(Reuters circulated the following article by Nick Carey on March 26.)
OMAHA, Nebraska — The screens on the wall and the computers that back them up can locate and guide hundreds of trains anywhere on Union Pacific Corp.’s 34,000 miles of track in the United States, but to John Cazahous this complex matrix is not enough.
“We need to take what we do to a new level beyond the end of the tracks,” said Cazahous, network operations head at the Harriman Dispatching Center here in Union Pacific’s hometown.
“If a ship is loading up in China, we should know what’s being loaded, where it’s headed and when it’s going to enter our network,” Cazahous said.
Facing unprecedented demand coupled with customer complaints over delays, U.S. railroads are embracing new strategies and technologies to handle rising volumes on their networks.
The pace of U.S. imports has seen double-digit growth over the past three years as more goods originate in rapidly developing economies such as China and India.
Combined with high fuel prices and an acute shortage of drivers hurting the trucking industry, a rising tide of cargo is hitting the rails, leaving railroads scrambling to match demand.
Customer complaints about rail shipping delays have multiplied, especially after railroads raised prices by up to 15 percent in 2005, the first major increases since deregulation of the domestic railroad industry in 1980.
“We have had complaints from customers because service did not improve to a degree commensurate with the price increases,” said Jack Koraleski, Union Pacific executive vice president for marketing and sales.
So, Cazahous and others like him are trying to introduce systems that pinpoint bottlenecks, predict traffic and provide logistics planning to Union Pacific customers.
Collectively, the four top U.S. railroads — Union Pacific, Burlington Northern Santa Fe, CSX Corp., and Norfolk Southern Corp. — have said they will spend about 17 percent more this year than in 2005 upgrading and maintaining their networks.
“We can’t do business like we used to,” Union Pacific Chief Executive Jim Young said. “We have to prepare and plan to effectively manage demand.”
Like industry leader Union Pacific, No. 2 U.S. railroad Burlington Northern operates its own Network Operations Center from its headquarters in Fort Worth, Texas, which navigates trains on 32,000 miles of track.
FIGHTING THE GOOD FIGHT
Both nerve centers have a “war room” atmosphere, with the structures encased in thick concrete to withstand the powerful tornadoes that can rake the southern U.S. Plains every year.
Both are reminiscent of air traffic control centers. UP keeps sensors on its tracks at 25-mile intervals that can detect equipment problems or electronics glitches.
Derailments not only cost millions of dollars and threaten life and the environment, but also can create logistical nightmares that can take weeks to untangle.
Around 2,000 of UP’s locomotives made by General Electric Co. — GE accounts for 36 percent of the railroad’s total fleet of 8,000 — are equipped with Expert On Alert, wireless technology that tells when a locomotive needs servicing 24 hours before it nears a workshop.
“This helps us plan our repairs effectively and keep the network running smoothly,” said David McGill, GE field service manager at North Platte, Union Pacific’s busiest rail yard, handling some 40 percent of its traffic.
Union Pacific representatives said that this and other locomotive technologies have cut road failures 8 percent so far this year compared with the same period in 2005.
But current technology just tracks what is happening on the network in real time, not what will hit the rails in weeks or months to come. Laying new track costs up to $2 million a mile, so gauging future demand and routes is key.
Burlington Northern has become more active at talking to shippers as well as their customers about business plans, Chief Marketing Officer John Lanigan said.
“It takes a significant amount of time and money to put in new rails,” Lanigan said. “We can plan our investments much better if we know when a customer is planning to increase production or import more goods through one port or another.”
TICKING AWAY THE MOMENTS
Railroads are interested in extending their field of vision as far as reasonably possible.
Union Pacific’s Cazahous and his team are working on a plan to forecast system-wide traffic up to a month in advance. Burlington Northern also has a group working on a similar project.
UP now estimates traffic loads five days in advance relying on customer information, weather reports, locomotives placement, railcar turnaround times and other statistics.
“By the end of 2006, I should be able to tell you with near certainty what our traffic load will be in seven days and with a fair degree of certainty what to expect in 30 days,” Cazahous said.
UP’s CEO Young said that by talking with customers, Union Pacific is working on managing customer inventories with its own logistics, helping customers plan when and how much to deliver to avoid jamming the railroad’s network.
“Planning and looking beyond the next few days is absolutely the right thing for the railroads to do,” said Tony Hatch, an industry analyst at ABH Consulting.
“With this approach they should be able to manage their resources better, increase their revenues and increase shareholder value,” he said.