Mining, fertilizer and chemical groups present myths about the rail industry – by Michael Bourque (National Post – March 27, 2014)

The National Post is Canada’s second largest national paper.

Michael Bourque is President of the Railway Association of Canada.

Additional intervention to a sector that is already heavily regulated has the potential to undermine good business practices and successful economic outcomes.

It’s not every day that a group of customers co-author an article in which they claim that their service providers “deliberately” provide poor service. That’s exactly what the heads of three major industry associations–mining, fertilizer and chemical interests–did this week in a commentary on this page. “Railways should serve all customers,” said the headline.

Another modest statement in the commentary was hard to argue with. “Simply, a railway should meet the customer’s needs.” Sure, the customer comes first; the customer is always right and we exist to serve our customers. But let’s unpack what is behind this statement, which has a lot of history in the long historical debate between commercialization and regulation of railways in Canada.

Canada’s railways operate with a view to serving all customer needs. One analogy is that we operate a bus route, where each customer’s needs are met by operating efficiently and in a predictable fashion. If a customer wants their bus to arrive at their door early, then that affects the time it will arrive at everyone else’s door. So, in reality the needs of the customer is paramount, but it can’t be at the expense of another customer: collaboration is key.

A related concept, put forward in the article, was the request to that the government define “suitable and adequate service”. One is struck by the reasonableness of this request. Why not? Again, the answer lies in the fundamental challenge of meeting all customer demands in a network environment. Let’s say legislation is introduced that service must include guarantees for transit times and order details, such as “your train with 34 empty cars will arrive at 8 a.m. on Wednesday”.

But, because another customer doesn’t empty a car and yet another holds up the train while loading, these conditions are not met. In this case, the railroad would be at fault and would presumably pay a penalty. And, because the customer has no obligation to commit to times or volumes, the penalty could not be collected from the offenders- the railroad would have to pay.

The most egregious argument in the mining/fertilizer/chemical arsenal is based on the premise that the number of locomotives or personnel can be linked to service. It is a well-known fact that railroads across North America have reduced the number of locomotives required as efficiency gains have been introduced, such as reducing yards and investing in sidings.

For the rest of this article, click here: http://business.financialpost.com/2014/03/27/mining-fertilizer-and-chemical-groups-present-myths-about-the-rail-industry/

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