We’re always on the lookout for good news and last week we highlighted the strong recent improvement in BNSF terminal dwell. And with dual lockouts at CN and CPKC, we were curious to what extent the shutdown of Canadian operations impacted their U.S. operations.
BNSF terminal dwell was down again last week, and we’ve now seen sequential improvements in 16 of the past 21 weeks. The first part of that includes seasonal improvements post-winter, but the latter is something new and different. We didn’t know why, but the BNSF operations team was kind enough to reach out and fill in the blanks. Yard optimization is complex, but the oversimplified version is basically threefold:
- As the biggest intermodal operator by far, BNSF has recently been taking its expertise in intermodal terminals and applying that with more structure and rigor to its eight hump yards. Terminals and humps are different animals, but there are still overlaps and lessons and skills to be learned and applied, and operations management has been methodically working through the eight humps and seeing notable success.
- There are four IT systems that can have a material impact on yard productivity, and these systems have not only been evolving, but are increasingly better communicating and integrating with each other.
- BNSF recently brought the Service Design function under Transportation. This has materially accelerated the improvement cycle in terms of adjusting the operating plan to better mesh and evolve with yard operations.
The chart below shows the initial results, which are impressive. If we take the average dwell for the eight hump yards over the past six weeks (orange columns) and compare that to the same period in 2023 (black columns), we have all but one improving by an average of 16%. The only one that hasn’t improved is Lincoln, Neb. But guess which one the current improvement program hasn’t gotten to yet? Lincoln, Neb.
While this is all very encouraging, it only matters if it’s sustainable, so time will tell. These improvements have also occurred in a modest volume pressure tailwind, with BNSF’s merchandise volumes down 2% YoY so far in Q3. Regardless, the renewed focus, effor, and initial results are good news for BNSF’ merchandise customers, where service is primarily reliant on the humps, local operations and main line performance.
To What Extent Did CN and CPKC Protect U.S. Ops?
Given the dual lockouts at CN and CPKC, we were curious to what extent the shutdown of Canadian operations dominoed across the border and impacted their U.S. operations, which didn’t shut down.
CN and CPKC still report operational and volume metrics to the STB for their U.S. geographies. CN reports U.S. activity as one piece while CPKC has two: the old CP U.S. network (from Kansas City north to the Canadian border) and of course Kansas City Southern (from Kansas City south to the Mexican border).
Tables for each are below, but the bottom line is the Canadian rails did a reasonably good job protecting their U.S. operations from the shutdowns in Canada, with one big caveat: Weekly operating data runs through Friday, so the data only includes a two-day impact from the lockouts (Aug. 22 and 23) Volume data is measured through Saturday, so it’s three-day impact (Aug. 22, 23, 24). We’ll update these tables again before we declare the all clear.
If we walk through CN as an example, you can see that U.S. volumes last week were 12% lower than the average of the prior three weeks. This is significant, but fluidity took less of a hit. U.S. velocity actually improved 1% compared to the prior three weeks, including 9% faster intermodal. U.S. dwell-related metrics did go the wrong way, with U.S. terminal dwell up 5% and the number of cars sitting idle for 48-hours or more in the U.S. 27% higher.
