Big Data and Railroad Analytics




Post by kevin foy

There was an excellent story by Steve Lohr in last Sunday’s New York Times on “The Age of Big Data.”  Many of you have probably heard about the term “big data,” which the article describes as ”…a shorthand for advancing trends in technology that open the door to a new approach to understanding the world and making decisions.”  According to Lohr, data is growing at 50% per year, more than doubling every 2 years.

The article goes on to describe how the nexus of new technology (e.g. artificial intelligence, data collection/storage and processing speed) and the exploding amount of data available from all imaginable sources, have created an environment whereby business, government, the arts and science can distill new insights from this tsunami of information.

One of the examples offered in the article is the now-familiar story of “Moneyball.”  In the book by Michael Lewis, and the recent film starring Brad Pitt, the story described how a professional baseball team general manager used new data sources and statistical analysis to identify undervalued players and built a winning team at a relatively low cost.

This reminded me of the story written last year by Oliver Wyman’s David Hunt, and published in the Fall Newsletter of INFORMS Railway Applications Section, entitled “Big Data and Railroad Analytics.”  In his article, David also used Moneyball as an example of the use of big data to analyze new metrics to dramatically improve the performance of an organization.  He went on to to describe how the North American Rail industry is just starting to use the treasure trove of data that they dynamically collect, to improve the analysis of their business, lower operating costs and produce greater profitability.  David also described the use of the new Traffic Flow Analyzer (TFA), that has been developed to manage the analysis of massive railroad databases.  If you missed the article, you can find a copy of it on this blog site.

It looks like big data is here to stay.

Service Design Groups: A Survey of the Class I Railroads




Post by david hunt

Oliver Wyman recently conducted an extensive survey of the Service Design groups at the Class I railroads.  Some of the results on similarities and differences between the groups will, I believe, be of interest to our blog readers.

The survey focused on five primary areas:  (1) Service Design responsibilities and composition; (2) the planning process; (3) central execution/control systems; (4) planning tools (developed in-house and acquired externally); and, (5) demand management planning.

There are generally 80 to 100 people employed at each of the Class I railroads for planning how the railroad operates.  Some of these staff are part of the Service Design group, while others are scattered throughout the company in a specific line of business (intermodal, coal, grain, etc.), in the dispatch center (locomotive planning), in Engineering (maintenance planning), or in operations research/information technology (tool building).

As might be expected, there were several similarities among the Service Design groups.  All of the Service Design groups plan road trains, blocking, hazardous material shipments, interline movements, and local service (usually jointly with the field).  All of the Service Design groups also develop trip plans for general merchandise and automotive traffic, and they generally measure trip plan compliance as the initial ETA plus 24 hours.  An interesting result of the survey was that all of the Service Design groups have a very limited number of staff (typically around 5) with the authority to directly make changes to the production version of the operating plan.  This tightly controlled access is necessary due to the complexities of the plan and to the mission critical nature of the information.

There were also several key differences identified between the railroads.  Some of the railroads make continual changes to the operating plan, while other railroads make changes on a fixed (typically weekly) schedule.  Short-term forecasts are used to develop the plans at some railroads, but the others prefer to use history due to concerns over forecasts accuracy.  There were also several differences between the groups in the planning of intermodal and bulk services.  While most of the railroads produce trip plans for intermodal flat cars, not all of the railroads produce trip plans for intermodal boxes.  Also varying from railroad to railroad was the planning of which bulk traffic moves in unit versus merchandise service, and whether or not bulk traffic moves in blocks.  Finally, all of the Service Design groups provide some planning for local service, but the level of detail and the accuracy of these local service plans varied greatly.

Follow this blog in the coming months as we release more detailed information on specific topics from the results of the Oliver Wyman survey of the Class I railroad’s Service Design groups.  If you have any questions about service design and our survey, please contact me at david.hunt@oliverwyman.com.

In Case You Missed It…




Post by kevin foy

As we wind down to the end of 2011, I thought that it would be a good time to take a look at some of the recent Oliver Wyman Publications that might be of some interest to our readers.  While this blog tends to focus on issues that surround rail planning, many of the materials produced by our colleagues in adjacent Practices could also applicable to the rail industry.

