Freight Rail Needs Technology to Better Compete Against The Trucking Industry

I was at WABTEC Corporation’s 2019 Digital Solutions Summit this week (June 4^th and 5^th). Wabtec is a supplier of technology-based products and services for freight rail and other markets. In February, a merger with GE Transportation was finalized, and this show marked the coming out party for the combined solutions for the freight rail segment. WABTEC offers solutions for both shippers and rail companies, but I was there on behalf of the group in WABTEC providing shipper software solutions.

Rod Case, a partner at Oliver Wyman, gave the keynote address. Mr. Case leads the Rail practice at Oliver Wyman. Mr. Case strongly urged railroads to get their act together. He pointed out that Rail modal market share had been steadily eroding. Truckload has benefited from this. The service levels are so bad, that the increased costs of inventory shippers are forced to carry to mitigate poor service, can make rail uncompetitive.

Further, technological changes on the horizon are apt to be more advantageous to truckers than to railroads. Being able to run trains with fewer or even no people will not lead to the same degree of cost savings that truckload carriers will get from platooning trucks. Further, the platooning of trucks could be just around the corner. This could really eat into rail’s intermodal business.

There are currently 1.6 million rail cars. 950,000 do not move on any given day. Over the course of two days, two thirds of cars sit idle. The delivery to pick up cycle is nearly five days. The largest dwell times are at customer facilities. “We can’t seem to get cars into customer facilities. We must work on tighter integration between railroads and their customers. We must kill dwell. Precision scheduled railroading targets this.”

But others, on a panel and in the audience, pointed to the atrociously bad visibility to car locations and unreliable ETA information as being at the heart of better carrier-shipper integration. Using EDI rather than GPS as the main visibility tool is part of the problem.

There was an interesting article last month on the different perspectives to precision railroading offered by shippers and carriers. Shippers complain about the increased use of demurrage and accessorial charges used as an incentive to get shippers to turn freight cars more rapidly. Shippers wrote that it is impossible to avoid demurrage charges when railroads deliver cars in bunches on the same day. Shippers attempt to ship empty cars to their sites at a pace of deliveries that matches a facility’s capacity. But despite the goal of having one or two cars arrive per day over several days, the cars arrive late in large bunches. Consequently, the cars cannot be filled in a timely manner. Fines are the inevitable result.

The WABTEC conference is designed to highlight how technology solutions can improve life for both railroads and their customers. For the railroads, Positive Train Control (PTC) was cited as a solution that can improve safety, but can also begin to serve as a railroad’s digital infrastructure. On the shipper side, WABTEC is bringing together software solutions from GE Transportation and WABTEC. A new platform is being built using microservices. The vision for the new platform is to use technology to greatly improve visibility and predictive analytics (better ETAs).