Key Imperatives for Short Line Railroads: Business & Technology
Global mobility, digitalization, and industry regulations are giving rise to considerable disruption across the entire freight industry thereby compelling the railroad industry to adapt or die. These are the key imperatives for short line railroads which are further compounded owing to the small size, limited resources and inability to execute rapidly. Below, we try to list down key imperatives for short line railroads which, if addressed, can help to drive disruptive innovation and growth.
What are Short Line Railroads?
Short line is a solely owned railroad business that operates in some of the most vulnerable divisions of the railroads. Categorized as Class II or III by the Surface Transportation Board which governs the network of US rail, a Short line railroad operates in most short distance and is an independent rail network. It is the business that competes aggressively and focuses on its hallmark- “First and last mile of the shipment” by serving the customer’s unique need and providing flexibility with the service. Nowadays, these short line railroads (around the world) are owned, financed and operated by large conglomerates viz. Genesee & Wyoming, Watco Companies, etc.
Like other industries, the short line railroad industry also faces certain challenges (external and internal). Let’s discuss on, in details, what are the key imperatives of short line railroads:
- Deferred track maintenance: The customer-focused and cost-efficient short line railroad have always carried the liability of track maintenance cost. To avoid freight declines to many regions, short line railroads have to pour around millions into track upgrades from their own finances, as they are an independent business of rail network.
- Competitive disadvantage: Short line railroads face large operating expenditures. Due to operational and economical inefficiency, the short line railroad operates at a competitive disadvantage. The publicly-funded infrastructure of trucking and inland marine networks run ahead of short line railroads in this aspect.
- Ineffective supply chain: As railroad companies rely on vast supply chains, there is a high potential for environmental and social impacts. Add to that the complexities of safety regulations, hazardous materials, railway interchanges, interline settlements, car rentals, and track sharing and it becomes one hell of a supply chain problem.
- High crew operating cost: Crews are a critical aspect of running any railroad and the problems are compounded by Labor Unions, Maintenance of FRA regulations (including Drug and Alcohol testing), Maintenance of Way (MOW) employees and scheduling / dead-head policies.
- High adoption costs for PTC (Positive Train Control): Short line railroads are heavily impacted by the mandate that further stretches their shoestring budgets. It takes around $12 billion to implement PTC, unfortunately, there is no provision for government funding for the purpose of implementation of the PTC system.
The Technological Disruption
External forces are bringing technological disruption to many industries. With the advancement of trucking technology, some believe that the concept of electric vehicle technology will bring revolution to the freight industry. The “supertrucks” will grow exponentially with its quicker delivery times, door-door services and improved in-time performance. As an impact, this is going to immensely hinder and challenge the railroad freight industry, especially shortline railroads as they directly compete with these.
Class I railroads are adding technology-enabled solutions to their lines every day, and some regionals and short lines have already caught on. From remote-controlled yard locomotives to computer-controlled schedules railroads are installing technology to lower operating expenses and gain efficiency.
A quantum leap must be made by the short line railroad, both from the operations and technology end, to tackle this challenge smartly. Here are the four critical points where shortline rail railroad could technologically disrupt itself to become robust and market and future-oriented. Hence, disrupting in these areas could bring growth and innovations in shortline rail industries.
a) Faster automation: The Trucking industry is growing above par every day. Like the trucking industry, railroads should also aim towards bringing driverless trains. Thanks to systems like PTC (Positive Train Control) and Trip Optimizer, railroads also can take an attempt to automate operations to become faster and smarter. Railroads should get ready for more automation even in the absence of any regulations or contracts. Advanced analytics & machine learning can make it possible to run and monitor trains without human intervention. For instance, the locomotives must be equipped with smart track sensing technology to help bring track and rolling stock inspection on the table. The detectors on the railcars will help monitor for the problems occurring in/ about to occur in wheels, brakes, and bearings.
b) Enhancing fuel efficiency: To become fuel-efficient, the next generation of locomotives must adapt some of the fuel-efficient rail technology. Some of the feasible options could be building hybrid locomotives that can help conserve regenerative braking energy, locomotive electrifications, and hybrid fuel cells. In order to scale up the promising technologies, all new innovations can be tested and experimented in a local environment with low risks.
c) Asset maintenance: In today’s rapid pace technology cycle, railroads should replace their assets in every 10-15 years. The redesigning of the assets can increase the lifespan of the railcars. This innovation will help them improve and bring efficiency to the industry by cutting down its operational and maintenance costs. Data-enabled asset tracking & preventive maintenance can bring a much-needed improvement in short line railroads.
d) Use of assets and resources: Businesses are being compelled to rebuild their supply chains with higher reliability, smaller shipments and more frequency in the service. What this implies for the rail business is that many trains are presently too huge. They invest a considerable measure of energy sticking around to be filled, and rail resources conceivably could be utilized all the more effectively. More continuous and short line railroads would be more receptive to the present requirements of the supply chain while likewise expanding the utilization of resources and assets. In the years to come, the present research and testing say that predictive analytics and machine learning can serve yet more possibilities to enhance assets and utilization of the resources.
In order to deal with the technology disruptions, short line railroads need to come out of their operational comfort zone. They definitely have the potential to grow exponentially in freight management with capabilities to exploit new advancements and market goals. In other words, the railroad industry needs to embrace technological innovation and its risk by understanding the tremendous potentials that disruption brings to the table. Companies like CloudMoyo provide best practices of enterprise asset management & resource management for improving the productivity of all types of railroad assets such as fleets, locomotives, rail vehicles, and related linear assets. This will assist railroads to achieve regulatory requirements, extend asset life, optimize parts management, reduce rail calls and increase planned maintenance.
Since short line railroads are the first/last haul provider to shipping customers, they are expected to run with the same levels of efficiency, safety, and on-time performance as their Class 1 interchange carrier. In times of increased competition and with higher demands from customers, short line railroads must rely on technology to increase their network capacity, grow revenue, and be profitable. CloudMoyo’s data analytics and modern product engineering solutions help freight railroads increase their yard’s efficiency and capacity with technology that will eliminate bottlenecks, handle crews, reduce manual processes, minimize lost cars and reduce train delays.
Do these challenges sound familiar? Book a session with us for a deep-dive into how CloudMoyo can help short line railroads with modern technology to solve operational problems.
Opportunities for digitalization in railroad contract management
Date: 8th Dec, 20 Time: 10:00 AM PST