Transportation A Global Supply Chain

Perspective 8th Edition Coyle Test

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Chapter 6: Railroads

MULTIPLE CHOICE

1. During 2009, railroads carried what percentage of all intercity ton miles moved?
a. 47.1 percent
b. 43.0 percent
c. 39.9 percent
d. 50.2 percent
ANS: C PTS: 1 DIF: Medium REF: Page 203

2. Intramodel competition is:

a. the joint use of trucks and railroads to serve common customers
b. trucking companies underbidding other modes to secure business
c. various modes seeking to gain market share from other modes
d. a government sponsored activity
ANS: C PTS: 1 DIF: Easy REF: Page 205

3. Which is a major reason for the decline in the number of rail companies?
a. mergers and unification occurring in the railroad industry
b. government restrictions on rail ownership
c. loss of business to other modes
d. desire of management to invest in other areas of business
ANS: A PTS: 1 DIF: Medium REF: Page 204

4. One of the benefits of a railroad merger is:

a. there are fewer grade crossings
b. less frequent interchanges between companies means faster service
c. cities and towns get back land once used for railroads
d. The STB does not have as many companies to regulate.
ANS: B PTS: 1 DIF: Medium REF: Page 205-206

5. What do the majority of rail movements involve?

a. manufactured goods
b. bulk liquids and coal
c. low value, heavy commodities
d. consumer goods
ANS: C PTS: 1 DIF: Easy REF: Page 208

6. The demand for freight:

a. originates when the carrier asks for the business
b. starts when the shipper calls the railroad to provide equipment to move a shipment
c. is a derived demand based on the demand for products
d. is based upon government quotas
ANS: C PTS: 1 DIF: Medium REF: Page 209

7. The railroads dominate the market for:

a. hauling 30,000 pounds or more over 300 miles.
 b. hauling 60,000 pounds or less than 100 miles.
c. oversize and over-dimension shipments.
d. coal and chemicals.
ANS: A PTS: 1 DIF: Hard REF: Page 210

8. What is one of the strengths of the railroad industry?

a. that it is not as affected by the weather as are other modes
b. that the railroads have large carrying capacity
c. that it can move products in both directions
d. that geographical barriers are not as formidable as they are for other modes
ANS: B PTS: 1 DIF: Medium REF: Pages 210

9. What is the difference between TOFC and COFC service?

a. TOFC is slower and cheaper
b. not all railroads can handle COFC
c. that COFC is more costly
d. one method moves the trailer on its wheels and the other moves only the "box" or the
container.
ANS: D PTS: 1 DIF: Medium REF: Page 213

10. Railroad carloadings have declined since 1900. What is the primary reason for the decline?
a. competition by foreign transportation
b. fuel efficient smaller cars
c. reduction in line trackage
d. larger cars and increasing car productivity
ANS: D PTS: 1 DIF: Medium REF: Page 212

11. The basic unit of measurement for railroad freight handling is known as the:
a. unit load.
b. Carload
c. freight load.
d. capacity load.
ANS: B PTS: 1 DIF: Easy REF: Page 211

12. Which type of railroad car has the greatest numbers in service?
a. tank car
b. covered hopper
c. flat car
d. Gondola
ANS: B PTS: 1 DIF: Medium REF: Page 211

13. Who are the owners the greatest percentage of rolling stock in use?
a. class I railroads
b. federal government for military moves
c. private car leasing firms and shippers
d. investment and financial firms
ANS: A PTS: 1 DIF: Medium REF: Page 212

14. What is the major cost element of the railroad?

 a. operation and maintenance of locomotives
b. operation and maintenance of rights
c. operation and maintenance of railcars
d. operation and maintenance of yards and terminals
ANS: B PTS: 1 DIF: Medium REF: Page 217

15. Which best characterizes the short-run cost structure of the railroads?
a. low variable costs, high direct separable costs
b. low fixed costs, low variable costs
c. low joint costs, high separable costs
d. large proportion of indirect fixed costs
ANS: D PTS: 1 DIF: Hard REF: Page 216