A great example of this is a recent piece from our Aviation, Aerospace and Defense (AAD) group on ”Crews Control.”  In a story, published in Airline Business, Oliver Wyman Partners argue that while C-Suite management would like to ignore the complexities of crew supply chain issues, at 10-20% of an airline’s cost structure, management would be well served to focus on this issue. The authors outline a plan for senior managers to aggressively focus on all facets of their crew management function, which can reduce crew costs by more than 20%.

Another publication, recently produced and distributed by our Corporate Finance and Restructuring Practice, suggests that the rules of the private equity game have changed and that investing decisions are increasingly dependent on operating performance gains rather than financial leverage.  In “Value Due Diligence,” the authors outline their thinking that the  “extension of scope, the combination of industry and functional expertise, and the focus on the key levers for post-acquisition value creation and risk management, pave the way for better decision making, immediate action and faster results.”

Our Energy Practice produces many fine publications each quarter, but I thought that their recent piece, provocatively entitled “Are You Ready For the Wrath of the Customer?” would be very appropriate as it deals with pricing and customer expectations in a capital intensive industry.  The piece states that as customers become more agitated by the constant upward creep of rates, “utilities will need to work closely with regulators and policy makers to achieve constructive regulatory outcomes while building and leveraging their capabilities, offerings, tools, and resources to create new value for their customers.”

Lastly, I would like to once again highlight the Oliver Wyman Transportation and Logistics Journal, which was posted in November of this year.  The Fall 2011 edition of our journal was very well received and I mention it here, just in case you missed it…

Have a great Holiday Season!

3rd Quarter Class I Railroad Analysis and Summary




Post by kevin foy

Once again, we are pleased to make available the Oliver Wyman quarterly Class I Freight Rail Analysis and Summary.  Please note that a few upgrades have been prepared for the Q3 report.  Slides 12 and 13 show the nine-quarter plot for dwell and velocity, which are critical measurements on the trends for customer service among the railroads.  In slides 14 and 15, we have added Mexican carloading data for Ferromex (FXE) for the first time.  In a future report, we hope to be able to break out the Kansas City Southern (KCSM) Mexican loadings as a comparison to Ferromex.

As with previous versions of this report, we have included all important financial data such as operating ratio (OR), revenue, operating income, ROIC and capex, showing a year-on-year comparison with the third quarter of 2010.  Other information included in the report are carloadings and revenue ton-miles (RTM) per employee.

Oliver Wyman only uses publicly-available data as the basis of our graphs and analysis and no proprietary railroad data is used in any way.  We would like to expand and improve upon the scope, analysis and presentation of this type of freight rail information.  If you have found it useful, or have suggestions for improvements, please contact me at kevin.foy@oliverwyman.com

On November 14th, I had the opportunity to make a presentation at the annual INFORMS Meeting in Charlotte, NC.  Attached is an updated version of my presentation, in which I tried to further flesh out and make more concrete, what types of business issues we might consider in Yield Management and how we might approach them.  There are two concepts presented:

  1. The application of yield management to capital investment decisions to manage a portfolio of business through a constrained asset, and
  2. A review of the impact of variability in supply chains and how that variability needs to be understood and managed, but likely not using the ‘traditional’ approaches to yield management which have been widely used in the travel and hospitality industries, but instead more of an approach of understanding the costs and value of accommodating variability and charging for it

 
These issues require a considerable amount of data through the coordination of commercial as well as operational information into a single view.  These ‘big data’ problems were the subject of a paper written by me and Oliver Wyman’s Dave Hunt, and published in the fall 2011 issue of the INFORMS Railway Application Newsletter (see page 12).  Oliver Wyman is currently working on tool sets to manage ‘big data’ problems at railroads.  Stay tuned for future updates.

Oliver Wyman Transport & Logistics Journal – Fall 2011




Post by kevin foy

I am pleased to provide our blog readers with the Fall 2011 Oliver Wyman Transport & Logistics Journal, a publication that examines issues facing the global transportation and logistics industries.  This issue highlights new thinking and strategies that we believe can give transportation providers an edge in what continues to be a challenging economic environment.

“Growth Strategies for Profitable Logistics” examines the recent phenomenal revenue growth of leading logistics companies—driven mainly by M&A.  These activities have proven difficult to translate into profits, however, without parallel attention to optimizing critical performance levers.

In “Rail Outlook: Interview with Oscar Munoz,” the Executive Vice President and CFO of CSX provides his perspectives on the current and future state of railroading in North America, including challenges the industry faces and factors that will continue to drive growth.

