Change in Competitive and Non-Competitive Rail Revenue

Improve Negotiating Leverage on Captive Rail Movements

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.            

Change in Competitive and Non-Competitive Rail Revenue

  1. Non-Competitive Rail Revenue (RVC’s >180%) has increased by 244% since 2004.

  2. This has resulted in a very large increase in railroad profitability.

  3. 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.Rail Negotiation Seminar Recommendations

For information on the Rail Negotiation Seminar and why this program is so important to shippers in the 2023 rail market, click the link below to obtain a brochure for the seminar.

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Percent Change in ALL-LF Index Before and After Error Adjustment

AII-LF: Check Your Index

RCC - Rail Negotiation Seminar Banner

Check the Index You Use to Escalate Multi-Year Rail Contracts

 

The All-Inclusive Index- Without Fuel (AII-LF) is the primary index used to escalate rail rates in contracts. However, there are two versions of this index that are used to escalate rates and during rapid inflation. One index tends to increase more than the other. The graph shows:

  • Since 1Q2021 the AII-LF index Before Error Adjustment has consistently increased more than the AII-LF index After Error Adjustment.
  • The cumulative difference over the last eight quarters is 2.2% (17.4%-15.2%).
  • The difference over just the last quarter is 1.3% (4Q2022 to 1Q2023)
  • Shippers need to verify which version of the AII-LF index is being used to increase their rates.

All-Inclusive Index- Without Fuel (AII-LF) Changes Over Time

**This graph was generated using the Rail Cost Control program**

The Rail Negotiation Seminar is the most highly recommended program by rail shippers for rail shippers. The 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 that can impact your rail expenses, such as the changes referenced above in the ALL-LF indexes.

Thousands of rail shippers, from every industry that ships by rail, have attended the seminar over the years. Below are some of the observations they have made:

Rail Negotiation Seminar - ALL-IF: Check Your Index

** If you plan to attend the seminar, make sure to reserve your hotel room before EOD, Friday 2/10, to ensure your discounted room rate. Click the following link to lock in your discounted room rate: Rail Negotiation Seminar Hotel Reservations **

 

For more information on the Rail Negotiation Seminar, click banner below to download the brochure. 

2023 Rail Negotiation Seminar Brochure