16. Railroad per unit costs decline as traffic increases. What is the reason for this cost behavior?
a. A high proportion of variable costs in the cost structure
b. A low proportion of fixed costs in the cost structure
c. A large proportion of fixed costs in the cost structure
d. Limited capital investment by the railroads
ANS: C PTS: 1 DIF: Hard REF: Page 219

17. What was the purpose of the legislation which created Amtrak?
a. It relieved railroads from the responsibility of providing passenger service
b. It allowed the government to provide service without concern for profit
c. It allowed the states to take over commuter service
d. It allowed the railroads to get rid of track that was only used by passenger trains
ANS: A PTS: 1 DIF: Hard REF: Page 220

18. Intermodal traffic expanded by _____ from 1980 to 2012.

a. 100 percent
b. 365 percent
c. 319 percent
d. 300 percent
ANS: C PTS: 1 DIF: Medium REF: Page 221

19. Railroads are:

a. more energy efficient than most other modes
b. more likely to haul energy producing materials than other modes
c. not as energy efficient as most other modes
d. buying more energy efficient locomotives
ANS: A PTS: 1 DIF: Medium REF: Page 218

20. When did scheduled common carrier freight and passenger service begin in the U.S.?
a. 1918
b. 1868
c. 1789
d. 1830
ANS: D PTS: 1 DIF: Medium REF: Page 202
21. What is the standard track gauge in the U.S?
a. 5 Feet
b. 6 Foot 2 Inches
c. 4 Foot 8.5 Inches
d. 4 Foot 10 Inches
ANS: C PTS: 1 DIF: Medium REF: Page 202

22. What led to the erosion of rail dominance in U.S. transportation?

a. Passenger air service in the 1920s
b. Government funded construction of roads
c. Steel price increase
d. Coal price increase
ANS: B PTS: 1 DIF: Easy REF: Page 203

23. How many Class 1 rail companies are there?

a. 5
b. 7
c. 66
d. 18
ANS: B PTS: 1 DIF: Easy REF: Page 204

24. What percentage of rail revenue is earned by local carriers?

a. 2.1 Percent
b. 1.8 Percent
c. 2.6 Percent
d. 28 Percent
ANS: C PTS: 1 DIF: Hard REF: Page 204

25. How many rail mergers have occurred in the last 30 years?
a. 15
b. 50
c. 28
d. 18
ANS: C PTS: 1 DIF: Medium REF: Page 206

26. What commodity accounted for 6,204,000 railcar loads in 2012?

a. Nonmetallic minerals
b. Food
c. Farm products
d. Coal
ANS: D PTS: 1 DIF: Medium REF: Page 209

27. Who is the largest single customer of some rail roads?

a. FedEx
b. DHL
c. Walmart
d. UPS
ANS: D PTS: 1 DIF: Medium REF: Page 214
 28. The major cost element borne by the railroad industry is the:
a. Rolling Stock
b. Fuel costs
c. Rights of way
d. Insurance
ANS: C PTS: 1 DIF: Medium REF: Page 217

SHORT ANSWER

1. Define Intramodal.

ANS:
Intramodal is competition within modes

PTS: 1 DIF: Medium REF: Page 205

2. What are mergers called that eliminate duplicate rail lines?

ANS:
Side by side

PTS: 1 DIF: Medium REF: Page 206

3. Name the top 4 commodities transported by railroads.

ANS:
They are coal, farm products, chemicals, and transportation equipment

PTS: 1 DIF: Hard REF: Page 209

4. What are the three major classifications of labor on railroads?

ANS:
Operating, non-operating craft, and non-operating industrial

PTS: 1 DIF: Hard REF: Page 218

5. Standard track gauge is defined as?

ANS:
The distance between the inside edge of the running rails of a rail track

PTS: 1 DIF: Easy REF: Page 202

6. As of 2012 what was the return on investment in the rail industry?

ANS:
12.49 percent

PTS: 1 DIF: Medium REF: Page 203

7. Rail is considered an oligopolistic market structure because:

 ANS:
There are a small number of interdependent large sellers and barriers to entry exist.

