CN Executive Lays Out PSR Intermodal Service Blueprint

A Canadian National executive last week laid out what could be the blueprint for intermodal service at railroads that have adopted the precision scheduled railroading operating model.

Speaking this week at an annual meeting of the Intermodal Association of North America, Keith Reardon, CN’s senior vice president of consumer product supply chain, described how intermodal traffic fared when his railroad adopted PSR after the late E. Hunter Harrison became its CEO.

CN ditched low-margin services, closed intermodal terminals, and reduced its intermodal volume.

Instead, it sought to establish a lower-cost and more efficient intermodal business network.

After that was finished, CN inaugurated new services designed to increase volume and revenue growth.

Although Harrison brought PSR to CN in 1998, the revamping of the intermodal business did not begin until 2003.

Known as the Intermodal Excellence program, or IMX, Reardon acknowledged  it was a bad three-letter word at the time.

“It was hard on us, it was hard on our customers, because we stripped away a lot of the terminals that we had that were inefficient,” he said. “We weren’t making any money.”

Reardon said Harrison told CN’s chief marketing officer to either fix intermodal or lose it.

On the receiving end of that directive was James Foote, who would later succeed Harrison as CEO of CSX after Harrison’s death.

“Going through that exercise  . . . taught us all a lot about what we need to do to run efficiently, not only for us but our customers as well,” Reardon said.

Although it was a painful process, Reardon said CN is now much better for having gone through it.

Intermodal revenue per unit rose to above the average for all of the commodities CN hauls, now seeing growth of 5 percent to 7 percent per year.

Reardon said CN is still evolving as a scheduled railroad and continues to evaluate its intermodal business.

It has added additional intermodal terminals and new services in response to changing traffic patterns.

He cited the example of establishing a terminal in Arcadia, Wisconsin, to serve an Ashley Furniture facility and a terminal in Chippewa Falls, Wisconsin, to serve a distribution center for Menards home improvement stores.

One reason why CN has closed some terminals while opening others was due to changes in distribution networks of CN customers.

Some of the terminals CN is now opening are what Reardon described as “boutique terminals” that Harrison would never have approved years ago.

“But we had to grow because that’s the next period, the next evolution of the business,” Reardon said.

Independent rail analyst Anthony B. Hatch said at the meeting that he expects CSX, Norfolk Southern, Union Pacific and Kansas City Southern to revise their intermodal networks in ways similar to what CN did.

CSX has already taken many steps that mirror what CN did, including closing low-density service lanes and terminals.

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