data proposed in this article may be exponentially larger than what is currently captured, but why shouldn’t it be? The proposed metrics include numerous range and performance criteria, which are critical if shippers are to make accurate, optimal decisions about how—and indeed, whether—they use intermodal. The proposed scope is not even complete; there are other metrics not mentioned here (for example, day of the week) that should be critical criteria as well.
Why go to so much trouble?
When the STB’s metrics were first developed, they were intended mostly for shippers’ use. Today, it appears to me that the financial community and industry analysts are the primary consumers of that data. Indeed, although the current STB metrics are almost insignificant, there are many analysts who dutifully report on them. (In my opinion, this is something like haruspicy: ancient soothsayers who foretold the future utilizing animal entrails.)
Intermodal is not just a mode of transportation. It is important to our society for providing supply chain capacity, reducing congestion and vehicle emissions, and increasing infrastructure efficiency. Despite these and other positive aspects, for years many shippers have been reluctant to use intermodal based on anecdotes (some of them apocryphal) about past poor service.
The right metrics could change all that. What we need now are data that will be meaningful and useful to those who use intermodal services: real data to quantify intermodal’s successes and identify opportunities for improvement. With accurate information, facts will replace apocryphal anecdotes, the financial community will encourage necessary investments, and public metrics will motivate railroads to “up their game”—all leading to improvements that will drive increased usage of and greater success for intermodal.
1. With the passage of the Interstate Commerce Act of 1887, the railroad industry became the first industry subject to federal regulation by a regulatory body. The Act was later amended to regulate other modes of transportation and commerce.
2. Train speed is also highly correlated to “mix,” since expedited, standard, and international trains run at different speeds. A change in mix—and thus, average train speed—does not necessarily translate to service issues.
3. Many intermodal shipments have two outbound initiations, with different railroads connected with a “cross-town” move.
4. In almost all cases, this has been the result of a misguided insistence on developing software internally rather than purchasing “best-of-breed” off-the-shelf solutions.
5. In certain circumstances hold outs may still result in plan compliance.
6. Allocations are a relatively new tool, as they are customized to specific customers and traffic. The formerly used approach was to issue an embargo, which was a complete cessation of traffic acceptance. The STB and Congress have never considered the distinction.
7. While parking turnover is common, less attention has traditionally been paid to car spots. When track turns are other than “load-load” (unloading followed immediately by reloading), there is increased demand for switching, which, in turn, consumes scarce operating time and reduces effective capacity. Both increase the likelihood of unfavorable operating outcomes. For example, “release-to-reset,” the period during which one set of cars on a ramp track is being replaced with a completely new set, quantifies latent terminal capacity that is readily available. The longer the time interval, the longer capacity sits idle.
8. Railroad CEOs are often unaware of how far behind the curve their company is when it comes to intermodal IT. One CEO classified his intermodal IT system as “world class”—even though it had no data elements for tracking chassis, while another bragged about adopting new capabilities that his competitors had introduced 25 years earlier.
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