PTS: 1 DIF: Medium REF: Page 205

8. Rails to Trails Conservancy has created how many miles of hiking trails?

ANS:
10,000 miles

PTS: 1 DIF: Easy REF: Page 207

ESSAY

1. What types of mergers occurred in the rail industry? What has been the result of this activity after the
passage of the Staggers Rail Act?

ANS:
The first mergers were mergers of rail companies who had lines that were side-by-side. This allowed
railroads to eliminate duplication of parallel routes and strengthen financial position. Later, end-to-end
mergers allowed carriers to extend their route structure to provide more effective intermodal and
intramodal competition.

Customer service and reliability can be improved by these mergers. With the end to end mergers the
customer has one company that is responsible for the shipment. Additionally cost should improve as
many of the operating costs, such as car switching and clerical costs or record keeping can be bought
under control. Although there is less competition, the cost should also be less as there is less
duplication.

After passage of the Staggers Rail Act, the merger trend accelerated. Because of these mergers, there
are now only four major railroads.

PTS: 1 DIF: Hard REF: Page 205-206

2. The railroads can claim a number of service advantages, such as a large carrying capacity, assumption
of liability for shipments, and an increased use of technology. However, there are also a number of
disadvantages. Please describe the rail disadvantages.

ANS:
Rail service is constrained by fixed right-of-ways. The rail network is thus not as extensive as the
roads. The constrained right of way limits the degree of service completeness. It is impossible to
provide door-to-door service unless both shipper and receiver have rail sidings. In many cases, the
movement of goods must be completed by another mode of transportation such as truck. Declines in
total track mileage make the railroad industry less service complete and more dependent on other
modes of transportation for movement completion.

The rail system provides a nationwide network of service. However, carriers are regionally located and
tend to be able to complete national shipments through interchange between carriers. The multiple
handling of shipments creates delivery delays, as well as a higher incidence of loss and damage. Rail is
primarily a long-haul mode, making it difficult to provide cost-effective short-haul service. However,
in the future the goal is to expand service into short-haul markets and selected lanes.
 PTS: 1 DIF: Medium REF: Page 210

3. Abandonments have reduced the total track mileage by 50 percent since 1929. Why did these
abandonments occur? What have been at least two outgrowths of this abandonment trend? Does any
government agency oversee railroad abandonments?

ANS:
Overexpansion couple with a decline in rail shipments and the cost effectiveness of truck
transportation left extensive amounts of excess trackage in many areas. Face with significant amounts
of under-utilized assets, the railroads had to abandon large portions of rail trackage to remain
competitive. Parallel and overlapping routes, therefore, have been eliminated whenever possible.

In the late 1950s, the government opened the Interstate Highway System. This increased the cost
effectiveness of trucking service, which caused shippers to use motor carriers. To effectively compete
with trucking companies for time-sensitive traffic, railroads had to focus on efficient routes.

Once the railroad companies abandoned the tracks, they sold the rails and ties to scrap dealers. They
received as much as $10,000 per mile or reused the materials elsewhere.

The ICC, and later the STB, still regulate abandonments but changes in the law made it much easier
for the rail road industry to close unprofitable lines. Not all the lines were scrapped as regional and
short line operators took over some of this property.

New developments, such as unit trains carrying one commodity like coal or grain from shipper to one
consignee helped the railroads operate profitably. As more and more trains were concentrated on fewer
and fewer routes, overhead costs were spread over more businesses. Another advantage of the
abandonment was the rails to trails programs where the abandoned rails were turned into extensive
networks of biking and walking paths.

PTS: 1 DIF: Medium REF: Page 206-207

4. Piggyback service was designed for increase service levels to intermodal customers. What are the
characteristics of this traffic?

ANS:
Intermodal traffic has been increasing about 20 percent per year.

