Schultz, Charles L.

English

University of Denver

Intermodalism-The Past Is PrologueCharles (Chuck) L. SchultzExecutive Vice President and CMOBurlington Northern Santa Fe CorporationAfter I accepted the invitation to speak at the Intermodal FoundingFathers of North America Conference, I gathered the oldest of our peo-ple together and brainstormed all the different things that either the for-mer Santa Fe or the former Burlington Northern did in the initial stagesof intermodalism. It is an impressive list: in 1959 the Flexi-Van; in 1963working with Mi-Jack-the first true intermodal crane; in 1968 the begin-ning of a very unique marketing relationship with UPS; in 1969 the Land-bridge and the Super C; and, in 1970 we started what we thought were thefirst dedicated intermodal trains. More recently, we had the first zerofailure UPS peak season in 1994; we initiated the HUB container pro-gram in 1998; and, we entered a unique marketing relationship with Wal-Mart and launched the Ice Cold ExpressTM refrigerated RoadRailer prod-uct in 1999. And, the list goes on.1Schultz: Intermodalism - The Past Is ProloguePublished by Digital Commons @ DU, 2000Transportation Law JournalTwenty years ago the industry was on the brink of nationalization.Today it is a growth industry. It is a Wall Street success story. A lot of usrailroaders would like to see a little more Wall Street success reflected inthe price of the stock, but it really has been a success story. The mergersare going to be very competitive programs. Our merger is the furthestdown the road, and I think that we are getting where we need to be nowin terms of having a better product than what we had before.Intermodal business is the railroad industry's brightest spot. Thegrowth has been tremendous. There is a container or trailer handledsome place every second of every day, 24 hours a day. Shippers havedemonstrated that there is a lot of momentum for intermodal. Railroadshave demonstrated that they can move less than truckload (LTL) freight.Railroads have demonstrated that they can move full truckload freight.However, in the last year and a half, the railroad industry has tripped,stumbled, and fallen.Service, Service, ServiceThe benefits of intermodal are cost and reliability. Reliability hasbeen an inconsistent benefit. To go forward, reliability must be moreconsistent. In terms of impact, no other means of hauling as much freightcan compare with the railroad. In addition, the railroad brings capacity.There is not another mode that can handle huge swings in freight in veryshort periods of time.[Vol. 28:3932Transportation Law Journal, Vol. 28 [2000], Iss. 3, Art. 5https://digitalcommons.du.edu/tlj/vol28/iss3/5Intermodalism-The Past Is PrologueThe key to growth is service, service, and service. Differentiation isimportant. Reliability is important. Supply chain management is impor-tant. We need to demonstrate that the product we have will be beneficialto the owner of the freight and that we can do more than just lower theirtransportation costs, lower their inventory costs, and change some oftheir financial picture. Ease of doing business is essential. Railroadsmust be easy to do business with.The BNSF VisionThe corporate vision of the Burlington Northern and Santa Fe Rail-way (BNSF) is to realize its tremendous potential by providing transpor-tation services that consistently meet our customers' expectations. Ibelieve that BNSF has the highest concentration of intermodal businessin the industry. Twenty-eight percent of our business is intermodal, and itis the fastest growing component. In 1998, we moved 3.1 million trailersand containers across our system. That is a load handled every 10seconds, 365 days a year, 24 hours per day.We do believe in a differentiated service. We have four very diversemarket segments: the less than truckload (LTL) parcel, the asset truck-load, the intermodal marketing companies, and then the steamship lines.While there is some overlap, all of these markets are somewhat different.They all have different needs in terms of cutoff, availability, and speed.2001]3Schultz: Intermodalism - The Past Is ProloguePublished by Digital Commons @ DU, 2000Transportation Law JournalBNSF has initiated a national account program so we can better un-derstand shippers' supply chains and to get a little closer to the beneficialowner of the freight. We believe that if we are truly going to provide avaluable service, then we have to understand our customers. That is thesuccess story with UPS-one of BNSF's largest customers. Basically, weunderstood what UPS's needs were, and then we built our productaround UPS's requirements. The Wal-Mart program is another successstory. In 