Western Railroad Discussion > How to improve BNSF’s OR

So the BNSF Operating Ratio (OR) for Q1 was 69.4%.
Similar to NS but materially worse than UP (60.7%), CSX, CPKC and CN (all 63-64%).
What ideas do our Trainorders community have to improve the BNSF OR?
More revenue? Less cost?
What should Greg Abel and Katie Farmer do?



Edited 1 time(s). Last edit at 05/07/24 10:42 by GN1969.

GUYS...The way to imrove the BNSF is more service, run trains at 7500 feet long instead of 15,000 and givre up this save fuel using and run trains at train speed, but service, which means local and car spotting that will lead to more revenue as customers recieve and ship the loads, they will be on the move, instead of using the PRV system which is chocking the railroads to death...There is a huge amount of new traffic to get gathered and they are waiting for service and promises of delivery in the near future and get away from stealing business from other railroads  as well as set themselves up to be ripped off........

My simplified take, but revive the customer-first Santa Fe business model then set tariffs accordingly (within competitive reason on an apples-to-apples basis) to compensate for the higher costs and raise the O/R. Focus more on long-term, high margin business instead of treating it like a red-headed stepchild. I think many shippers will be willing to pay a premium for truly superior service.

But that will take a massive cultural and paradigm shift from courageous people at the top who are willing to invest the time in a long-range vision. Unfortunately, that's not realistic when you are being influenced strictly by quarterly returns and the hedge funds/activist investors that demand a quick buck regardless of the consequences. IMHO, with the way things are they will never gain new business unless they happen to have dumb luck and a monopoly in that particular shipping lane.

All that being said, I firmly believe a well run, properly capitalized Class 1 railroad cannot function at that level with less than a 70% O/R. It's simply a capital-intensive business but one that can provide stable and reasonable long-term returns if it's allowed to.



Edited 1 time(s). Last edit at 05/07/24 11:52 by trainjunkie.

BNSF is spending a ton on extra labor costs due to having to continuously dogcatch trains because of absolutely horrible operating schemes, and also on penalty claims from violating union agreements.

BNSF is hell bent to become the biggest, baddest PSR railroad (even though they deny that they embrace PSR - they seem to have really embraced all the bad stuff which this PSR cancer is, and none of the good things that EH Harrison promoted about it - but no one, including him, followed).  Now days, the biggest thing is not running trains on time and reliably, but a holy grail called "UPT" (Units Per Train).  Now it's all about making those trains as huge as possible; but what's really happening is that yards now are just "shot gunning" cars into big trains to be switched again at another terminal down line.  Often these terminals are already very congested, if not in actual melt down, but the only thing that seems to matter is making that big train!  One of Hunter Harrison's big preaching points of PSR was building trains to bypass yards down stream (which also often included block swapping among trains enroute), but as I have stated many times, and BNSF is exemplifying now, its hard to build trains that can bypass yards and do less switching of the cars, AND make them huge.  There are only so many cars moving ("moving" is a questionable term on today's Class One's), with fewer each year because of lost customers, to build a massive train that can bypass yards down stream.  It's amazing to see car destinations with pretty heavy volume (like those going to Chicago and connections there) get reswitched at 4-6 yards enroute instead of building a smaller train, blocked for that destination.

Trainjunkie is so right!  70%!  That's what I've been saying (though I'm starting to like 75% better).

As I said many posts ago NS would have to run 80-90 to fix their mechanical issues but that would stablize
and reduce over time. You think an investor wants to hear that?

Out

Beginning to sound that way on BNSF too.

GN1969 Wrote:
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> More revenue? Less cost?

Yeah pretty much

Fluidity reduces total long-term costs.  Make trains that fit in sidings, so the dispatcher can do his/her job.  Get the freight over the road, fast.  Deliver it.  Free up the car for another load.

That's how LTL does it.  Get the freight delivered, then load up the trailer again to  "turn and burn, so the company can earn."

That is problem with Wall Street. The Operating Ratio should NOT be the focus, gross and net profits should be the focus. The way to a lower operating ratio is to get rid of any business that isn't 50% profit and rape the captive customers for all they are worth. That is the way UP does it, common carrier obligations be damned!

