I had the opportunity to participate in a conference call on August 26^th  regarding Norfolk Southern’s  inauguration of its Heartland Corridor service in September.  The discussion was hosted by Jeff Heller, Vice President of International Intermodal at Norfolk Southern.  While many of us are familiar with this project, Mr. Heller gave the attendees a good overview of the project and answered questions from the audience. 

In summary, the Heartland Corridor project has raised clearances over a route between the Port of Norfolk, Virginia and the Midwest (Ohio, Michigan, and Chicago) to facilitate double stack container trains on the most direct route west from Norfolk.  The following benefits come from this project:

• The new 200 mile shorter, more direct, route saves time and fuel versus the current routing via Harrisburg and Pittsburgh Pennsylvania to enable trains to better compete with trucks
• ­Double stacked container wagons have a net/tare ratio greater than 1.0, unlike trailers on flatcars or single stacked containers which have a net/tare ratio less than 1.0.  The net/tare ratio compares how much revenue weight is carried per ton of dead weight railcar.  This saves fuel and allows more containers to be carried for a given train length, which allows railroads to be more competitive with trucks.
• ­Terminal costs and size are highly dependent on track length.  A terminal generally must be able to hold an entire train at a time.  So stacking the containers two high on the rail cars allows the handling of more containers per foot of track in a terminal thus allowing terminals to handle greater volumes of container traffic in a given footprint.  Handling containers vs. trailers is also somewhat more efficient, as containers can be stacked in the holding areas and trailers cannot.

Read The Full Posting…

We now have a link available for on-line registration for the Rail Planning Workshop and Conference on October 5-7 2010.  We have already had excellent feedback from the industry and the detailed agenda is quickly coming together.  I am very pleased to announce an addition to our program of Dr. Christian Kuhn, Member of the Management Board for Production of DB Schenker Rail.  Dr. Kuhn will be our guest speaker for the opening night conference dinner on October 5th. 

We have also been able to confirm the particpation of some of the US Class I Railroads in our “Management by Design” sessions.  If you have not been contacted about presenting in one of our sessions, and you wish to do so, please contact me or Bonnie Painter.  Additionally, e-mail or call Bonnie if you have any questions or problems with the registration form.

We are looking forward to seeing you in Princeton in October.

Halfway around the world – twelve time zones from the US Midwest – lies Kazakhstan, the world’s ninth largest country and the world’s largest landlocked country.  Kazakhstan is an emerging world player for at least two reasons.  First, Kazakhstan is located in Central Asia, situated among multiple high growth economies: most importantly, China to the East, Russia to the North, and India to the south, and it is a critical transit location between these countries. Second, Kazakhstan is blessed with a significant supply of raw materials valued by the world economy, including oil, grain, coal, iron ore, and titanium.  Kazakhstan is the world’s seventh-largest producer of grain and tenth largest producer of crude oil.

Temir Zholy, or “KTZ,” is investing in its infrastructure to support its robust export sector.  The large railway is close in size to Canadian Pacific Railway as measured by network size, tonne-kilometers, and active rolling stock fleets.  The KTZ network of 14,000 kilometers serves all of the country’s population centers and directly connects to five countries.  KTZ also serves the country’s coal, iron ore, and oil production areas.   Read the full post…

High-speed rail hurtles toward globalization

The new set of environmental regulations established in several European countries and recent efforts to jump-start the crisis-ridden economy have breathed new life into Europe’s domestic high-speed rail industry.  In France alone, with over two thousand kilometers of dedicated railways today, the HSR network will more than double by 2020.  In Western and continental Europe, high-speed solutions have been immensely successful, as proven by the popularity of the Eurostar, the Thalys and more recently the TGV Est jointly operated by SNCF and Deutsche Bahn.  On a planetary scale now, many major projects are in the works, creating unprecedented opportunities in an industry long confined to continental borders. 

ICE Train at Cologne Station

New opportunities

Barack Obama’s stimulus package is expected to give a major boost to passenger rail.  An initial $8 billion is being invested specifically in high-speed transportation, representing the most notable change in U.S. public transportation since Eisenhower decided to build the country’s interstate highways in the fifties, as a secular response to, at that time, the nation’s old congested railway network.  This initiative will also do a great deal to improve the profitability of America’s 240,000 miles of rail tracks, now used principally for freight, but at only 25 percent of its potential capacity.

But the most ambitious rail project in the world is on the drawing board in China, likely to drive the highest potential growth.  Providing 1.3 billion Chinese with high-quality transportation will take extraordinary measures.  Indeed, the country wants to lay 24,000 km of track by 2020 and invest over $300 billion in various types of rail infrastructure and equipment. In just a decade, China will produce over three billion trips a year, more than double the current traffic, with major links (Peking-Shanghai) served at over 300 km/hour.  This historic decision will help modernize the Chinese nation and smooth over the impact of the recent economic recession.  Read the full posting…

I am currently attending the RailwayAge & Systra conference on Operations Analysis & Modeling, being held at the Marriott Courtyard in Center City Philadelphia.  Yesterday (July 20th), I had an opportunity to make a presentation on ”Equipment Deployment Optimization for Passenger Railways.”

