Opinion: It's Time to Bring the Railroad up to Supply Chain Speed

Automating the exchange of rail supply chain data involves more than just digitizing old processes


Automating the exchange of rail supply chain data involves more than just digitizing old processes

Cary, NC — March 18, 2005 — U.S. railroads haul more than 40 percent of U.S. freight tons every year, and in 2004 they handled over 10 million intermodal container and trailer shipments. Whether you realize it or not, your supply chain touches the rail system and depends on rail data.

But you may be surprised to learn that — like the rest of the supply chain at large — some inventory and supply chain data generated by customers to rail carriers is still handled by phone, fax and paper.

Until recently, the flow of this data to rail carriers suffered from the same "last mile" problems that affected telephone service long ago and more recently plagued broadband Internet: The data infrastructure backbone was in place, but it could not be easily accessed.

Short-line railroads, through their operation of terminals and feeder lines often represent "the last mile," struggled to get their data into universal, digital form where it could be shared up and down the supply chain. Lacking budgets for investment in automation, shippers continued to push paper into fax machines.

In the rail industry, that's changing ... and fast. Today, some of the rail industry's data and information service providers are taking dramatic steps to move rail data — bi-directionally — fully into the digital age, where the railroads' allied trading partners (third-party logistics (3PLs), shippers and truckers) can exchange supply chain information in a highly portable, digital format.

Indeed, in a world that is seeing the increasingly forward deployment of inventory, vendor-owned inventory and demands for real-time visibility to shipment dispositions, the rail industry can deliver nothing less. So, the rail industry is responding with broad efforts to digitize its customer's data and take paper out of its supply chain processes, while adding sophisticated "trace, track and control" features, especially in intermodal applications (when rail cargo switches to a truck or a shipping container switches to rail) or interline shipments (where one or more railroads are involved in transport and delivery).

However, the movement to bring rail transactions fully into the digital age has recently taken two paths, one of which has substantial drawbacks that retard digital progress for the rail industry. One path some rail data service providers have chosen is to map out the information paths that are currently processed with paper forms, and cut out the paper by moving to electronic forms on desktop computers, laptops, wireless devices and handhelds.

Sounds efficient, doesn't it? Sounds as though you'd save bundles of cash, wiping out all that paperwork, right? Unfortunately, simply going "paperless" misses the real opportunity presented by enabling automated digital data exchanges.

By taking existing processes and digitizing them, you are very likely digitizing many old, inefficient processes you wanted to eliminate. The true savings are to be found — and passed along to the 3PLs, shippers and truckers who depend on rails — not in just digitizing rail processes but in automating the exchange of data and adding value through intermediate "on the fly" processing. The need to automate the exchange of data certainly does not come as breaking news to those who have watched automated supply chains flourish in other industries but, for the rail industry, simply making inefficient paper processes into inefficient digital processes is the wrong way to go. Let's look at an example.

The rail industry is no different from any other logistics services provider. Rail shippers seek to drive down costs through consistent delivery of freight, more accurate estimated times of arrival (ETAs) and reducing the need for just-in-case inventory. But rail freight isn't a static station-to-station shipment; it often involves multiple modes, such as ships and trucks.

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