This intermodal traffic, when the modes are rail and truck, are called trailer-on-flatcar (TOFC) and
container-on-flatcar (COFC) service.

TOFC service transports highway trailers on railroad flatcars. It combines the line-haul efficiencies of
the railroads with the flexibility of local motor pickup and delivery service. On-time deliveries,
regularly scheduled departures, and fuel efficiency are the major reasons for the present growth and
future potential of TOFC service. For example, a 100-car train (which places two trailers on each
flatcar) is more economical to run than 200 trucks over the road. Fuel is saved and railroad economies
of scale are realized. Traffic congestion, road damage, and maintenance and repair costs are all
reduced because of the reduction of number of trucks out on the highways.

The railroads realized the necessity of improving the TOFC and COFC service to compete effectively
with motor carriers. To facilitate this the rail providers have made developments such as include
terminal facilities for loading and unloading, as well as changes in the railcars and trailers and
containers. However, the changes have not stopped here. The railroads have invested a significant
amount of money recently in improving right-of-way and structures to improve service by preventing
delays.
 Intermodal movement of trailers and containers grew rapidly during the 1980s. This growth was
stimulated by the advent of double-stack containers used in international trade. Also, the railroads have
placed new emphasis on their intermodal business after a number of years of doubting its profitability.

PTS: 1 DIF: Hard REF: Page 213

5. The railroad's short run cost structure consists of a large proportion of indirect fixed costs resulting
from the mode's investment in long-lived assets. Explain the fixed elements of the mode's cost
structure.

ANS:
The major cost element is the operation, maintenance, and ownership of rights-of-ways. The rights- of
way are the actual track and strip of land the track sits on.

Right of ways require a significant initial capital investment and subsequent annual maintenance costs.
Another element fixed cost element is the terminal facilities. Terminal facilities Include freight yards,
terminal areas and sidings. Passenger stations may also be included. The investment for equipment for
rail transport is another major cost element. This includes investment for locomotives and various
types of rolling stock.

PTS: 1 DIF: Medium REF: Page 217

6. Discuss the legislative reform which has occurred since 1973. How did each new law impact the
railroad industry? You need not include the legislation which started Amtrak.

ANS:
The Regional Rail Reorganization Act of 1973 (3R Act) attempted to maintain rail freight service in
the Northeast by creating the Consolidated Rail Corporation (Conrail), which was formed from six
bankrupt northeastern railroads. The act also created the United States Railroad Association (USRA)
as the government agency responsible for planning and financing the restructuring. By 1980, the
federal government had granted Conrail more than $3.3 billion in federal subsidies to cover its
operating expenses. Conrail proved to be very successful and was "spun off" to the public with the sale
of in 1992. Conrail's management was able to rationalize the excess track while preserving and
improving service. After a failed attempt by CSX to takeover Conrail, CSX and the Norfolk Southern
Railroad agreed to split Conrail between them and paid collectively over $10 billion for the property.

The Railroad Revitalization and Regulatory Reform Act of 1976 (4R Act) was the first attempt to
deregulate the industry since the railroads came under regulation in 1887. The goals of the 4R Act
were to help the railroads obtain funds for capital investment and to allow the railroads more freedom
concerning decisions on mergers, abandonments, and rate making.43 Although the 4R Act was an
attempt to deal with regulatory problems, the ICC's interpretation of the act negated much of its
positive aspects and in some cases actually increased rail regulation.

The Staggers Rail Act did a great deal to enable the railroads to help themselves and avoid further
deterioration of the industry, although they still face financial challenges because their return on equity
is very low (about three percent) compared to many other industries. However, many railroad
managers are optimistic that the industry will be able to keep its profitability and financial health if the
Staggers Rail Act is not altered to introduce more regulatory control and is allowed to continue
working. Many railroads have continuously improved their financial situation during the 1980s.
 The ICC Termination Act of 1995 eliminated the ICC and transferred economic rail regulation to the
Surface Transportation Board (STB), which is part of the DOT. The STB has taken a relaxed posture
on rail regulation, sometimes to the dismay of the shippers, so the railroads are now subject to market
pressures more than economic regulations. It is interesting to observe that the STB faces some of the
same challenges faced by the ICC (i.e., rail consolidation, larger shipper bargaining power,
capitalization, etc.).

