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February 2007

Rail News: Rail Industry Trends

Net Effect: How the internet has changed the way railroads do business


By Pat Foran, Jeff Stagl and Angela Cotey of the Progressive Railroading Staff

To say that the Internet has revolutionized the way we communicate, collaborate and conduct commerce is to state something so obvious it can obscure the fact that this change, indeed, has been revolutionary — with all that accompanies such a rapid, sweeping shift. And the rail realm’s certainly been along for the ride.

“In the mid-90s, we played with content. In the late 90s, we played with doing business versus just content. Now, it’s pervasive,” says Mark Davis, Union Pacific Railroad’s assistant vice president of e-business. “We’re connected all the time.”

How has that connection changed the way North American railroaders approach their jobs? How has it changed the way freight and passengers roads do business?

The Progressive Railroading staff recently posited those and other questions to more than two dozen railroaders. Although they weren’t always sure how to measure the Net Effect on their respective roads or the industry at large, or how to articulate just what it’s meant to their careers, the short answer is: The Internet has fundamentally and forever changed the way railroaders communicate, manage and, to an extent, think.

Not that they’ve got it all figured out. The Internet’s pervasiveness has presented a host of new challenges, mostly of the mind-set variety.

“This is really not about technology,” says Fred Grigsby, senior vice president and chief information officer for Canadian National Railway Co. “It’s about business, and how to get better at it.”

E-ssential communication
Railroads’ e-journey began when personal computers began ornamenting managers’ desktops in the mid- to late 1980s. Some managers were communicating via linked computer networks.

“If nothing else, it drew some of us to the keyboard,” recalls Ron Batory, president and chief operating officer of Consolidated Rail Corp. “We all had computers, but we really only used them for processing information internally.”

Not Lester Hightower. As a high-schooler in the late 1980s, 10East Corp.’s current chief technology officer was doing part-time programming research at the federally funded Supercomputer Computations Research Institute (SCRI) in Tallahassee, Fla. While attending Florida State University, Hightower stayed on with SCRI as a graduate assistant. He knew the Net would change the world.

“The Internet was an everyday thing for us at SCRI — it was how we communicated with each other,” Hightower says. “But at that time, it hadn’t taken off for most of corporate America.”

Once it did in the mid-1990s, and the general public was well on its way to untangling the World Wide Web and emailing up a storm, railroaders continued to communicate with business partners, customers and each other via phone and fax. The Net, as several railroaders put it, remained “something the kids played with.” But not for long.

“A lot of our customers didn’t have email until ’96-’97-’98,” says Mike Wilson, VP of 10East, which bills itself as the oldest “software as a service provider” focused solely on serving the North American rail industry. 10East now markets Railway Daily Operations Control Systems (RailDOCS), a Web-based operating management platform for freight railroads and transit agencies.

But once railroaders embraced email, they never looked back.

“It’s absolutely tremendous — I can now reach out to 15 people simultaneously instead of having to call them all,” says Joe Giulietti, executive director, South Florida Regional Transit Authority (SFRTA). “Or, if a situation happens, I can immediately get in touch with hundreds of transit properties to see if anyone has had a similar situation.”

You can’t beat email for quick, one-to-one communication, either.

“The [legislative] staff members I have close relationships with say they appreciate a quick email rather than a phone call,” says Jalene Forbis, director of governmental affairs for the McCloud Railway Co., VP of advertising and guest services for the Shasta Sunset Dinner Train, and executive director of the California Short Line Railroad Association. “You can just send a quick heads-up about legislation you’re hearing might be introduced and save the phone call until you really need them.”

Email also can be an extremely efficient mode of communication; you don’t have to “go through all the niceties on the phone when you only have two sentences you need to communicate,” says Forbis.

(Net)tlesome emails
But even those two-sentence electronic messages can fill up an inbox in no time flat.

