Consumables

"Consumables" continued from Resources Page:

An accurate, alternative method for measuring shortline performance is tracking the consumables required to support customer expectations. What you get is a revenue move budget upon which managers can predict man/hours per revenue move and gear that to the rate at which consumables are consumed.

The elegance of the scheme is it strips out non-operating, non-cash line items like depreciation. It tells one exactly what's expected in terms of cold, hard cash. Start with revenue moves, budget the man-hours (fuel, car days, etc) to support the moves and keep score daily, weekly, monthly and YTD. Only in this way can one see what's not working and take corrective action right away.

I particularly like this method for dealing with items like car hire. Railroad A may get five days car hire relief on everything, Railroad B may get three days on covered hoppers, and railroad C may not get any. As a result, car hire expense as a percentage of revenue will be more favorable for A than B or C. On the other hand, since asset turns are so key to managing capacity, car days per revenue move tells a predictive, non-cash story liked to specific customers rather than a historical cash line-item story that's hard to link to any specific customer requirement.

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Laura Blanchard, email preferred lblanchard@rblanchard.com