Shippers Negotiating Leverage Has Just Improved on Captive Rail Movements.
The amount of revenue that railroads receive from rates with Revenue to Variable Cost Ratios (RVC’s) greater than 180% has increased dramatically since 2004.
Non-Competitive Rail Revenue (RVC’s >180%) has increased by 244% since 2004.
This has resulted in a very large increase in railroad profitability.
Shippers need to understand that very large rail profit can increase negotiating leverage with a railroad on captive movements.
To provide context to point 3, the new Revenue Shortfall Allocation Method (RSAM) data just released by the STB has improved shipper’s negotiation leverage on captive rail movements. The high level of railroad profit is factored into the RSAM data, and this improves a shipper’s ability to win a 3-Benchmark Rate Challenge at the STB.
Based upon the new RSAM data a rail shipper’s captive rates could be similar to competitors but be considered more than 25% above these rates in a 3-Benchmark Rate Challenge. This is a big deal!
To be clear, shippers don’t necessarily need to initiate a 3-Benchmark Rate Challenge at the STB. However, shippers do need to understand that a railroad now has more to lose by not listening to a shipper’s concerns about rates and service on moves where there is a lack of rail competition.
Being smarter about your options improves a shipper’s ability to negotiate better rail rates for its movements. This is what the Rail Negotiation Seminar is about, and it is the reason this seminar is so highly recommended by rail shippers for rail shippers.
The Rail Negotiation Seminar is effective as it provides policies, strategies and negotiation practices that help reduce and better control your rail expenses. In addition, it keeps you current on changes in the marketplace as well as regulatory issues that can have a big impact on your rail expenses.