The railroads have certainly been in the news lately—largely due to the threat of a rail strike and a last-minute intervention by Congress to prevent one.
In a recent post, we cited a July 18th Congressional Research Service report authored by transportation policy analyst Ben Goldman which described the dynamics involved and some of the issues that played a role in negotiations.
“Negotiations have occurred against a backdrop of declining railroad employment, a trend that began well in advance of the Coronavirus Disease 2019 (COVID-19) pandemic,”
Goldman wrote.
“Since November 2018, railroad employment has shrunk by some 40,000 jobs, or by over 20%, according to the Bureau of Labor Statistics. Some of these job losses can be attributed to the decline in the transportation of coal, while others may have been due to new approaches to staffing and asset use within the rail industry.”
Those “new approaches to staffing and asset use within the rail industry” refer to the implementation of Precision Scheduled Railroading (PSR), which Goldman described as one of the key issues being negotiated.
“Several of the largest railroads in North America employ a loosely defined set of industry practices designed to maximize efficient use of railroad assets, collectively known as ‘precision scheduled railroading’ (PSR),” Goldman said. “Rather than adhering to regular schedules as the name suggests, these practices often involve planning train movements so as to reduce the amount of physical assets (such as yards and locomotives) needed to generate revenue, thereby improving an indicator of railroad performance called the operating ratio. PSR sometimes can be accompanied by workforce reductions, but labor unions have contended that it also has placed unrealistic workloads and duty schedules on remaining employees.”
He also noted that “The surge of freight volume and other supply chain disruptions experienced since the start of the COVID19 pandemic may already be prompting a retrenchment from some of the more aggressive implementations of PSR among large railroads.”
Which brings us to hump yards—which were largely either idled or eliminated by the railroads which embraced the PSR model.
But recently, they’ve been regaining a bit of steam as some have been reopened and placed back into service.
So does that mean railroads are rethinking the effectiveness of PSR?
What is a Hump Yard?
BNSF Railway describes a hump yard like this:
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“Hump yards, also known as classification yards, are generally segmented into three parts: the receiving yard, the classification bowl and the departure yard.”
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“A manifest train carrying mixed freight enters the receiving area and prepares for sorting by climbing a small artificial hill on the lead track.”
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“At the crest of the hill, a yard worker then uncouples from the train a single car or a block of cars that are intended for a specific destination track.”
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“The gravity of the hill provides the necessary energy to propel the car or block of cars into the classification bowl, which features an array of switches that direct cars to different tracks that have an assigned destination.”
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“Retarders, or stationary brakes located on the tracks, safely control the speed at which the cars travel into their designated destination tracks.”
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“Cars then join other cars that have the same destination and are coupled together to build a new manifest segment of railcars.”
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“At the departure yard, locomotives are assigned and join a congregation of railcars. Once the newly-formed train is inspected for safety, it leaves the hump yard toward its destination.”
This video from V12 Productions shows how a hump yard works.
What is Precision Scheduled Railroading?
Precision Scheduled Railroading is an operating model created by former rail CEO E. Hunter Harrison.
“Harrison implemented his low-cost operating model at Illinois Central, then went on to deploy it at Canadian National, Canadian Pacific, and CSX Transportation,” wrote Bill Stephens in an April 2022 article for Trains. “Less than a year after Harrison’s death in December 2017, Union Pacific, Norfolk Southern, and Kansas City Southern would adopt PSR, too. BNSF Railway remains the lone holdout.”
Citing Harrison’s book, How We Work and Why, Stephens listed five “guiding principles” of PSR:
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Provide Service: Do what you say you’re going to do.
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Control Costs: Eliminate unnecessary costs.
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Optimize Assets: Use assets more efficiently and productively.
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Operate Safely: Safety is the top priority.
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Develop People: Cultivate the best team of railroaders.
And seven “service design principles” to “govern a railroad’s transportation plan”:
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Minimize car dwell time in yards.
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Minimize car classifications.
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Have more than one way to move cars to destination.
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Run general-purpose trains.
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Balance train movements by direction.
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Minimize power requirements.
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Strive for steady workload flow.
