2019 will be remembered as the year of Precision Scheduled Railroading (PSR) and for the great traffic drought in North American railroading. PSR has indeed helped deliver the eye-popping levels of operating ratios (OR) that rail executives could once only dream about, and many of the Class I’s set record ORs throughout the year.
However, along with the improvement in OR and profitability, the Class I’s continue to deal with a lengthy downturn in carloads and intermodal traffic. For 2019, the AAR reported a 4.9% decline in carloads and an intermodal drop of 5.1%, compared with 2018. And the trend has continued into 2020. The AAR attributes much of the decline to the long-term drop in coal demand and the uncertainly created by trade disputes. But it seems that no one is willing to predict that there will be a continued secular deterioration in rail volume.
With PSR, many asset management and cost cutting strategies have been put into motion. But, regardless of the source of the traffic recession, no amount of cost cutting and improvements in asset utilization will bring back freight rail traffic. Longer trains and uncongested yards, in themselves, will not fully reverse the volume decreases that the industry is experiencing.
So, what are the strategies to help the industry turn this traffic corner? What are the next phases in service design and operations? In this “post PSR” environment, will the railroads look to approaches such as improved trip plan compliance, reduced cars on line, supply chain integration, or intensifying planning for full automation?
At Biarri Rail, we believe that there are a few current developments and technologies that should help the industry turn the traffic corner, while retaining the fruits of the PSR revolution:
- Transparency in the Supply Chain – There has been much written recently about better integration of rail into the supply chain, with improved rail data and visibility for the customer. Shippers are expressing a desire to be able to see and track shipments from release to delivery, in the same way they can visualize their truck movements, or how consumers track Amazon shipments. We believe that new technology and alliances will make this more probable in the near future. Devices and software (from the railroads and third parties) for precisely tracking cars and individual shipments are practical, and the integration of data feeds and systems is rapidly evolving. This can only help railroads attract more service-sensitive traffic and make rail more enticing for all.
- Big Data and Analytics – The railroads are being inundated by massive amounts of data being produced and captured in all parts of the rail operation. Information is flowing into railroads from GPS systems, signaling, Positive Train Control (PTC), Internet of things (IoT) sources and locomotive on-board event recorders. However, if the info is collected and stored without governance, it only adds costs and confusion to the railroad. But when used to manage assets, operating and capital costs can be reduced, and powerful levers are made available for management to make a difference in real time. Cloud-based tools, such as Biarri Rail’s Boss platform, are now available for railroads to do the analytics, and produce plans that are quantitively ranked to produce optimized results.
- New Service Models – Railroads have offered many different service types over the years, but most traffic currently moves in basic manifest, intermodal (long haul) or unit trains. One of the more interesting new services discussed in the past couple of years is short-haul intermodal (frequently defined as under 500 miles). Jim Blaze’s article on short-haul IM (Railway Age, January 2, 2020) offers a strong analysis of the pros and cons, and concludes that short-haul intermodal is mostly still a working theory (mostly due to drayage costs). However, analysis of this, and other service offerings, should continue throughout the industry.
- Optimized Planning for Better Service – All of the Class I’s have the data and tools to prepare train schedules, blocking and trip plans for the carload traffic they are carrying. Done accurately, the plan will show a fairly accurate arrival date and time for a shipment. However, aside from the operational issues that can delay a car, a non-optimized plan could doom the trip compliance of the traffic before it is tendered. At Biarri Rail, we believe that all railroads should be using algorithmic tools for defining the blocks, optimizing the assignment of traffic to the blocks and creating efficient block swaps to increase car velocity, while reducing train and crew starts. This approach takes the carrier beyond the basics of PSR with the development of operating plans that optimize assets while ensuring very reliable customer service.
- Tools to Empower Rail Planners – Regardless of the planning paradigm (PSR or more traditional planning) a railroad needs flexible quantitative analysis tools to: 1) Allow rail planners to develop and test multiple options in a reasonable amount of time; 2) Quantitatively measure the outcomes by costing various scenarios to understand trade-offs; 3) Have the flexibility to quickly test the plan when an input is changed, such as traffic volume or asset availability. Rail operating plans are difficult to develop and require specialized tools. Excel spreadsheets will not work for this sort of analysis, and railroads need to develop and maintain plans with an integrated set of automated planning and optimization tools, such as the Biarri Rail’s Boss platform
While none of these trends can slow or stop the macroeconomic factors impacting traffic volume, railroads can certainly take some control by deploying new strategies for better service outcomes and to possibly open new markets. Additionally, the ability to produce better and more flexible plans, in a rapid response to changing conditions, will continue to improve their ORs while gaining market share that has been lost to the motor carriers.
If you have questions about post PSR planning or Biarri Rail, contact Tom Forbes at [email protected]