Ted Curphey
Ontario, OR

Get rid of Katy Farmer! Then get a someone who worked his way up from the bottom for CEO. 

Interesting thread.  My take is this:  Railroads and "customer service" are mutually antagonistic.  Railroads have never put "customeer service" at the head of their priority list.  Railroad attitude is "we'll get it there."  This dates back to the 19th century when railorads had a virtual monopoly on overland transport.  When railroads figure out, and I'm not optimistic on this, "when it gets there matters,"  then we'll see better OR's.  And Ted, don't forget carloads, an important factor.  Wall Street  greed may hinder all of this.  JMHO.

Nick Tharalson,
Marion, IA

bnsfengineer1 Wrote:
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> Get rid of Katy Farmer! Then get a someone who
> worked his way up from the bottom for CEO. 

BNSF "PSR" push is coming from higher up than Katie Farmer; it's coming from the "mothership" Berkshire Hathaway.

Another thing that blew my mind is when I saw the "Operating Ratios" of trucking companies - they're in the 90's!  So Wall Street expects the railroads' Operating Ratios to be in the 50's, but it's alright for trucking companies to be in the 90's!?!?  Maybe it's easier to massacre the railroads companies because they are huge, few, and have lots of assets where trucking companies are smaller and many?

Ticeska Wrote:
-------------------------------------------------------
> bnsfengineer1 Wrote:
> --------------------------------------------------
> -----
> > Get rid of Katy Farmer! Then get a someone who
> > worked his way up from the bottom for CEO. 
>
> BNSF "PSR" push is coming from higher up than
> Katie Farmer; it's coming from the "mothership"
> Berkshire Hathaway.
>
> Another thing that blew my mind is when I saw the
> "Operating Ratios" of trucking companies - they're
> in the 90's!  So Wall Street expects the
> railroads' Operating Ratios to be in the 50's, but
> it's alright for trucking companies to be in the
> 90's!?!?  Maybe it's easier to massacre the
> railroads companies because they are huge, few,
> and have lots of assets where trucking companies
> are smaller and many?

Maybe it's because railroads have to completely fund their infrastructure, AND pay taxes on it, AND have it return on that considerable investment for a very long time regardless of how the freight economy for the lanes served evolves. The only significant capex the truckers need to worry about is their rolling stock. 

Railroads did have customer service before deregulation. When the ICC was setting rates between points, railroads only had customer service to compete with each other. The railroad that failed to deliver in a timely manner lost the business. After deregulation it turned into a race to the bottom where the railroads were undercutting each other on competitive business, and the most efficient railroads won, the others went bankrupt or merged and abandoned mainlines. Deregulation wasn't the total panacea that it's often made out to be.

Ted Curphey
Ontario, OR

bnsfengineer1 Wrote:
-------------------------------------------------------
> Get rid of Katy Farmer! Then get a someone who
> worked his way up from the bottom for CEO. 


EHH worked his way up from the bottom.  It isn't all it is cracked up to be.

funnelfan Wrote:
-------------------------------------------------------
> Railroads did have customer service before
> deregulation. When the ICC was setting rates
> between points, railroads only had customer
> service to compete with each other. The railroad
> that failed to deliver in a timely manner lost the
> business. After deregulation it turned into a race
> to the bottom where the railroads were
> undercutting each other on competitive business,
> and the most efficient railroads won, the others
> went bankrupt or merged and abandoned mainlines.
> Deregulation wasn't the total panacea that it's
> often made out to be.

And look how crowded our interstates are with semi-trucks.  How much of the cargo in those trailers could be moving by rail?  Environmentalists make such a big deal out of "carbon footprints," but the truck-vs-rail comparison seems to be ignored. 

That is because the environmentalists know that at least trucks don't use coal for fuel!

Out 

100% agree Mike!

Posted from iPhone

While only speaking for myself, and firmly an environmentalist, I DO want to get the semis off the road for anything but short hauls.   The Class 1s are so lame that they offload boxes to trucks to effect interchange in Chicago.   What???
All of them interconnect, but apparently are so poorly managed that the truckers get the transfer work. 
As to CEO competency, as others have said Harrison rose through the ranks--he should have been run off decades ago.   I do not know anything about Ms Farmer, but I would suggest that she takes orders from the sage of Omaha.