Weighing the options

Railway Age, Dec, 2004

The CPR has always marched to the beat of its own drummer. Some say its Scottish-Canadian roots have compelled successive presidents to never throw caution to the wind and plunge into new ideas or investments with abandon. The CPR has a relentless habit of always studying its options, analyzing the experience of other roads, and then moving with patience, precision, and prudence.

To say that approach is working today is an understatement. In third-quarter 2004, CPR profit jumped 93% over the same period a year before, coming in at C$177 million, or C$1.11 a share. Freight revenue rose 10% on an increase in total shipments of 6%. Six of seven commodity groups posted increases, led by coal and intermodal. Yet all of these increases occurred without any big bang capital programs or significant changes in strategy. The CPR is holding to a well honed and service-proven plan to make its assets sweat.

Today's CPR arches over a diverse, 14,000 mile swath of the continent. Though viewed historically as a Canadian transcontinental carrier, the company has an increasingly valuable reach across the border and, through long-term steamship contracts, still effectively "spans the world." Global and transborder traffic account for 65% of its business today.

Geographically, the CPR splits into four main corridors: Western (Vancouver-Moose Jaw), Southern (Moose Jaw-Chicago), Central (Moose Jaw-Toronto) and Eastern (Montreal Chicago). These are augmented by regional clusters, such as its Prairie grain and potash network, and major feeder routes such as the Pacific Can-Am Corridor linking western Canada with the U.S. Northwest and south into Mexico.

"Our franchise is geographically driven," says CFO Mike Waites. "We're strong in bulk with grain, potash, and metallurgical coal. Our intermodal business has a healthy mix of domestic and import/export with a strong terminal position, enabling us to grow it 6-8% annually for the last 20 years. Carload is strong, too. Put all of these resilient businesses together and we can grow them organically to deliver a solid value proposition to shippers and investors."

Working at the expansion of that "value proposition" is the focus of the CPR today. There are no earth-shattering capital works on the go (although CPR is considering its options for an infrastructure expansion of up to C$500 million). There are no complete teardowns and rebuilds of business segments, nor is there an abundance of revolutionary IT programs waiting to be unfurled. Instead a multitude of concepts and technologies are at play as part of a broad program to take what the CPR brass consider a good product and make it an excellent one. Increased discipline is the phrase that comes up over and over when they speak of where they are and where they're going.

If there is one horse pulling the CPR's plough in this drive for greater discipline, it is the Integrated Operating Plan (IOP). Based on Multimodal Applied Systems' MultiRail service design software, the IOP has been used increasingly since 1999 to craft a broad package of service improvements and reduced train starts through the use of forward-looking traffic data. Implementation has been in easily digested stages over the last five years, beginning with the creation of premium intermodal train services in 2000. Next came the Montreal-Chicago Eastern Corridor and a refining of systemwide schedules to improve transit times by eliminating unnecessary intermediate stops for lifts and setoffs. All aspects of operations have been integrated under the IOP.

The result has been a 13% increase in train weights, a 33% increase in locomotive utilization, and a 17% reduction in fuel consumption since 1998. Daily car-miles have increased more than 40%, and this improved utilization has helped shed more than 4,000 cars from the fleet.

As impressive as the IOP's impact on operations has been, Executive Vice President and COO Fred Green says it isn't just about bringing new science to the traditional ways of running the railway. He emphasizes, "A huge part of the IOP world is change management. That means we've had to do an awful lot of work with our employees to help them to understand the change it brings to the way we run every aspect of the business and then get them to actually implement that change."

These accomplishments are only driving the CPR team to do better, says Senior Vice President-Operations Neal Foot. To do it, a multitude of additional programs and technologies are being gradually intertwined with IOP software and functionality. Currently being implemented is the CPR's version of Norfolk Southern's Train and Yard Execution System (TYES).

TYES will bring the same discipline to yards that the IOP has brought to overall operations. It has been modified to work in unison with other CPR IT programs such as PROYARDS (hump operations), Vista (trip planning and tracking), and Delta (car supply management). The west-to-east TYES roll out began in Vancouver early in 2004 and is sweeping across the system to completion in first-quarter 2005.