Freight Rails Digitize Supply Chain to Compete Amid Pandemic and Climate Change

As all rail operators seek new ways to navigate industry disruptions, leading organizations are using location intelligence—especially geographic information system technology—as a tool to gain a competitive advantage.

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Freight railroad companies are navigating an environment that is shifting on many fronts—evolving customer supply chain strategies, efforts to expand markets with shorter lengths of haul, and a global move away from fossil fuels. Now, the Coronavirus disease (COVID-19) pandemic is accelerating several of these pressures and rippling through supply chains. As one indication, total U.S. freight rail carloads were down 17.6% in July 2020 vs. July 2019, according to the Association of American Railroads (AAR).

Railroads must keep pace with the modern, consumer-driven economy that expects shipments to be delivered in a trackable number of days, not weeks. As a signal of industry changes, precision-scheduled railroading (PSR) focuses on moving freight cars faster and more reliably, freeing up capacity to enable business growth. Many digital innovations are also catalyzing change in the freight rail industry to meet customers' modern supply chain needs with more precise visibility and predictability.

Underpinning it all is geospatial technology, which allows organizations to understand their operations through location data, map-based visualization, analysis, and digital twin creation. Precise location data digitally mimics the railroad's geography—customer locations, territory boundaries, track lines, wayside instrument positions, and weather events. These layers of information can highlight locations where systemic operational problems will occur, show where freight is in real time and predict arrival times, and target sales resources in areas where supply chains need rail service the most.

As all rail operators seek new ways to navigate industry disruptions, leading organizations are using location intelligence—especially geographic information system (GIS) technology—as a tool to gain a competitive advantage.

Fuel efficiency

Advancing value and market share of rail transportation in the supply chain is always top of mind for railroad executives. In recent years, trucking has been challenged by driver shortages, reduced capacity, and inferior fuel economy; and railroads have made efforts to capture market share. Railroads use one gallon of diesel fuel to move a ton of freight 473 miles, a figure that's four times more efficient than trucking. This is due in part to trains having a significant friction advantage over trucks and to the adoption of optimized fuel routing systems that prescribe optimal throttle levels through the train's route based on detailed topographic data, such as hills, slopes and curves.

Locomotive manufacturers are also aiming to nearly double locomotive fuel efficiency—a timely goal, as climate change affects not just the physical landscape but also fuel prices. In addition to fuel economy, railroads can leverage PSR efficiencies, intermodal services, and technology advancements to offer greater visibility; flexibility; and consistent, high-quality service to customers.

Growth and the digital twin

Strategies focused on efficiency and growth are also driving railroad companies to create a complete digital twin of their operations. A digital twin, a clone of real-world infrastructure and conditions, can be created using internal and external data analyzed and displayed in 2D and 3D maps using GIS. The digital twin provides a real-time understanding of train locations, operational constraints, suppliers, capacity, and proximity to customers, in addition to tracking capacity and health. This gives operators and executives a holistic view for running efficiently and utilizing capacity to spur business growth. This sort of location-based digital twin also aggregates historic data such that any information can be recalled to spatially visualize and analyze trends, find causality, and gain insights on how to avoid slowdowns and address reliability issues or allocate resources optimally for maximum returns.

Intermodal transportation

Railroads are also improving intermodal solutions to reach more customers. Intermodal, the important interface between two transportation modes, requires strong collaboration and information sharing enabled by real-time geospatial visibility into inbound and outbound container locations and predicted arrival times. Detailed mapping of intermodal yards and real-time container locations are the brains behind automation and robotics, similar to the detailed foundational topographic maps behind the fuel-optimized routing systems. Armed with powerful geospatial technology, freight rail companies are gaining unparalleled insights into their entire supply chains and, as a result, are able to better serve customers with efficiency, consistency and visibility.

Market insight

Location intelligence (the output of GIS) is achieved via visualization and analysis of geospatial data to empower understanding, insight, decision-making and prediction. By adding layers of data—such as customer demographics, track infrastructure, supply chain information, and weather—to smart maps, railroad companies can provide location intelligence across their business units. This location intelligence helps make connections between otherwise disjointed business functions (e.g., the connection between track health, operating efficiency and capacity for business growth). For instance, by seeing locations marked as high growth potential by the sales team, the capital planning department can allocate budget, resources and personnel to those areas well in advance.

Redesigning the railroad for digital operations

Digital operating systems have been helping manage transportation for years. As these systems become integral to operations, transportation companies are mining their location data to re-create operations and look for insights to redesign or optimize. A railroad's geospatial digital twin combines information about the physical infrastructure (e.g., curve, slope) with operating data such as GPS, idling, speed and tonnage. By combining and analyzing this information geographically, transportation companies can see where they have systemic issues, where they may want to change methods of operation, or where a track redesign may better suit the new digital operations strategies.

Though railroads have been using technologies like GIS for decades, they have been primarily focused on infrastructure asset management. The value of GIS is well understood as a tool for capital planning and managing maintenance programs, but these advanced technologies now support optimized operations and business development as well.

Some experts believe that the current COVID-19 crisis will precipitate further digital and technological advancements related to data analysis, artificial intelligence software and overall end-to-end supply chain management. GIS is being widely adopted in railroad customer industries (e.g., retail, manufacturing) to enable risk mitigation for events such as the COVID-19 pandemic by providing a real-time view of suppliers and materials. Likewise, railroads are also in need of visibility and predictability around their commodity markets, origins, destinations, routes and alternative options when a supplier, route or workforce pool becomes unavailable.

Improving visibility into customers and supply chain

It's estimated that 80% of freight in the United States is transported less than 250 miles. That number is sure to increase as e-commerce, now being accelerated by the COVID-19 pandemic, allows customers to order a wider variety of goods, promises ever faster delivery times, and allows end-to-end tracking. Consumer expectations for fast delivery and shipment visibility ripple through the supply chain as retailers demand visibility from distributors, distributors from manufacturers and manufacturers from suppliers. Railroads and other transportation providers can no longer operate without transparency, reliability and velocity.

Location intelligence through GIS enables railroad companies to meet those demands, thanks to smart maps and dashboards that can track goods from supplier to destination. Those same tools are also allowing executives and salespeople to easily identify their total addressable market based on proximity to rail infrastructure, commodity-specific market needs, and operating ratios.

In a period of extreme uncertainty and upheaval in the industry, the same kinds of smart maps that rail engineers and capital planners have been relying on for years are no longer the niche tools of specialists. This type of location intelligence is now illuminating the industry's path forward. The future of the freight rail industry will belong to companies that master this digital transformation to optimize operations, deliver market intelligence and shape the design of the digital railroad.