The Organization for Economic Co-operation and Development (OECD) has developed a new report, Strategic Transport Infrastructure Needs to 2030, with the sponsorship of Oliver Wyman’s Global Risk Center, which outlines the world’s growing transportation infrastructure needs and the challenges they represent.  Along with the 246-page full report, Oliver Wyman and OECD have also produced a 21-page “Main Findings” summary of the report.   Among other topics, the report looks at whether gateway ports, hubs, and their inland transport connections are up to the demanding tasks ahead.

At a time when infrastructure development, including railroad investment, could play a vital role in global economic recovery, we hope that you will find this report timely and thought provoking.   If you would like more information on Oliver Wyman infrastructure-related reports and events, please visit http://www.oliverwyman.com/transportation-infrastructure-2030.htm

Maximizing Returns on Large Investment Projects, a new report from Oliver Wyman, describes an approach that can boost returns from large capital investment projects by 20% or more. Oliver Wyman’s work with clients has shown that developing greater transparency around the risks involved in such projects, and then tracking mitigation efforts closely, can improve investment projects’ earnings significantly. This strategy is especially effective when it is applied throughout a project’s life cycle.

Complete details about Maximizing Returns on Large Investment Projects, along with other Oliver Wyman infrastructure-related reports and events, are available at http://www.oliverwyman.com/large_investment_projects.htm.

•      End customers increasingly value sustainable products; for example, recently more than 50% voted at Coop’s homepage ( a large Switzerland- based food and grocery retailer) that they would be willing to pay more for completely sustainable food – including CO2-neutral supply chains

•      Companies that focus on “local food” have enormous growth rates in the US.  For example, Bright Farms cuts out the need for long-haul transportation by building large-scale greenhouses on top of local malls.

•      NGOs like Carbon War Room have declared war on “dirty” transportation companies and already publish web pages such as http://shippingefficiency.org/, to enable increased transparency into maritime vessel energy efficiency. Global companies can use these pages to ensure their products are shipped sustainably. Land-based transport will be next.

•      Highway and city congestion is increasing, fuel costs are rising, and governments and local cities are imposing increasingly tight regulations on emissions and CO2

Although some railroads already have sustainability and clean energy programs in place, particularly with an emphasis on new locomotive technologies and fuel management, they may be missing out on opportunities to more aggressively market the role they can play in a sustainable future. For example:

•      Rail needs to market its low CO2-footprint per ton-km far more aggressively.

•      Railroads may want to consider developing and branding “green” products or services, as is already common in other transportation sectors (like parcel).

•      Rail companies should think about marketing and building sustainability-focused brands with end consumers, whose opinions can create pull with traditional freight B2B customers

•      Consolidated deliveries into cities and last-mile distribution via rail will experience a renaissance and allow for new revenue opportunities.

To unlock these growth opportunities, railroads will need to:

•      Ensure a “green” energy supply wherever possible

•      Review guidelines for suppliers when purchasing equipment (design and choice of material is one of the key drivers for a closed circle economy)

•      Think about even more sustainable operations (e.g., maintenance, waste disposal)

•      Develop easier and cheaper intermodal transfers options (e.g., roll-on/roll-off)

The potential impacts could be substantial.  For example, parcel companies, by creating “green” products, realized a 20-30% increase in margins. The CO2 footprint of vigilant companies can easily be reduced by 30+ percent. Urban environments can particularly benefit from increased usage of rail and ex-urban traffic consolidation: some cities have seen traffic speeds increase by 30 percent and emissions reduced by 20-35 percent by reducing through truck traffic.

Oliver Wyman has developed a new Sustainability & Resource Productivity Initiative which will support transportation, logistics, energy, manufacturing, and other industrial sectors in developing sustainability solutions worldwide. For more information, please visit www.oliverwyman/sustainability, or contact me at michael.lierow@oliverwyman.com.

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.

The inaugural Marsh & McLennan Companies 2012 North America Infrastructure Risk Conference was held on April 24th at the Mandarin Oriental in New York City.  With attendance by more than 160 senior industry practitioners,  the invitation only event was highlighted by a keynote address by US Representative John Mica, Chairman of the House Transportation & Infrastructure Committee. 

The program also featured thought leaders from the public and private sectors, who provided conference participants with a greater understanding of how to define, balance and mitigate infrastructure risks to increase deal flow and funding for much-needed infrastructure projects.

