In a January 21st article in Railway Age (“A New Decade of Post-PSR Service Planning Starts Now“), Tom Forbes stated that “2019 will be remembered as the year of Precision Scheduled Railroading (PSR) and for the great traffic drought in North American railroading.”
Even with the PSR-influenced improvements seen in operating ratios (OR), the downturn in traffic levels impacted earnings for most of the Class I railroads. The Association of American Railroads (AAR) reported a 4.9% decline in carloads and an intermodal drop of 5.1%, as compared with 2018. Recent reporting also shows this trend continuing in 2020. While it appears that lower coal shipments and trade uncertainty created much of the drag, there also could be a long-term deterioration in rail volume that defies an easy explanation.
With PSR, many asset management and cost cutting strategies have been deployed. 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. It appears that new Post-PSR strategies will be needed by the Class Is. In the Railway Age article, we laid out some current trends and technologies that should help the industry turn the traffic corner, while retaining the fruits of the PSR revolution:
Transparency in the Supply Chain – Shippers are expressing a desire to be able to see and track shipments from release to delivery. We believe that new technology and alliances will make this more probable in the near future. Devices and software for precisely tracking cars and individual shipments are now practical and this can only help railroads attract more service-sensitive traffic and make rail more enticing for all shippers.
Big Data and Analytics – The railroads are capturing massive amounts of data being produced 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. When this data is 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.
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). See Jim Blaze’s article on short-haul IM (Railway Age, January 2, 2020). This, and other service offerings, should continue to offer more interesting options for shippers throughout the industry.
Optimized Planning for Better Service – All of the Class I’s have the tools to prepare train schedules, blocking and trip plans for the carload traffic they are carrying. At Biarri Rail, we believe that all railroads should also 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 to 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.
While none of these will slow or stop the macroeconomic factors impacting traffic volume, railroads can take some control by deploying new strategies for better service outcomes and by opening new markets. 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.
For more information on these topics, please contact Kevin Foy at Kevin.Foy@Biarri.com.