Precision scheduled railroading, demurrage, and shipper adjustments

Abstract

This study examines the likely linkage between reported precision scheduled railroading PSR implementation and escalating demurrage using Class I freight railroad traffic and financial data between 2002 and 2017. Our empirical analysis shows that PSR operational changes have led to higher demurrage. PSR implementation is associated with an estimated 71 percent increase in total real demurrage per car mile. Results indicate that shippers have not adjusted to PSR related changes to mitigate the increasing burden of railcar delay charges. However, railroads billed shippers with privately-owned railcars an estimated 0.43% less in total real demurrage per car mile compared to shippers using railroad-owned freight cars. This suggests that shippers using privately-owned railcars have been able to mitigate part of the effects and changes imposed by PSR. Results show that Class I freight railroad demurrage and operational policies have differential effects on total real demurrage per car mile compared to the base railroad when controlling for PSR. Even though we do not attribute escalating demurrage entirely on PSR, overall, these results support the idea that PSR adoption contributes to the higher-than-normal demurrage billed to shippers for railcar related delays.