“Coming to a Road Near You: E-Mobility,” presents recent Oliver Wyman research on transportation electrification.  Through 2040, e-mobility can be expected to increasingly impact all avenues of transport—creating many new opportunity spaces for savvy businesses.

We next offer a pair of short perspectives on fleet costs: “Why Airlines Need a New Aircraft Purchasing Strategy” looks at how the total cost of ownership needs to figure more heavily into new aircraft purchases.  “Optimizing Fleet Management Costs in Public Transit” describes the options that exist to better manage and reduce transit fleet costs.

“Scheduled Operations: Not Just for Railroads Anymore” discusses a concept that has revolutionized how freight railroads operate, and which could be applicable to a wide range of other transport modes.

And finally, “Dynamic Risk Management in Infrastructure Finance” addresses how the risks of large infrastructure projects can be better managed—and reduced—through dynamic risk modeling, ensuring projects are both approved and completed.

I hope you will agree that this issue provides a wealth of timely and provocative information.  If you have any questions or comments about Oliver Wyman Transportation & Logistics, please contact me.

 

Summary of the 2011 European Rail Planning Conference




Post by kevin foy

We have just completed a very successful European Rail Planning Conference in Hamburg on October 24-26.  The event was attended by 37 delegates from 15 rail, intermodal and infrastructure companies, and organizations represented at the conference included DB Schenker Rail, JSC Russian Railways (RZD), Kazakhstan Railways (KTZ), Green Cargo, SBB Cargo, Rail Cargo Austria AG, FGC – Catalonia Railways, Norfolk Southern Railway (USA), BLS Cargo AG, Evrosib – Transport Systems, and Hupac Intermodal SA.  Oliver Wyman is very appreciative for the excellent presentations given by the attendees, and we also want to extend our thanks to DB Schenker Rail, who hosted a tour of the Maschen marshaling yard.

Presentation by DB Schenker's Thorsten Dieter

A dominating message of the conference was that for the European Railways to achieve sustainable profitability, a fundamental change of the business model will be required.  In the presentations, Q&A, and conversations among the attendees, we noted that there were key issues that should drive the changes needed for the growth of European freight rail profitability:

  • After years of cuts and restructuring, a more analytical approach to network and capacity management is the developmental stage, and could be the basis for more sophisticated commercial models in Europe.
  • There was significant discussion on managing capacity through a booking process or similar means.  Attendees suggested that capacity management should include wagon supply, train management, and yard management, and also include shipment transparency for the customer.
  • Several speakers expressed a desire to see railways take a more aggressive approach to reducing costs by carefully reviewing plans to maximize train length, reduce handlings, increase equipment velocity, speed border crossings, and better manage local services.  Integrated planning and operations will blur the line between wagonload and train load.
  • Many railways talked about the need to improve consistency or reliability of service through the creation of better plans, better plan adherence, and through better execution.
  • Most railways would agree that improving capacity, network, costs and asset planning is not possible without good computer systems for both planning and execution.
  • Any change will require huge organizational change and consistent senior management support of a multi-year period. This is critical, and of equal importance to everything else.
  • The regulatory framework continues to be a crucial factor in planning and operations, but the railways are critical of the implementation of railway reforms and want a stable environment for the future.

 

I believe that most of the conference delegates found the presentations and informal conversations to be valuable, and I expect that the discussions initiated at the conference will continue among the attendees.  We plan to continue our series of rail planning events with a North American conference in 2012 and a second European-based event in 2013.  Hopefully you will be able to join us at one of these future events.  More information on these events will be provided when it is available.

Copies of all of the conference presentations are available on the tab at the top of the home page labeled “2011 Rail Planning Conference – Presentations.”  The presentations are password protected and if you would like access to the documents, please contact me or Bonnie Painter.

2011 European Rail Planning Conference – Final Agenda




Post by kevin foy

The final agenda is now available for our 2011 European Rail Planning Roundtable and Conference being held on October 24th through the 26th at Le Royal Méridien, in Hamburg Germany.  The theme for the conference is Designing a Profitable Freight Rail Network in Europeand we have confirmed registrations from delegates representing 12 railroads from Germany, Switzerland, Kazakhstan, Russia, Spain, Sweden, Austria, and The United States.

The conference starts on Monday evening at Le Royal Méridien with registration beginning at 17:00 in the Le Soleil Foyer, to be followed by a cocktail reception at 18:30.  The Conference Welcome Dinner will be served at the hotel’s Restaurant Le Soleil II at 19:30.