PTS: 1 DIF: Hard REF: Pages 220-221

7. After the passage of the Staggers Rail Act of 1980 the railroads have improved service to their
customers. Describe these areas of improvement.

ANS:
The Staggers act increased competition among the rail companies by allowing rate making freedom.
Since the passage of the Staggers Rail act the railroads have shown increases in customer service
levels. There has been an improvement in safety, with declines in accidents, injuries and fatalities. A
survey of rail shippers showed that 86 percent of the respondents approved of government actions
allowing rate-making freedom for the railroads. Intermodal traffic has increased by 319 percent
between 1980 and 2012. Train accidents per million train-miles declined by over 79 percent from 1980
to 2012.

PTS: 1 DIF: Medium REF: Page 221

8. What is a "unit train" and what are the advantages and disadvantages of unit trains?

ANS:
The unit train is a train that specializes in the transport of only one commodity, usually coal or grain,
from origin to destination.

The unit train evolved from the rent-a-train concept for the movement of goods. Many times a
shipper, who owns cars, will rent the train to another shipper for a particular period of time. For
example, a typical coal unit train move would involve the transportation of 10,000 tons of coal in 100
hopper or gondola cars, each with a 100-ton capacity. The movement would be directly from the mine
to an electric power-generating station with no stops in transit. Because of the single commodity
nature and the need to maintain regularly scheduled movements, empty backhauls occur. However,
this drawback is offset by the high revenue-producing capabilities of the unit train resulting from the
improved overall car utilization.

PTS: 1 DIF: Medium REF: Page 216

9. Discuss the history and current situation of alcohol and drug abuse in the railroad industry.

ANS:
Many industries, including the rail industry, are taking a close look at the drug and alcohol abuse and
at possible methods of dealing with it.

Transportation jobs, such as rail and trucking, are particularly susceptible to drug and alcohol abuse.
The long hours, low supervision, and nights away from home can lead to loneliness and boredom,
which can then lead to substance abuse. Because of this situation, the railroads have been dealing with
the problem of substance abuse for a century. Rule G, which was established in 1897, prohibits the use
of narcotics and alcohol on company property. Rail employees violating this rule could be subject to
dismissal; however, the severity of this punishment led to the silence of many rail workers who did not
want to jeopardize the jobs of their coworkers.
 To deal with this problem, the railroad industry has attempted to identify and help employees with
substance abuse problems. The industry has established employee assistance programs (EAPs) that
enable these troubled employees to be rehabilitated.

Employees can voluntarily refer themselves to EAPs before a supervisor detects the problem and
disciplinary actions become necessary. However, a Rule G violation- substance abuse while on the
job-usually necessitates removal of the employee from the workplace to ensure his or her safety and
the safety of coworkers. Employees who are removed can still use EAPs for rehabilitation and can
apply for reinstatement after they have overcome their problem.

Railroad EAPs have proven to be very effective. A recent Federal Railroad Administration report
found that the rate of successful rehabilitation has risen by 70 percent. The success of these programs
depends largely on support from rail workers as well as all levels of management.

PTS: 1 DIF: Medium REF: Page 222

10. Discuss the current use of technology in the railroad industry.

ANS:
To become more efficient and consequently more competitive, the railroad industry is becoming a
high-tech industry. Computers are playing a large role in every mode of transportation, and the
railroads are no exception. A line of "smart" locomotives is being equipped with onboard computers
that can identify mechanical problems, and the legendary "red caboose" was phased out by a small
device weighing 30 pounds that attaches to the last car of the train. This electric device transmits
important information to engineers and dispatchers alike, including information about the braking
system. Other applications of computer technology are as follows:
• Advanced Train Control Systems (ATCS): A joint venture between the United States and
Canada that will use computers to efficiently track the flow of trains through the entire rail
system
• Rail yard control: Computer control of freight yards that is used to sort and classify as many as
2,500 railcars a day
• Communications and signaling: Provides quick and efficient communications between
dispatchers, yard workers, field workers, and train crews
• Customer service: By calling a toll-free number, customers can receive information on the
status of their shipments, correct billing errors, and plan new service schedules
• Radio Frequency Identification (RFID) tags to track equipment and shipments and improve
visibility. The role of high technology and computers will continue to expand and increase the
ability of the railroads to provide progressively higher levels of customer service.

