Milling & Baking News - May 7, 2019 - 25

Transportation and Distribution

Precision Scheduling moving forward
In addition to challenges from wintry
weather and spring floods, some rail carriers have added the controversial "Precision
Scheduled Railroading" (P.S.R.), an operating model focused on efficiency and cost reductions, into the mix. In a review of P.S.R.
in late December 2018, the U.S.D.A. noted
that proponents believe P.S.R. can deliver
greater efficiency and service to rail customers. Opponents contend that it results
in decreased service "in the form of arbitrary reductions in delivery and pulling of
trains from facilities, as the result of major
reductions in locomotives, crews and customer service personnel." Opponents also
contend that P.S.R. primarily is designed to
appease shareholders seeking higher profits rather than to better serve customers.
But the bottom line, as stated by the
U.S.D.A., was that "P.S.R. reflects a
broader trend in the railroad industry to
reduce operating ratios."
P.S.R. was the brainchild of the late E.
Hunter Harrison, who implemented it
while at Illinois Central, Canadian National and Canadian Pacific before joining CSX in March 2017 and immediately
announcing that CSX also would implement the new model. Mr. Harrison died
unexpectedly in December 2017. CSX met
with extreme customer dissatisfaction
during the implementation of P.S.R. that
resulted, in part, in greater oversight by
the Department of Transportation's Surface Transportation Board (S.T.B.). While
metrics for CSX improved significantly
in 2018 (a year into P.S.R.), indicating
improved rail service, the U.S.D.A. noted several limitations to the data that in
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Strong demand seen for truck freight
Midwest floods also impacted truck
movement at a time of high truck demand. Numerous roads and interstate
highways were closed briefly, with a portion of Interstate 29 in Iowa near the Missouri border still closed in late April. But

tonnage was up 3.8% from a year earlier.
"In March, and really the first quarter
in total, tonnage was negatively impacted
by bad winter storms throughout much of
the U.S.," said Bob Costello, chief economist at the A.T.A. "While I expected tonnage to moderate in the first quarter, the
late Easter holiday and the winter storms
made it worse. It is likely that tonnage will
improve in the second quarter, although
year-over-year gains will be significantly
below the 2018 annual increase of 6.7%."
Another key metric for the trucking industry is driver availability. A nationwide
driver shortage was exacerbated by the
H.O.S. and E.L.D. mandates early in 2018
that put tighter restrictions on truckers' driving times and in effect meant more trucks
and more drivers were needed. The A.T.A.
has maintained that a long and significant
truck driver shortage has existed as a large
number of current drivers "age out" and the
younger generation is less inclined to take
on the rigors of over-the-road trucking.
The Bureau of Labor Statistics in a
March report titled "Is the U.S. labor market for truck drivers broken?" challenged
the A.T.A.'s portrayal of a longstanding
trucker shortage. The Bureau concluded:
"The overall picture is consistent with a
market in which labor supply responds to

indications are the impact of flooding on
truck freight costs were minimal.
Demand for truck freight was strong
throughout 2018 and was expected to remain strong in 2019, although at a slower
pace.
The American Trucking Associations'
(A.T.A.) seasonally adjusted for-hire truck
tonnage index in 2018 was up 6.7% from
2017, the largest annual increase since 1998.
But the gauge has begun to waver in
2019. After rising almost steadily since October 2016, the A.T.A. truck tonnage index
declined in the past two months, though
still up from a year ago. The index dropped
2.3% in March and was down 1.5% in February. The March index was up 1.6% from
March 2018, and February was up 3.9%
from a year ago, while total first-quarter

increasing labor demand over time, and a
deeper look does not find evidence of a
secular shortage. We modeled exit from
and entry into the occupation, finding
that occupational migration among drivers is similar in magnitude to that of other
blue-collar occupations. Perhaps most
surprising, a basic model of moving between occupations shows that truck drivers have lower occupational migration
than other workers with similar education levels. This suggests that, in the aggregate, the labor market for truck drivers works about as well as the labor markets for other blue-collar occupations."
Mr. Costello of the A.T.A. responded,
"Unfortunately, in their article (the authors) demonstrated some basic misunderstandings about the trucking industry

some cases could show up as improved
metrics for the railroad but in fact mean
worse service for specific shippers.
Union Pacific Railroad began a conversion to the P.S.R. in October 2018, and
Norfolk Southern Railway and Kansas
City Southern Railway also are in the
early stages of transitioning to the P.S.R.
operating model.
A key to a railroad's transition to P.S.R.
or any significant operational changes,
the U.S.D.A. said, is the need to "communicate with shippers long before changes
happen," which was a major issue during
the CSX transition. While "Wall Street"
loves P.S.R. because it improves the bottom line of railroads' balance sheets, many
shippers remain opposed to the model,
noting that it hasn't really been tested during prolonged severe weather or other
stresses to the system. The S.T.B. continues
to closely monitor railroads that already
have transitions or are in the process.

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a year earlier, the U.S.D.A. said. Year-todate deliveries to the Mississippi Gulf
were up 102%, to the Texas Gulf were
down 27%, to the Pacific Northwest were
down 12% and to the Atlantic and East
Gulf were even with a year ago.
Overall, the Association of American
Railroads (A.A.R.) reported rail traffic
during the week ended April 20 down
2.4% from the same week a year ago, with
carloads at 262,011, down 0.9%, and intermodal at 264,130, down 3.9%. For the year
to date as of April 20, total rail traffic was
down 1.8% from the same period last year,
with carloads at 3,969,837, down 2.7%, and
intermodal units at 4,266,729, down 1%.
Of the 10 carload segments tracked by
the A.A.R., all were down from a year
ago except petroleum and petroleum
products, which had a year-to-date total
of 200,453 cars, up 24% from the same period last year. The segments showing the
largest declines from a year ago were coal
at 1,241,965 carloads, down 6.4%, and
grain at 345,738 carloads, down 5.1%.

Milling & Baking News

May 7, 2019 / 25

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Milling & Baking News - May 7, 2019

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