Creating software for assigning the right type of equipment to each passenger train can help in improving overall passenger comfort, reducing operational cost, and in creating a tool to help service planners develop better schedules.  The keys to making an equipment assignment optimizer is to recognize the variety of costs and constraints, and to effectively map passenger demand to new timetables.  This presentation highlights these key concepts and explains the important items needed for effective optimization and the supporting passenger demand model.

If you have any questions on passenger demand modeling or on rail equipment cycling optimization, please feel free to post a comment here or contact me at: marc.meketon@oliverwyman.com.

Management by design in a rapidly changing environment

Oliver Wyman’s Surface Transportation Practice is pleased to confirm that we will be hosting our 2010 rail planning workshop and conference on October 6th and 7th at the historic Nassau Inn, situated in the heart of Princeton, New Jersey.  The theme for this year’s conference will be “Management by Design in a Rapidly Changing Environment.” 

As the global rail freight industry is working its way out of the Great Recession, the results suggested something fundamental had changed in railway management. For the first time in modern times, many of the major freight railways of the world appear to have masterfully controlled their operating costs during the 2008/2009 downturn.  It would appear that advanced service design practices, and the rapid implementation of these new designs, navigated the railways through an unprecedented drop in traffic.  Further, early 2010 results suggest that the railroads have been well positioned to enjoy a profitable recovery. 

But the railroads and their Planners will not be able to rest on their laurels.  We are entering an era of unprecedented structural change in the freight rail industry.  The new environment is not only being impacted by issues such as positive train control (PTC), emission standards, passenger train access, regulation, access to capital and enhanced competition. Railroads also have to plan for, and manage, business conditions that are directly affected by far-reaching changes in the auto, steel, international container, coal and agricultural markets.    

Our conference agenda will focus on best planning practices that served the world’s freight railroads so well during the recent recession.  We will investigate and debate, among the global experts, what was different this time.  Additionally, we will be discussing the upcoming fundamental changes to the industry and how freight-rail Service Designers will be rising to this challenge.  How will the industry plan to operate at optimal efficiency, so as to have sufficient resources to adapt to the changes?

As is our normal practice, we will be inviting the industry’s leading service-design experts to come to Princeton in October.  Through presentations, panels and meals, we will jointly examine and explain the methods and philosophies used to pull the freight railroads through the recent recession and also look at the challenges of developing your next operating plan. 

We hope that you and your team will be able to continue the success of these conferences and plan to attend and participate in this important discussion. As in the past, we will be inviting railways from every continent and we will share and learn the latest techniques along with your industry colleagues. 

Preliminary agenda and registration information is available now, and we would like your feedback now as to what you would like to see in the program. 

If you have any suggestions/questions, please contact me at Kevin.foy@oliverwyman.com.  We look forward to seeing you in October.

In David Lehlbach’s posting of April 28th, Oliver Wyman Assessment of PTC Commercial Benefits, he reviewed the results of a Positive Train Control (PTC) study that Oliver Wyman had prepared for the Association of American Railroads (AAR).  That posting is still available below and it contains a link to the full report.

Subsequent to the release of the AAR study, two of Oliver Wyman’s Partners, Bill Rennicke and Carl Van Dyke, had an opportunity to make a presentation entitled “Economic Consequences of Positive Train Control” during the Stifel Nicolaus freight transportation/logistics conference call of May 28, 2010.  Both Bill and Carl are well-known experts in the field of freight railroading and were members of the team that developed the PTC study for the AAR.   

Thanks to Stifel Nicolaus, we are pleased to be able to post the complete transcript  of the May 28th conference call, which captures the full verbal presentation as well as many of the Power Point slides that were referenced by Bill and Carl.

If you have any questions about the transcript, or general questions about the PTC study, please contact me at kevin.foy@oliverwyman.com.

In January 2010, the Federal Railroad Administration (FRA) issued a ruling on the implementation of Positive Train Control (PTC), with a timeline for adoption of the technology by the US rail industry.  Following this ruling, several cost-benefit analyses were conducted, including one by L.E. Peabody & Associates, on behalf of the Chlorine Institute.  These analyses ascribed large-scale commercial benefits to PTC implementation, including improved car velocity for shippers. 

The Association of American Railroads (AAR) President and CEO Edward R. Hamberger has stated “This is the single largest regulatory cost ever imposed on our industry by the FRA, and as such, we take the mandate very seriously.”  Due to the critical nature of this technology adoption, the AAR asked Oliver Wyman to respond to these analyses, and deliver an independent evaluation of potential commercial benefits to be derived from PTC.  Mr. Hamberger has cited “There are many broad and general assertions out there on business benefits from PTC, so it was important to get an independent analysis and clear up any misconceptions that might exist. Oliver Wyman brings considerable expertise on these issues, both in the U.S. and Europe.”