1995 the intermodal business was $1.95 billion. We will finish1999 in the $2.6 billion range. It is a huge business for us, and it has beengrowing steadily.At BNSF we segment the business. We are convinced that in-termodal is not a single product, but that there are many different prod-ucts meeting many different needs. Our mission is pretty simple. Wewant to improve significantly the customer's perception of doing businesswith us by transforming the way we interface with them through a seriesof both process and cultural changes.The objectives are simple. We have to figure out where we are, whatwe need to fix, and devise a game plan to fix it. We have organized intofour different teams. We have more than 75 people in the organizationon these teams. They encompass all aspects of marketing, customer ser-vice, and operations. We have several quick start teams. We havesurveys going. We have various specific customer-focus groups. By theend of 1999 we will establish a customer board of directors. We are goinginto some very specific profiles for all of our top accounts and will re-design all of our customer service and marketing processes. By the endof 1999, we will have an overall short-term and long-term e-commercestrategy for the company. We must do these things to move to the nextstep.The BNSF StrategyBNSF has spent a lot of money, and Wall Street has not exactly re-warded us. Since the merger, we have spent about $8.5 billion. Thatamounts to $5,000 a minute for every single minute that the merged com-pany has been in existence. We have had enough rail re-tied for tworoundtrips between New York and California. We have re-laid enoughrail for a roundtrip from Denver to Seattle. We have re-surfaced enoughtrack to go around the world twice. We have laid enough rail to go be-tween Denver and Fort Worth, and by the end of 1999, one out of everythree BNSF locomotives will be less than four years old. This is the com-mitment of BNSF to do our part.[Vol. 28:3934Transportation Law Journal, Vol. 28 [2000], Iss. 3, Art. 5https://digitalcommons.du.edu/tlj/vol28/iss3/5Intermodalism-The Past Is PrologueHow are we doing? Not good enough, but better. We performedpoorly in 1997 and 1998 in one aspect of service-on time performance.There were many reasons for this poor performance. Our competitor inthe West was in trouble, so a lot of freight came to BNSF that we werenot completely prepared to handle. Service went down, and some freightwent back to the highway. In June 1999, however, intermodal service wasaround 94 percent. We must get into the 90s, stay there, then move intothe mid-90s, and on to the upper 90s. The corporate commitment ofBNSF is to remain at high service levels so that intermodal will continuegrowing. The evidence of our success will be when customers find it easyto do business with us and when they receive their freight 100 percent ontime and damage-free.200115Schultz: Intermodalism - The Past Is ProloguePublished by Digital Commons @ DU, 2000Transportation Law JournalThe Future of IntermodalI asked the same group of former intermodalists I talked about ear-lier to gaze into a crystal ball. Their prognostications are mostinteresting.* In 2002, the first 15,000 TEU vessel is launched.* In 2003, most terminal operations are converted to ground stack,doubling the parking capacity at most intermodal facilities.* In 2004, someone finally defines what a scheduled railroad is.• In 2005, the whole industry becomes a scheduled railroad.* In 2005, a 45,000 TEU vessel is announced and a national draynetwork is formed." In 2006, all of the Chicago railroads collaborate and build a"super hub," a shared facility.* In 2007, the high-speed intermodal trains are operating 125 milesper hour.* In 2008, the 80,000 TEU vessel is launched.* In 2009, two transcontinental railroads are established.* And, in 2010 the intermodal market share will become 50 percentof both everything that moves on the highway as well as every-thing that moves on the railroad.It has been said that sometimes innovation is building on anotherperson's idea. Unlike Thomas Edison who invented the light bulb, or theWright Brothers who were the first to fly an airplane, or Alexander Gra-ham Bell and the telephone, Henry Ford did not invent anything. WhatHenry Ford did was to improve the way something was being done. Ourjob is to improve intermodal and to move it forward.[Vol. 28:3936Transportation Law Journal, Vol. 28 [2000], Iss. 3, Art. 5https://digitalcommons.du.edu/tlj/vol28/iss3/5

Intermodalism - The Past Is Prologue

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Intermodalism - The Past Is Prologue

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