Conference sessions will begin on Monday morning at 09:00 in the Blankenese Conference Room.  Refreshment breaks and lunch will be provided during the conference and Tuesday evening’s dinner will be held at Brook Restaurant Hamburg.  Prior to the dinner, we have secured a group reservation for an optional trip to Miniatur Wunderland, considered by many to be the largest and most detailed model railway layout in the world.

If you have any questions about conference registration or hotel accommodations, please contact Andrea Steverding at Oliver Wyman at +49 89 939 49763 or via e-mail at andrea.steverding@oliverwyman.com. In North America, you can contact Bonnie Painter at +1 609-520-2190, or via e-mail at bonnie.painter@oliverwyman.com.

Oliver Wyman’s Joris D’Incá was one of the keynote speakers at the 6th International VDV Railway Congress, held on October 5 – 6, 2011 in Frankfurt am Main.   Joris delivered a presentation entitled “Developments and Trends in Single Wagonload Rail Traffic in Europe.”  In his speech, he asked the questions: “What is the future of single wagonload rail traffic in Europe? Are we heading towards growth or shrinkage? Are the numerous restructuring programs of the various rail operators helping the system as a whole, or are they reducing the likelihood of a European solution?”  And finally, “what are the chances for competition?”

In answering these questions, Joris outlined the current challenges in the European single wagonload rail traffic; the future market opportunities; and the steps for making single wagonload rail traffic successful.  In examining the market opportunities, he argued that several logistics market trends could increase the attractiveness of the single wagonload business.  Included in these trends are:

  1. Relocation of production and longer transit distances
  2. “Green” logistics
  3. Volatility of flows and smaller shipment sizes
  4. Integrated supply chains and outsourcing

 

In the concluding section of his speech, Joris outlined the various steps that the industry can take to make this market successful.  He stressed that the single wagonload system needs to be fundamentally changed to achieve a sustainable development, and then went on to deliver specific suggestions for this fundamental change.

Joris D’Incá is a Senior Partner in Oliver Wyman’s Surface Transportation Practice and is based in Zurich.  Please contact Joris directly if you have questions about this presentation.

 

Steve Jobs and Dennis Ritchie – Giants of Technology




Post by marc meketon

Two giants of technology passed away over the past two weeks.  One received attention throughout the world – Steve Jobs.  The other one is remembered by only us “geeks” – Dennis Ritchie.  Both, however, had tremendous influence in how our world operates.  Enough has been written about Steve Jobs.  In this blog posting, I will focus on Dennis Ritchie.

Ritchie and Ken Thompson at Bell Labs developed in the early 70’s the UNIX operating system.  40 years later, all modern operating systems such as Apple’s iPhone/iPad iOS5, Apple’s iMac OS X, Android, Linux, “Watson’s” AIX (the winner at Jeopardy) and many other operating systems evolved from UNIX.  Even Windows shares some heritage with UNIX.

Dennis MacAlistair Ritchie in 1999

Dennis Ritchie in 1999

The beauty behind UNIX is encapsulated in a paraphrase of an Einstein quote: “Everything should be as simple as possible, but no simpler”.  UNIX was simple enough for literally throngs of people to understand, learn, and expand.  Complex enough to be expandable and to grow for use by the most modern of computer processors.  That took genius.

UNIX also was the first (or nearly so) and arguably the single most successful example of “open source” code.  Bell Labs decision to release it to academia ultimately led to research and enhancements that kept it alive and in use today.

While UNIX was a technological marvel, Ritchie is most remembered as the inventor of the programming language “C”.  Also invented 40 years ago to support the development of UNIX, it is the grandfather of the most popular computer languages in use today, and the ones that run the internet (C++, Java, C#, and of course, C).  Other popular computer languages used on the internet such as Python, Perl, PHP can trace themselves to the creativity and thinking of Ritchie.

Ritchie, with co-author Brian Kernighan, also created a revolution in teaching computer programming through their small monograph about “C”.  It became the classic programming book for its clarity.  Their opening example “Hello, world” has been literally copied by most other authors of books on programming languages.  Their book continues to be the standard for all programming texts.

Indeed, the world lost two giants this month.  One everyone knows, and the other – Dennis Ritchie.

Marc Meketon is a Vice President for Software Product Development at Oliver Wyman