The encyclopedia · Strategy & Leadership · Strategic decision · 2012–2018
Harrison ran CSX on a fixed train schedule and cut the operating ratio to 58.7%
Precision scheduled railroading ran trains on time instead of full, and CSX posted a record quarter.
CSX Transportation
the move
For a century, railroads made money by packing trains as full as possible before departure, which left freight and locomotives waiting in yards. E. Hunter Harrison, who built precision scheduled railroading (PSR) at Canadian Pacific and Canadian National, argued the opposite: run trains on a fixed schedule and make freight fit the schedule, not the schedule fit the freight.
CSX adopted PSR in 2017 under Harrison. The changes, listed in a Moody's review, included converting seven of twelve hump yards to flat switching, sorting cars in blocks instead of one by one, lengthening trains by 12.5% and cutting cars on the system from roughly 140,000–150,000 to under 120,000. Railcar miles per day rose 12% and dwell time fell 16% versus 2013.
The payoff showed in the third quarter of 2018: an operating ratio of 58.7%, a company record and a 9.7-point improvement over 68.4% a year earlier, and Moody's concluded that service levels at PSR railroads improved by several measures. The transition was not free: CSX also cut about 3,000 jobs and some customers had to adapt to the railroad's schedule.
why it works
- Fixed schedules turn a waiting system into a conveyor
- Longer, block-sorted trains move more cars per crew and locomotive
- Fewer cars on the system means less dwell and faster velocity
- A lower operating ratio released cash to shareholders
what transfers
When your asset is expensive and idle, optimize velocity, not fullness: a train that leaves on schedule is worth more than one that leaves full and late.
what came after
PSR spread to Canadian National and Union Pacific, and CSX kept the model after the late Harrison's death, posting its record third quarter. Critics note the transition disrupted service for some shippers, and Moody's warned that deep capital cuts cannot be sustained forever.
references
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