The executive vice president and chief operating officer of Canadian National Railway Co. is shaking up old, unreliable railroads by making freight deliveries to a precise schedule. Adherence to the schedule, he says, is monitored every step along the way. "This isn't a quality program or e-commerce but a basic change in how to run a railroad," said Mr. Harrison during a recent visit to Canadian National's sprawling MacMillan freight yard here. "We follow it religiously," he added.

A successful effort, economists believe, could make North American railroads a more potent force in the economy. Railroads are the naturally low-cost method of transportation for many goods, but customers have turned increasingly to trucks for reliable service.

"If customers were more comfortable with railroad service, they would tend to choose rail over truck," said Harvey Levine, a transportation economist in Rockville, Md. "That would benefit the economy in the form of lower prices for consumer goods, less congestion on our nation's highways and greater fuel efficiency."

Customers say Mr. Harrison's efforts are beginning to pay off for the company's shipments of chemicals, lumber, paper, food products and other merchandise freight that account for more than half of its traffic. Canadian National now delivers chemicals shipments 90% on time, compared with 67% for the rest of the railroad industry, said Larry Landuyt, rail team leader of DuPont Co., Wilmington, Del.

"Canadian National runs its freight trains much more like passenger trains," he said. "If all the other railroads ran that way, we could remove inventory and rail cars from the supply chain."

A few railroads are taking steps in this direction. Union Pacific Corp. has started to provide money-back guarantees that perishable shipments from California will reach New York City in eight days. Norfolk Southern Corp. is programming its computers to track on-time performance of each freight car by early next year.

Still, railroads are afraid that operating to a schedule will drive up costs or be undermined by random events, such as storms or mechanical breakdowns. "You don't run a precision operation; you run a realistic operation," said John Bromley, a spokesman for Union Pacific's rail unit.

Other railroads are still busy recovering from post-merger service breakdowns. "We're more now into railroading 101," says Michael Ward, executive vice president-operations of CSX Corp.

Canadian National's Mr. Harrison is a U.S.-bred railroader who started to experiment with scheduled operations at the former Burlington Northern in the 1980s and then fully implemented them at the Illinois Central. Now, Mr. Harrison, 55 years old, is operating on a bigger stage at Canadian National, which acquired Illinois Central in 1998. He will move to a larger stage yet if Canadian National and Burlington Northern Santa Fe Corp. are allowed to combine.

That proposed combination has been stopped temporarily by a 15-month moratorium on rail mergers imposed by the U.S. Surface Transportation Board in March. Canadian National, Burlington Northern Santa Fe and some of their supporters are appealing the moratorium's legality.

Under Mr. Harrison's plan, each freight car is assigned an individual trip plan, measured in hours rather than days. Managers are held accountable for moving cars hour by hour according to the plan and have to explain when they fail to do so. A guiding principle: Stick to the plan. Typically, other railroads annul trains when they don't have sufficient tonnage to meet production targets. But Canadian National runs the trains anyway even when they're too small to be economical.

Mr. Harrison says that by operating this way, Canadian National is moving more freight with fewer locomotives and freight cars. It also has been able to close some terminals and smooth out operations at others. Stuart James, a switch tender at the MacMillan yard, says that before the plan was implemented often five or six trains would arrive at one time and "swamp the place." Now train arrivals are spaced more evenly so freight jams are less frequent.

Not every one is impressed. Canadian National's on-time performance falls short of what the railroads' chief rivals, the truckers, achieve - delivering goods at customer plant sites or distribution centers 98% on time. "In our industry, providing a 90% on-time level of service would get us a one-way ticket out the door," said David Gibbs, an executive vice president of Celadon Group Inc., a trucking company in Indianapolis. Even Mr. Harrison concedes there's much work to do. During his MacMillan yard visit, he notices that one train is ready to depart the yard but is blocked by another train.

-- (The Wall Street Journal)