37. The problem with noncompetitive access.

Your shipping facility is served by a single railroad who is charging you as such with unacceptable service that doesnt meet most of your customers requirements. You company is this railroads 10 largest customer in terms of freight revenue $50 million per year.

• The relationship with the senior sales rep of the railroad continues to sour, yep he is not working on your companys behalf he is in the way. The service level for this railroad is known to be last or near last in the country, there rates to you are prohibitive. The railroad is hemorrhaging cash due to its gross inefficiency and lack of leadership in turning it around. Reducing your freight cost just lowers their revenue and margins.

• From your companys perspective six previous companies tried to profitably run the business and they all declared bankruptcy the railroad issue was but one of the many reasons. Nevertheless you were hired to fix it, find a solution reduce cost operating expenses the first year by $2million and then get after it more so in successive years. A tall order that they paid you to do.

• The drinks before the big meeting in San Francisco with you, your VP and the President with the senior account representative of the railroad went terrible late that Sunday evening in 10 minutes before the Monday meeting with the owner of the railroad and his leadership team that also didnt go well the next day.

• The President banned the representative from entering the office building and you would be out of a job if he did. Nevertheless you must achieve financial improvement in the overall operation this being but one area of it.

• You see the owner of the railroad and his wife at major seminar in Arizona around 6 PM in the evening he ask you how you are doing and how are things with the railroad and your company?

• What do you say this is an opportunity to tell exactly what happened the night before the meeting in San Francisco? Leave be you are at an association seminar and not confront the 800 pound gorilla, he is with his wife and .. Or do you go for it and rip the band aid off get this addressed once and for all? What are the ramifications of not taking action, of taking action and communicating with candor the facts?

• What did the professor do?

So with this information which is limited admittedly and recognizing that there is bulk truck service that does serve the facility for close customers you begin to assemble a plan.

What key points must you consider in looking at where you ship, what potential assets are near you, what do your competitors do? If money was no object what could you do?

The products are inbound low sulfur coal in 100 car unit trains of coal and outbound rail hopper cars 150,000 to 170,000 pounds per railcar of bulk soda ash, potash, boric acid for starters. Those are enough to focus on.

You must keep the plant open, you must serve your customers, and you must reduce your overall operating expense.

You are a member of various railroad, and national associations with contacts. You do have relationships with other railroads.

What do you think the outcome was, I communicated it in class and online several times.