“The positive is that there is no lack of ability for people to be able to communicate — we can share so much information,” SFRTA’s Giulietti says. “The negative is, well, that’s why people call it the ‘CrackBerry’ — we jump every time that thing shakes and have to instantly read what came through as if we’re all starved for the information coming in.”

In short: For some railroaders, the very thing that’s made email so useful is also what can make it that much less so.

“Now, we constantly have to sift through information,” Giulietti says. “When you read an email, you take the first three lines and that’s where you have to get information from, these sound bites, because you’re getting inundated.”

And a failure to sift properly can lead to misinterpretation and, ultimately, miscommunication.

“Many of us tend to write emails in a conversational way, and sometimes that’s not appropriate,” adds Trinity Railway Express VP of Commuter Rail Kathryn Waters. “When you put something in writing conversationally in emails, you forget that the person receiving it can’t see that you’re smiling and you’re not slamming them — that it’s supposed to be funny.”

Emailers also tend to forget that anything sent electronically leaves a trail of e-crumbs.

“If it’s anything you wouldn’t want to see in the newspaper, you shouldn’t put it in there because you never know where one sends your messages,” Waters says.

And not all railroaders want to send messages electronically. Three months ago, Morristown & Erie Railway Inc. distributed BlackBerrys to all train crew members. The idea: give them cell, email and Web access in one device, and “they’ll use it to give and get data,” says Director of Operations Steve Friedland, who also is president of Short Line Data Systems, which offers the Rail Operations and Customer Service (ROCS) package of management and operations software.

“We’ve heard from some of them that if they wanted to sit in front of a computer all day, they would have been a clerk,” Friedland says.

At The Indiana Rail Road Co., employees overwhelmingly voted to receive the regional’s quarterly newsletter by snail mail vs. email.

“That way, they can read it at their leisure,” says President and CEO Tom Hoback. “They said they’re already spending a lot of time staring at a computer screen.”

To others, email is used instead of phone or face-to-face communication far too frequently. One railroader said he had emailed a particularly e-oriented colleague with the plaintive plea, “Pick up the phone.”

It’s a matter of balance and nothing a little common sense can’t cure, email proponents say.

“I personally will err on the side of getting too much information,” says Railroad Development Corp. (RDC) Chairman Henry Posner III, summing up a sentiment many shared. “You really can’t overcommunicate.”

Working the web
Particularly when your business hinges on connecting with constituencies around the world to help you get your message across.

“Our business wouldn’t be possible without the Internet — we tell our story through our Web site,” says Posner of RDC, a Pittsburgh-based railway investment and management company with operations in North and South America, and Africa. “Our Web site is probably the single-most strategic asset we have.”

For Class Is such as BNSF Railway Co., which built its Web site in the early 1990s, the Net is a similarly strategic tool — if only because it affords another opportunity to keep information “transparent” for customers, says BNSF General Director of Corporate Communications Pat Hiatte.

“They can find a fuel surcharge, tariff or mileage on the Internet,” he says. “For a fuel surcharge, we used to send out a fax or a letter, but a customer could misplace it. Now, they can always look it up on the Internet.”

Web sites for rail transits are no less focused, particularly on the marketing front. The McCloud Railway launched its Web site “almost immediately” after the road began operating the Shasta Sunset Dinner Train in 1996. It’s been a “great tool for getting the message out,” says Forbis.

And like most transit-rail agencies, Dallas Area Rapid Transit (DART) has a Web site aimed at providing customers with basic system information — schedules, maps, fares and general destination information.

“It’s probably 80 to 90 percent of our traffic,” says Morgan Lyons, senior manager of media relations. “We’ve always had customer service phone numbers [but] I think a lot of people come to the Web site because they can ask questions they might be afraid to ask a human. They can just about ask us anything via email.”

On Jan. 1, DART tried to give riders a little bit more of what they’ve been asking for, launching a new Web site that offers real-time trip information.

“[Customers are] trying to use this technology to give themselves more control over their schedule,” Lyons says.