Stephens provided an in-depth explanation of the nuances involved with PSR, so please check out the full article.
While the Class I PSR railroads and their investors have been very pleased with the lower operating ratios and higher profits PSR has enabled, critics have been unhappy with the negative impacts.
Writing for FreightWaves in early 2020, Michael Baudendistel described the pros and cons of PSR, summarizing them like this: “What can be agreed upon is that PSR generally involves eliminating classification yards, consolidating dispatch centers, greatly reducing headcount, and reducing capital budgets with the ultimate objectives of greatly improving a railroad’s margins and returns on invested capital through greater asset utilization.”
Hump Yards and PSR
As both Stephens and Baudendistel point out, PSR and hump yards typically don’t mix.
“The closure of hump yards is one of the most visible examples of PSR in action,” Stephens said.
He cited a CP white paper to explain the reasoning from the railroad’s perspective.
“For yards that do a large amount of breaking down and rebuilding trains, a hump may be the most efficient means of switching. However, rail operations have changed significantly since the humps were built decades ago,” CP said. “Far fewer trains need to be broken up to be rebuilt, and those that do can, in most cases, be more efficiently flat-switched by a locomotive on yard tracks. Removing the hump enabled faster processing of trains within the yards, and eliminated maintenance and replacement costs of expensive hump yard components. Since 2011, closing humps has helped CP reduce its terminal dwell – the time a train spends in any given terminal – by 19%.”
In a 2019 article published in June of that year, Stephens agreed that shutting down hump yards wasn’t an integral part of the PSR strategy—but rather an outcome of this operational shift.
“The conventional wisdom says this signature move of PSR is simply part of cutting costs to the bone,” Stephen wrote then. “But the conventional wisdom is wrong. The idling of humps is a byproduct of operational changes that render them superfluous. …Yes, idling humps saves money. But PSR railroads don’t close humps as some slash-and-burn exercise in rooting out costs. Rather, humps become unnecessary as operational changes shift their classification work elsewhere or eliminate it altogether. In a nutshell, PSR starves some hump yards of the volume they need to survive.”
His closing statement in the article may have been prescient regarding the recent hump-yard-reopening trend.
“As railroad operating plans evolve, the bottom line is this: Hump yards will continue to play an important role in moving rail traffic when they’re at the right places and can handle enough volume…,” Stephens said.
Of course, that was pre-COVID when the logistics world had not yet been completely turned on its head.
After the initial shock of an idled global economy and subsequent surge in volume, the much leaner version of a PSR-enabled rail industry has struggled to keep up.
The result has been complaints—and lots of them.
Writing for FreightWaves in a post published earlier this month entitled, “The railroaders are now seeing they’ve gone too far,” Rachel Premack described the current tension—and perhaps a rethinking of PSR.
“It seems that the railroaders are starting to also see the issues around endless streamlining,” Premack wrote. “Class I freight railroads are reconsidering some factors around PSR, which has left them with furious customers, employees on the verge of striking and probes from the Surface Transportation Board on unusually bad service. In one quarter of 2021, a year of unusually high U.S. imports, rail’s intermodal sector, which moves containerized goods, claimed just 11% of all freight movement — its lowest in almost 12 years.”
She cited Bloomberg Intelligence’s Lee Klaskow—who leads logistics and transportation research—as saying, “I truly believe they’ve learned their lessons. I think they will operate not as lean as they once did because they missed a huge opportunity. Because there’s so many different commodities that collapsed during the pandemic, they could have been winning a lot of intermodal share — especially given the tight trucking market that we saw a year ago. But they couldn’t, because they didn’t have the service.”
Premack listed the various ways railroads are “reconsidering — or even undoing — previous moves around efficiency,” including hiring more staff, bringing more locomotives into service, and reopening hump yards.
Though the humble hump yard is a pretty simple concept, it seems to make a big difference when it comes to keeping customers happy.
In a September post, Stephens cited Eric Monger, vice president of KBX Rail, the logistics arm of the Koch Industries conglomerate, who said resuming hump operations in several yards recently has helped to improve service.
“Bringing these operations back online has really helped to move freight, and I’m thankful to the Class I’s for being able to do that…,” Monger said.
