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The Cost/Value of Perfect Information. A Technology Case for the Rail Industry. Shipper ’ s Issues. Need more efficient use of shipper/carrier infrastructure & assets Inventory/working capital costs Incur unnecessarily high costs for use of cars (private car owners)

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the cost value of perfect information

The Cost/Value of Perfect Information

A Technology Case for the Rail Industry

shipper s issues
Shipper’s Issues
  • Need more efficient use of shipper/carrier infrastructure & assets
    • Inventory/working capital costs
    • Incur unnecessarily high costs for use of cars (private car owners)
    • Staff to make sure supply chain continues to move effectively
  • Back office inefficiencies
    • Lack of ability to resolve accounts payable transactions
    • Inability to accrue & book expenses in proper period
    • Information delivery from railroads (i.e. paper)
shipper s goals
Shipper’s Goals

Clean, easily accessible data which allows:

  • Supply chain improvements
  • Efficient electronic transactions
  • Closer management of assets
  • Quicker resolution & payment of obligations
  • Data standards

…where both parties benefit

So what’s the problem?

rail technology advantages
Rail Technology Advantages
  • E-billing
  • Electronic scheduling
  • Rail Car Tracking (CLM)
rail technology disadvantages
Rail Technology Disadvantages
  • E-billing
    • Inaccurate billings
    • Excess charges in conflict with the CLM data (below)
  • Electronic scheduling
    • Inconsistent availability
    • Inconsistent car flow (both RR-owned and shipper-owned)
  • Rail Car Tracking (CLM)
    • Inaccurate car locator messages
    • Incomplete tracking data
    • High cost/value multiple
age of information sharing
Age of Information Sharing
  • Technology has allowed the railroads to reap mostly one-sided benefits
  • While offering some tracking in the public eye (see the websites of the Big 4) the back office is inconsistent or non-existent
  • Partnership between shipper and shipping mode can work to the benefit of both—technology can make it happen
  • Shippers need a common solution across carriers that fosters true logistics visibility
car locations the info key
Car Locations—The Info Key
  • Tracking technology has improved
    • RFID
    • Advanced Bar Code
    • Satellite/GPS
  • Little of this technology is implemented outside of the railroad tracking its own assets
demand better data
Demand Better Data
  • Shippers should be able to demand better information on car location
  • If shippers don’t demand it now, the Department of Homeland Security may demand it later at a much higher price
  • Accurate tracking is the key to better billing, better asset tracking, and better scheduling
improving car location tracking
Improving Car Location Tracking
  • Satellite
    • Highest cost, most accurate, most detailed, on-demand
  • RFID
    • Middle-tier cost, very accurate, relies on infrastructure improvements and standards, fixed demand, active or passive
  • Bar Code
    • Lower-tier cost, fairly accurate, relies on infrastructure improvements and standards, fixed demand, passive
better clm data improves
Better CLM Data Improves…
  • E-Billing
    • More accurate locations and times for freight bills & location-based accessorial charges
    • More timely information for accurate accrual accounting
  • Electronic Scheduling
    • More accurate ETA information for scheduling car delivery/pickup
    • Improved track utilization through location analysis trends
rumor mill
Rumor Mill
  • Is CLM Data really that bad? If so, why?
    • Only about 30% of CLM data comes from the AEI tags—the rest comes from train constructs
    • Inconsistent location identification—abbreviations, old names, misspellings
    • Time delay—hours to days as data weaves its way to/from RAILINC
the clm technologies
The CLM Technologies
  • Satellite/GPS
    • PRO: Cost has come down in the past 5 –7 years as increased satellite sharing and utilization has become important
    • PRO: Partnerships with ground-based systems for communication (e.g. cell towers)
    • CON: Still not cost-effective for all assets—even the railroads typically use it only for high value assets
the clm technologies1
The CLM Technologies
  • RFID
    • PRO: Cost has come down drastically over the past 3 years—thanks to Wal-Mart and the DoD
    • PRO: Increased utilization on toll roads and other modes of freight transports has worked out most of the “bugs”
    • PRO/CON: Requires better standards to gain “economies of scale”
    • CON: Current value of data from AEI tags affected significantly by maintenance of readers
the clm technologies2
The CLM Technologies
  • Advanced Barcode
    • PRO: Since the last attempt (ACI in the 60’s and 70’s) technology has improved
    • PRO: Cost of implementation, repair, and redundancy has come down significantly over last 10 years
    • CON: Dirt and Frost/Ice on both readers and code plates
    • CON: Passive only system (ID only)
debunking the myths
Debunking the Myths
  • The Railroad Industry spent $250 Million in the early 90s for AEI and it hasn’t helped
    • Did they get the ROI expected? Ask BNSF, whose internal use has contributed directly to the bottom line and drives their R&D budget
  • Sharing information dilutes the competitive advantage of technology
    • By sharing the information with customers, they get better tracking
    • By sharing the information with competitors, better track utilization and more accurate cross-system billings occur
everybody wins
Everybody Wins
  • Who is everybody?
    • Railroads
      • Get their money quicker
      • Make customers (shippers) happy
    • Shippers
      • Get better data on assets
      • Get better data on liabilities
      • Get better data on product location
    • Other stakeholders (DOT, DHS, etc.)
      • Get info that has not been available previously
      • Better information for negotiations (ROW, Security, etc.)