PTS: 1 DIF: Medium REF: Page 223

11. Briefly explain the factors that led to the erosion of Rail dominance in 1920 and 1930.

ANS:
The construction of large scale, hard surface roads began the erosion of dominance of rail in the 1920s.
The road provided superior service and/or cost characteristics for motor carriers and automobiles. The
revival of inland water transportation, which was aided by government-financed navigation
improvements on rivers, also negatively impacted demand for rail. From a bulk stand point the advent
of privately financed construction of oil pipelines hurt rail. Air transportation emerged as the
dominant mode for passenger and mail traffic during the 1930s. Overall, the railroad industry suffered
significant decline in relative importance after 1920.

PTS: 1 DIF: Medium REF: Page 202

12. Describe some of the strengths of the rail industry.

ANS:
The key strengths of the rail industry are the large carrying capacity and the ability to generate
economies of scale. Each train car can carry two truck trailers. Trains have a much higher weight per
car capacity also with virtually no weight restrictions. Additionally trains generate significant
economies of scale, that is it cost very little to add an additional car to a train.

In general trains are very effective at carrying large volumes of low value commodities (such as coal)
over long distances. The various types of cars available give rail companies flexible solution for
carrying various types of cargo. The rail companies assume liability for loss of damage.

The rail companies are improving equipment and technology with better yard management and routing
software. The companies are also making improvements in the intermodal area, such as trailer on
flatcar, and container on flatcar, to include double stacks.

PTS: 1 DIF: Medium REF: Pages 210-211

13. Describe the various types of rail company rolling stock.

ANS:
The rail companies have a number of solutions available to meet the demand of customers to move
various types of products. The rail companies have developed specialized rolling stock to support the
various commodities being shipped. This rolling stock includes:

Boxcar (plain): Standardized roofed freight car with sliding doors on the side used for general
commodities.
Boxcar (equipped): Specially modified boxcar used for specialized merchandise, such as automobile
parts.
Hopper car: A freight car with the floor sloping to one or more hinged doors used for discharging bulk
materials.
Covered hopper: A hopper car with a roof designed to transport bulk commodities that need protection
from the elements.
Flatcar: A freight car with no top or sides used primarily for TOFC service machinery and building
materials.
Refrigerator car: A freight car to which refrigeration equipment has been added for controlled
temperature.
Gondola: A freight car with no top, a flat bottom, and fixed sides used primarily for hauling bulk
commodities.
Tank car: Specialized car used for the transport of liquids and gases.

With these various types of rolling stock the companies can transport virtually any type of cargo.

PTS: 1 DIF: Easy REF: Pages 211-212

14. Discuss some of the elements of rail road industry’s cost structure

ANS:
The rail industry cost structure is based upon fixed costs (such as right of way) and variable cost (such
as labor).
The fixed costs: The right of way is the track and land that the track is on. The purchasing of land,
and then the construction of track is a significant capital expense for the rail company. Once that right
of way is established it must be maintained. This too is of significant costs. The rail company also has
significant investments in the various types of rolling stock and in the locomotives. The terminal
facilities (train stations) and the associated freight yards represent significant investment and
maintenance costs.

The variable costs: The two main variable costs for the rail industry are the labor and fuel. Much of
the rail road labor force is highly skilled and expensive. While rail is more fuel efficient than trucks,
fuel still accounts for a significant portion of the variable cost.

PTS: 1 DIF: Medium REF: Pages 216-218