The conference was hosted by Oliver Wyman, Marsh, Mercer and NERA Economic Consulting, which are operating units of Marsh & McLennan Companies.  Collectively, this group has come together to form a dedicated Infrastructure Practice to provide deep industry insight and leading-edge risk management capabilities to support infrastructure financiers, operators, builders, regulators and others.  To read the Twitter feed from the event, please use the hashtag  #MMCInfra12.   Presentations and information from the conference will soon be available on a special post-conference site and I will provide that link as soon as it is available.

UP AC locomotives in DP mode push a manifest train in Oregon

Last week, Canadian National launched a press release containing two announcements that caught my attention, and perhaps signaled some changes to come soon in the North American locomotive market – with ripple effects worldwide.  The press release is summarized “CN will acquire 65 new high-horsepower locomotives as well as 96 second-hand high-horsepower locomotives that will be upgraded.”  The release then details the decision to purchase new AC traction locomotives.  Keith Creel, EVP and COO stated:

“The program includes the acquisition of alternating-current locomotives (AC), which will represent a first for CN.  Our current fleet of approximately 1,900 locomotives employs direct-current (DC) traction technology, which has served us well because of the overall favourable grades of our network. 

We will harness the key advantage of AC traction – much higher adhesion or train-pulling ability at low speeds — in assigning the new AC units to heavy-haul coal service in northern British Columbia and Alberta, where steep grades and sharp rail curvature make heavy demands on our locomotives.”

CN is also on record with a locomotive type and financing summary for the second-hand locomotive acquisitions: “CN will purchase… 42 second-hand GE Dash 8-40C locomotives, 11 leased GE Dash 8-40C locomotives, and 43 second-hand EMD SD60 locomotives.”  Read full article here…

Manny Hontoria, a Partner in Oliver Wyman’s Surface Transportation Practice, gave a keynote address on “The Impact of Growth on the Freight Rail Network – What this Means to the Equipment Community.”  Manny’s topical presentation covered the impact of capacity, congestion and network velocity on demand for locomotives and cars through 2035.   Jeffery Elliott, also with the Surface Transportation Practice, presented “The Changing Locomotive Marketplace – Implications for future demand.”  As the rail industry emerges form the long economic downturn, Jeff reviewed the factors that will drive new locomotive demand in the next decade.

Manny Hontoria, a Partner in Oliver Wyman’s Surface Transportation Practice, gave a keynote address on “The Impact of Growth on the Freight Rail Network – What this Means to the Equipment Community.”  Manny’s topical presentation covered the impact of capacity, congestion and network velocity on demand for locomotives and cars through 2035.   Jeffery Elliott, also with the Surface Transportation Practice, presented “The Changing Locomotive Marketplace – Implications for future demand.”  As the rail industry emerges form the long economic downturn, Jeff reviewed the factors that will drive new locomotive demand in the next decade.

Oliver Wyman, together with other Marsh & McLennan Companies of Marsh, Mercer and NERA Economic Consulting, are sponsoring the 2012 North American Infrastructure Risk conference on April 24, 2012, in New York City.  This invitation-only conference focuses on key infrastructure risk topics related to the public interest and private investment.  For more information, please contact Ken Cudlipp at ken.cudlipp@oliverwyman.com or 214-721-1508.

In the 4th quarter of this year, Oliver Wyman’s will host a North American Rail Planning Conference.  The date and location of the event are not yet set, but based on the interest and participation by the rail planning community in the 2010 Princeton, New Jersey, and 2011 Hamburg, Germany events, we will be hosting a US-based conference in late 2012.  As plans for the conference are developed, we will be contacting previous participants via e-mail and I will post the details in this blog.

1)      Revenue and operating income are finally reaching the peak levels last seen at the start of the recession

2)      Domestic coal is weakening and projections do not indicate a comeback soon.  However, export coal remains strong

3)      Domestic intermodal is providing much of the intermodal growth in the East

4)      Operating indicators such as dwell and average velocity had been heading in the wrong direction in early 2011, but now appear to be flattening or improving

5)      The Bakken Shale oil and gas is providing a traffic boost for several railroads due to demand for oil and gas drilling equipment and materials

Please contact me if you have any questions about this report.

The trip was outstanding. The weather was beautiful.  The trip was timed for a week when the moon was full, so sightseeing continued at night if desired.  We had an informal group of 20 railroad industry people and we constituted about half of the sleeping car passengers.

The entire train left Vancouver with 73 people.  There were three types of travelers on board, tourists like our group, locals that really used the train to get around (the train made a couple of flag stops especially across the great shield where road access is limited), and pass holders who could travel for free.  The onboard service was generally great – friendly and attentive

Read the full article…