How did CN transition from an emphasis on profit margins, he asked, to one of growth?
“We are, as you say, the pioneers of Precision Scheduled Railroading. It is initially a difficult process for customers,” Janet Drysdale, CN’s vice president of financial planning, responded.
“Certainly one thing we learned going through it, and having the benefit of hindsight, is that we felt like we were acting fast,” she says. “The pace of PSR I think has picked up in recent times. But we were acting fast and we weren’t necessarily communicating with our customers as well as we should have during that difficult transition period. I think we’ve learned from that.”
CN realized in 2010, when it was pivoting to growth under new CEO Claude Mongeau, that it had a low cost structure and high fixed costs in an industry that’s asset intensive. The only way to produce earnings growth, Drysdale explains, is to generate revenue growth.
“The lowest cost way to grow is to grow with your existing customer base,” Drysdale says. “So you want to have a relationship where the customers actually want to do business with you.”
CN set out to mend fences with customers who had been put off by former CEO E. Hunter Harrison’s disruptive implementation of PSR over the previous 10 years.
“Our pivot was really understanding that operational excellence, which drives our low cost operation, is not always relevant from a customer point of view,” Drysdale says.
CN talked to shippers and developed a new set of service measurements that are important to customers.
“If I’m a customer, what’s more meaningful to me? Is it that the railroad has a low operating ratio? Or is it that the railroad brings me the empty cars that I’ve ordered on the day that I’ve ordered them, and is consistent in the end to end service that they provide to me,” Drysdale says.
“We are trying to balance operational excellence with service excellence, and I think we’re trying to take an end to end supply chain approach,” she says. “So getting the empty car back to the customer is as important as picking up the load.”
“When you start to do the operational and service excellence well, this is what’s been supporting our growth level that has outpaced the economy and has outpaced the industry,” Drysdale says. “So it’s about managing what’s good for us as a business, but also managing what’s good for the customer. And when our customers win, we win.”
Drysdale spoke at the Stephens Nashville Investment Conference on Wednesday.
All this at the expense of employees – 10 hour shifts, orphaned in a bunkhouse in the middle of nowhere and no personal life. When was the last hourly paid position anybody worked and didn’t get proper recompense? My friends work at CP and it’s not much better there. In Canada these guys will get legislated back to work at whatever CN offers despite having no contract since July. Management will get big bonuses and shareholders will get big increased dividends and the workers will screwed royally.
My post is completely misunderstood.
I HOLD WORKERS IN THE HIGHEST ESTEEM.
It is management that needs another HUNTER to clean it up.
PSR is a scam. You do not grow a business with PSR.
Curt, I can always understand your comments without any “help.” Earl, I think I will need a couple of Barley Pops tonite to try and decipher just what it is you are saying in yours. I even noticed a back door jab at labor (which I know you have no use for) in one of them by saying Trainmasters and Superintendents catered to the crews? So somehow it’s the fault of the crews your shipments werent getting delivered?
All I need to see now is ashot from one of the other ones in here who is quite anti labor and blames them for everything.
And for the record Earl, I am a 26yr ACTIVEEEEEEEEE railroader in the midst of going through the PSR (Prune Slash Reduce) roller coaster where I am now. I could post a bunch of what I see out here from the ground, but I would be dismissed as one of those evil, overpaid Union guys so why bother. At least CN woke up and realized they needed to take the listing out of the ship and did something about it. Cant say the same for where I am at right now.
Janet Drysdale is one of the best in the industry. She gets it, and yes, CN gets it. And this account is exactly what I heard from CN insiders and customers 8 years ago: getting CN more efficient was essential. 1) Harrison cut to the bone and instilled operating discipline; 2) once that was done, and seeing the damage done to customer relationships in the process, Mongeau & company went on an “apology tour” and created an entrepreneurial mindset to keep the operating discipline but grow business. And hired marketing people and more T&E employees that were needed after EHH cut too deep. CN has worked very well for a decade now. BUT, what today’s “cult of PSR” CEO’s don’t seem to grasp is this: Hunter’s plan isn’t rocket science, and he went too far at CN. There was pain at CN & its customers that could have been avoided if Hunter didn’t have such an ego and bent for blood. Wall St. was No. 1 and the humans who rely on the railroad — employees and customers — truly didn’t matter. Unfortunately, the barons at UP, CSX and NS don’t seem to get this. It’s hard to watch.
Do you think MR HARRISON completed the house cleaning of “feather bedding types ” at the top. If not perhaps he should be invited back to finish the job, but just leave the workers alone,not much if any feather bedding going on among the workers jobs.
Cost cutting = poorer customer service. PSR focuses on cost cutting. That was Harrison’s mantra without regard to how badly it hurts service. Railways need to look at opportunities to INCREASE business rather than drive business away..
Of course they aren’t! But they should.
Dilly, dilly!
“Michael Lampman-Is someone actually looking around the PSR blinders and seeing the real world? Shocking.”
CN still uses the PSR model.. They have figured out how to use it. Harrison lacked the marketing effort..
Lance Fritz and Jim Squires; are you reading and understanding what Ms. Drysdale is saying here?
Earl; I was blessed to have some very good rail sales people during my career. It was always easier working with the ones who really cared than those who just viewed it as a job.
CURT
I was in sales and I followed my shipments from start to delivery Took a bit of time but I had many satisfied customers although I was at times criticized by ASST SUPERINTENDENTS AND TRAINMASTERS who ran the railroad to satisfy the crews rather than the customer .A few times it was necessary to contact the railway HIGHER UPS to take pn those arrogant SUPTS AND MASTERS,
No Earl; I doubt any of us commenting on here really believe the railroads give a flip what our opinions are. But; you know what? It makes us feel better to be able to vent. Kind of how I’m betting you felt better after typing your missive.
I am 40 year rail shipper retireeeeeeeeeee!
Dilly – dalley…………………what a Faulie !I
All this crap is exactly that
the railroads will run their railroads the way they want to and all those who comment are just arm chair quarter backs….get over it…your comments are not worth reading
Do you reall think that the railroad pay any attention to this arm chair garbage.
I AM 40 retire railroad retireeeeeeeeeeeeeeeeeeeeeee !
Finally some common sense.
Someone once said RR’s are in the business to make money. But you don’t make money without satisfied customers.
Is someone actually looking around the PSR blinders and seeing the real world? Shocking.