Much of the recent discussion around technology and the railroads has focused on how positive train control (PTC), a safety technology that allows railroads to track the distances between trains, can serve as a technological precursor to more advanced applications, such as automated operations or even autonomous trains within restricted environments.
“The rail industry can automate just like any other industry,” Canadian National (NYSE: CNI) chief executive officer JJ Ruest said during his company’s second quarter earnings call on July 24.
However, the railroads also have near-term options for using technology to enable faster and more efficient responses to rail capacity needs. This ability can be particularly helpful when macroeconomic outlooks appear cloudy or certain.
Using technology to bolster rail operations gives “me the ability to ask all of these new questions that I didn’t even have time to consider because it just took me a long time to come up with any plan, let alone a very efficient plan,” said Tom Forbes, chief executive officer of Biarri Rail, a technology firm that produces software that aids rail operations. Biarri’s tools were among those that Kansas City Southern (NYSE: KSU) used to develop KSU’s precision scheduled railroading operating model.
There are two key ways in which technology can benefit rail operations, Forbes said. Technology can enable a more holistic approach to address capacity needs, by allowing a railroad to see where capacity demand rises or falls within a network so that the railroad can determine how best to deploy nearby assets – locomotives, rail yards and crews – to meet that capacity need. Technology can also help the railroads move more freight without spending huge amounts of money for new equipment or locomotives.
Forbes pointed out an instance when Biarri was working with KSU on managing the demand needs of different customers using railcars and service for the same commodity. Kansas City Southern was seeking how best to deploy its assets under different demand scenarios.
“You quickly have dozens of permutations of things that could happen, and you want to have plans to address all of those permutations,” Forbes said.
“You quickly have dozens of permutations of things that could happen, and you want to have plans to address all of those permutations,” Forbes said.
The other way in which technology can benefit rail operations is the ability to assess capacity needs quickly.
“Without sophisticated tools, railroads have been planning by all sorts of legacy capability. Sometimes they use in-house tools. There are still a lot of Excel spreadsheets that get used, and a lot of know-how and historical experience from people who have been doing this for a long time,” Forbes said.
“But what’s complex about this is that as volumes go up or down, it can be hard to know where you might have capacity on your network. If there’s a certain volume uptick in a particular part of your network at a particular time, it might have no impact at all. Or, it might require a whole new set of services and assets. And so one of the key things is to be able to quickly underpin that impact,” he said.
While technology can help railroads manage their assets more efficiently and deploy them more effectively, shippers can benefit too, especially in situations where shippers and railroads are willing to share their forecasts. For instance, a shipper can share its forecast of how many railcars it might need a week or two weeks out, which enables a railroad to meet that shipper’s needs and make more informed plans across its rail network.
“If a shipper can share some of its production forecast information to railroads, railroads can plan better to meet that capacity. Conversely, if railroads can open up and show where their empty railcars are to the shipper so that the shipper has a bit more confidence that the right number of railcars are going to show up, then the shipper can more confidently choose rail,” said Jennifer Schopfer, vice president and general manager for the transport logistics division of technology provider Wabtec.
The next phase in technology deployment?
While railroads and shippers have started to deploy more technology to make operational and production decisions, technology’s role within these industries is still evolving.
WIthin a company, individual departments might use technology to facilitate processes, but the use of technology across departments is still developing.
For instance, a sales and marketing team might use technology to develop volume forecasts, and that team will hand over those forecasts to a service design team. After the service design tinkers with the forecasts, they will hand over the forecasts to a capacity planning team that will then determine how to deploy the assets.
But there could come a time when these different departments use technology to make the overall forecasting process more interactive between the departments, Forbes said.
“Typically, the railroads will deploy new technology to enable them to do individual pieces of equations more intelligently. But what will happen is that they’ll realize that these tools let them consider more of the problems simultaneously. These tools provide a more integrated framework,” Forbes said.
“That obviously leads to more process changes. Now, we can analyze the impact of a volume forecast much more quickly so that we can start to communicate back to sales and marketing, for example, and say how that forecast has an impact on our asset costs. Can we direct our sales and marketing teams to start selling capacity because the cost to serve that new volume might be less than the cost to serve different volumes,” he said.
Forbes added, “This process becomes more interactive as you start to deploy that technology and start to consider the process changes that can come from that and make people structure processes around that as well.”
“Typically, the railroads will deploy new technology to enable them to do individual pieces of equations more intelligently. But what will happen is that they’ll realize that these tools let them consider more of the problems simultaneously. These tools provide a more integrated framework,” Forbes said.
Meanwhile, outside of the company, challenges remain in deploying technology across different industries or different members of a supply chain. Using technology to improve communications between the different actors within the supply chain can able optimal network fluidity and better asset utilization overall.
“There’s been a ton of great digitization and technology advancements but you see the adoption in silos. You can take the silo analogy across the entire supply chain. Marine terminals are extremely digitized. So are railroads. It’s where those two come together that you have a gap in that digitization,” Schopfer said.
She continued, “It’s where the two organizations meet and need to work together that it gets difficult. So, the more that you can digitize and enable collaboration across these silos of digitization, you’ll get way more bang for your buck and you’ll inherently take friction out of the system.”
While they have been integrating technology into the railroads’ processes, the railroads also have been making significant investments to deploy technology throughout their companies, whether that’s through the deployment of safety technology to monitor and manage track health or the addition of technology chiefs to their executive rosters.
“The more that you can digitize and enable collaboration across these silos of digitization, you’ll get way more bang for your buck and you’ll inherently take friction out of the system,.” Schopfer said.
The examples are plentiful. In 2019 alone, announcements about the railroads’ technology developments have included CN’s appointment of David Trent as chief digital officer to oversee CN’s efforts to modernize its operations via technology and KCS’ expanded deployment of the CloudMoyo Crew Management system. The system uses artificial intelligence and advanced analytics to optimize crew assignments and reduce dwell time, and it is being deployed to KCS’ U.S. operations after a successful launch with the company’s Mexican operations.
And just this past week, Canadian Pacific (NYSE: CP) said it has joined the Blockchain in Transport Alliance, while in May, the Association of American Railroads (AAR) hosted a technology day to showcase safety applications and describe to lawmakers how the industry can be an integral player within the supply chain through the use of technology.
“This is not your grandfather’s railroad. Big data, trackside detectors and even drones give railroads eyes and ears across a 140,000-mile network. All of this is made possible by the massive private investments that go back into our network every day, averaging almost $25 billion annually in recent years,” AAR president Ian Jefferies said at the technology day it hosted in Washington, D.C. in May. “Lawmakers [need to] understand that we need a policy framework that embraces new technologies and allows further innovation critical to help rail do into the future what it’s always done, and that is to deliver for America.”