After analyzing currently available information on PTC and current advancements in the use of technology by the rail industry, including public and private research and data, interviews with industry experts and railroad representatives, and case study information from railroads in North America and Europe, Oliver Wyman has outlined results in 4 categories, with the following conclusions:

1.  Core Assumptions:  Oliver Wyman has found no direct relationship between the use of precision dispatching and the implementation of PTC (precision rail dispatching is computer aided and uses a range of sophisticated techniques to ensure optimum train performance, in terms of network velocity and capacity usage).  At the same time, Oliver Wyman has concluded that the adoption of PTC as currently planned by the Class I railroads (independent of precision dispatching) will not materially increase effective line capacity or train speeds, whether on single or multi-track mainlines.

2.  Incremental Benefits Analysis:  Many of the incremental benefits being claimed for PTC are based on the adoption of technologies that are not tied to PTC (such a precision dispatching) and as such should not be ascribed to PTC.  Other benefits from PTC would only be realized from the adoption of an “advanced” PTC system, whereas the Class I railroads only plan to implement an “overlay” PTC system to meet FRA mandates.  Additionally, Oliver Wyman has outlined the business risks from PTC implementation.

3.  Shipper Benefits Analysis: Oliver Wyman has concluded that the net benefit to shippers from the planned implementation of PTC will be zero.  Improvements in railroad on-time performance, and subsequent shipper benefits, would be attributable to precision dispatching, which is currently not in production use, is being developed independently from the PTC initiative, is not part of the FRA mandated PTC implementation, and is likely to be only marginally influenced by the roll-out of PTC.

4.  European Experience with ERTMS:  ERTMS is designed to overcome interoperability problems between the countries in the EU, due to different control and signaling systems in each country. While the ERTMS system includes safety components similar to those required by US PTC regulations, the primary goal of ERTMS is to make cross-border travel and trade more seamless, rather than to enhance safety or capacity.  The key lesson to be learned from the ERTMS experience is that the versions of ERTMS that are most similar to PTC systems being implemented by the US Class I railroads are at best neutral with respect to capacity, and in many cases are showing an adverse impact on capacity. Additionally, the amount of European trackage covered by ERTMS is modest and the system will be implemented much more slowly than in the US, while the costs for implementing ERTMS have been much higher than the costs projected for US PTC system implementation.

The above takeaways are carefully substantiated in our report.  Please feel free to read the full report and note that this link redirects you to the website of www.aar.org.

In our world of transportation consulting, performance benchmarking is a staple part of our service to clients.  We are frequently engaged in cases where we compare one client’s business to a series of industry peers.  From these comparisons, we can help define where industry trends lie, where companies have divergent approaches to handling the same business problems, etc.  From there, we assist our client in recognizing a progression of action steps to make change for the better.  Sometimes this is in a different direction from the trends of industry peers.

As part of our work for the Kazakh National Railways, better known as KTZ, we are busy with the implementation of our MultiRail software for rail freight planning.  We started this process in early 2009 and we are well into the customization, training and deployment throughout the KTZ organization.  I have personally spent about 15 weeks in Kazakhstan over the past 13 months and the experience of working in Central Asia has been extremely educational for me and for our team. This project has also helped to solidify Oliver Wyman’s reputation as an international leader in rail consultancy with active and recent projects on 6 continents.

In an effort to promote more structured planning and execution, in February we coordinated a visit of the KTZ senior management team to Calgary for a series of meetings with Canadian Pacific’s leadership, including a finale meeting with Brock Winter, Chief Operating Officer of CPR.  This visit provided our client with an opportunity to see how an industry-leading planning organization plans trains, assets, and infrastructure.  The KTZ delegation was also able to see some core business process issues in action, with visits to the local intermodal facility, signal development shop, and maintenance of way (MOW) equipment shop.  I have attached a couple of photos taken during the CPR visit.  A big thanks to Canadian Pacific for being such gracious hosts, as well as allowing us to understand more about their business.
 

KTZ Senior Management Delegation at Canadian Pacific Headquarters in Calgary

KTZ Delegation Touring CPR's MOW Equipment Shop in Calgary - One of Five in the System

Oliver Wyman has been working with Kazakh Railways (KTZ) over the past year, helping them identify ways to improve the efficiency of their operating plan and deploying MultiRail. The railway is based in Astana, in the northeastern part of the country. In winter, Astana is a land of snow and ice, with the same latitude as Calgary, Alberta. For that reason it only seems fitting that there would be a mutual interest in railways and hockey between the two countries. For example, we recently worked with Canadian Pacific to host a very successful visit by the Kazakhs to learn about how CPR manages its railways. On our most recent trip to Astana, this connection was further reinforced when we attended a professional Continental Hockey League game between Astana and Minsk (Astana won!). The railway is a major sponsor of the Astana team, which includes four Canadian players. Our project manager, Toronto-based Associate Partner Rod Case was even given the opportunity of meeting several of the Canadian players after the game!

Rod Case with the Barys Astana Hockey Team