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.

An "intermodal data transfer" often means that a worker handles a printout of a bill-of-lading, in the hopes that a loading dock worker can read the data and will enter it manually into his own system. Clearly, those days are numbered, but the rail industry has to learn from the successes of other automated supply chains and make strides to automate its own data exchange processes while enabling seamless, event-triggered, cross-platform, cross-modal exchanges of inventory data.

Here's where the "last mile" example comes into play again, because supply chain management applications for rail are now hosted on the Web. Users don't have to install "client-side" software, nor do they have to purchase costly IT infrastructure to run and maintain complicated computer programs. Smaller railroads and short lines can use sophisticated solutions that were previously available only to large companies. With Web-based systems, the data has universality; automating the supply chain becomes that much easier. Creative energy is focused on optimizing and automating processes, not on struggling to bring everyone into the digital age by simply updating old paper forms.

Two other types of enabling tools are driving digital data exchanges beyond simple "paperless" processes: 1) shipper tools for all types of rail customers, and 2) mobile/wireless data capture and exchange solutions.

The shipper tools solution offers a one-stop Web site for all the critical tools any rail customer needs to manage their interaction with rail carriers — particularly those located on short lines. This tool delivers real-time "end-to-end" visibility to manage transportation services and logistics with any connecting rail carrier from any Internet connection.

Additionally, mobile or wireless tools enable any crew to send and receive data without leaving the cab or car, such as switch lists; car moves; online inventory; and locations from their office staff, other train crews or their customers.

By automating that exchange of essential supply chain data that is generated by railroads, and bringing portability to that data — not just making it "paperless" — the North American rail industry can bring 3PLs, shippers and truckers the benefits that have become increasingly commonplace in other supply chain sectors, including: consistent delivery of inventory; data transparency; data portability; more accurate ETAs and auto-exchanges of ETA data; business-rules-driven, auto-reconciliation of common commercial exchanges; reduction of "safety stock;" reduced reliance on capital for carrying safety stock; and fewer errors due to manual data entry.

So, let's get the rail industry beyond paperless, where these digital advances will be welcomed by the 3PLs, shippers and truckers who depend on the railroads as equal supply chain partners.

For more information on the latest trends in the logistics space, see the article "The Analyst Corner: Fulfillment & Logistics" in the October/November 2004 issue of Supply & Demand Chain Executive.