The biggest challenge for Canadian National Railway and rival Canadian Pacific Railway this year may not be proving they can run an efficient, fluid operation but showing shippers they can provide top-notch service.
In 2005, Canada's railroads are beating up on the rest of the rail industry when it comes to keeping trains moving. According to data submitted by the railroads to the Association of American Railroads, CN and CP are outpacing the U.S. railroads in average train speed, terminal dwell time and cars on line -- all measures of operational efficiency.
But, Canadian shippers so far are unimpressed.
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"The railways have their measures, but based on our discussions with shippers, we're not seeing any significant improvements in car supply or on-time delivery with the two big railroads" compared with the first quarter of 2004, said Robert Ballantyne, president of the Canadian Industrial Transportation Association, which represents freight shippers across all modes.
Like the U.S. carriers, CN and CP are defying the global trend in transportation by moving away from long-term, confidential contracts toward published tariffs, "and those prices keep going up, without the service to match it," Ballantyne said. "Even where you're locked in to a long-term contract, they'll keep hammering away at accessorial charges that they can change, like fuel, storage and demurrage."
Robert Armstrong, president of the Canadian Association of Importers and Exporters, whose 750 members include large and small retailers and manufacturers, said cycle time uncertainty, rising transportation costs and terminal congestion are still big concerns for his members.
Armstrong also sees a difference in service between the two railroads.
"Both railroads are dealing with huge volumes, I understand that," Armstrong said. "But right now, CP seems to be listening more to the customer. They are more open to working with us, whereas CN is not very flexible. Their attitude seems to be, 'you have to march to our drum.'"
For example, Armstrong said, CP has been keeping its Montreal ramp open late at night so truckers can pick up containers for delivery outside the greater Montreal area instead of having to compete with drayage companies making local deliveries during the day. "CN, on the other hand, is requiring customers to pay a $200 storage fee" instead of allowing them to pick up the shipment, he said. "It makes things more difficult for us."
To a certain extent, CN said, some of the service problems customers are experiencing are seasonal issues, such as cold weather tending to reduce the size of trains in order to maintain proper braking power.
"We're doing our best to keep a good fluid network and to make sure velocity is the best we can get it," said CN spokesman Mark Hallman.
Hallman said CN has worked hard over the last seven years to bring a high level of operating discipline to the railroad, and acknowledged that it has caused some shippers to resist adjusting to the railroad's stricter service requirements.
"It's true that they have become less flexible on the intermodal side in terms of pickup and delivery" by requiring customers to stick to a tight reservation schedule, Hallman said.
"But the system makes sense and it works. The whole idea is to smooth out the demand for our service. It's a new model, and we really think it has value for the railroad and for shippers. Our financial results reflect that discipline. We generate good returns, and that doesn't happen without having a product that people are prepared to buy."
Ballantyne said "in fairness, the carriers have been doing things that are making a difference" for his members, such as co-production agreements between the railroads that allow them to share sections of each other's track to make better use of available capacity. "We have seen the benefits of that, but we're still waiting to see more congestion clear up," especially at the Port of Vancouver, where capacity constraints on the railroads' mainlines leading into and out of the Port have dragged down cycle times, he said.