A New conduit for commerce
Similarly, DART and other passenger-rail agencies also are trying to leverage Internet technology as they strive to achieve operational efficiencies. As a result, they’re convincing customers to conduct more and more business transactions on the Net. It’s been a pretty easy sell.

“When we started planning to sell passes on, there was some discussion internally if this would be useful to our customers,” Lyons says. “We tried it anyway, and one of the great things about the Internet is that there are fairly low barriers to entry. We were able to try it quietly, and wow — it just continues to take off.”

In December 2006, online pass sales were up 40 percent compared with passes sold in December 2005.

Transit agencies learned early on in the Net era that the procurement arena, in particular, was ripe with potential productivity gains.

“Before the Internet, we had to communicate everything in public contracting in writing, so it was all done by mail,” says DART VP of Procurement John Adler. “The obvious efficiency there is it now can be done as an attachment to email. You can use an electronic signature, send secure documents over the Internet and get them there much quicker.”

The Net also makes it much easier for procurement officials to find potential bidders.

“We used to have to go to directories ... and then it was hit or miss,” Adler says. “Now, you can Google a list of suppliers, send an email and within minutes, have multiple responses to consider.”

Eliciting electronic interaction is also a top priority in the freight-rail universe.

“It has gone the past 10 years from ‘Let’s consider this,’ to the new kid on the block to a standard way of doing business,” says CSX Technology Inc. President John West.

Witness the e-focus at CN. By year-end 2006, the Class I’s eBusiness Sales team had boosted the level of electronic transactions from 38 percent in 2004 to a whopping 89 percent.

“On an average weekday, we’re seeing 40,000 log-ins and 4,500 unique visitors,” CN’s Grigsby says. “There’s not a minute in the week where there’s fewer than two log-ins per minute.”

What are they logging in to do? Pay invoices, track shipments and, since 2004, get real-time price information. Three years ago, CN and CSX Transportation jointly introduced “A+B Pricing,” a Web-based tool that provides shippers instantaneous interline prices for carloads moving over several railroads’ networks. It’s now available on six Class I Web sites.

“Five years ago, for a rail customer to get a quote, it was not uncommon for it to be a two-week process,” says Paul Clarke, CN’s senior manager, eBusiness. “Now, we return about 93 percent of the request within one minute. Talk about change.”

At Norfolk Southern Railway, “things changed” on the e-front after NS and CSXT took co-control of Conrail in 2000, says NS’ Tom Werner, AVP of technology.

“At the time, 65 percent [of our customers] communicated by EDI and 35 percent by fax or phone call,” he says. “Now, a very minor percentage is done by fax or phone, and all rest through the Internet. The information flow is much better.”

And that’s especially critical given the industry’s chronically constrained capacity. At Conrail, managers use Global Positioning System (GPS) technology and the Internet to incorporate fact-based decision-making to improve asset utilization, reduce fuel consumption, monitor crew performance and efficiency, and create capacity.

“Ten years ago, I’d be bird-dogging a day late using very cursory information, and trying to ascertain what needed to be done,” Conrail’s Batory says. “With instantaneous access to information, we’re able to make faster and, ultimately, better decisions.”

Officials at The Indiana Rail Road also have been rethinking practices and turning to the Net to drive transactional efficiencies. After acquiring Canadian Pacific Railway’s former Latta Subdivision last year, the railroad implemented the Precision Transportation Initiative, an information/billing system that has reduced the department’s workload, and improved communications and data flow.

“It’s all Internet-based now,” Hoback says. “Before, we knew the location of cars. Now, when cars are spotted, we can do car orders and releases electronically. There are no more verbal commands or faxes.”

The productivity boost is clear, Morristown & Erie’s Friedland says: “I used to spend one-and-a-half hours in the morning finding out where cars are and updating lists. Now, I have the information available on the Internet and I’m done in 10 minutes.”

Similarly, an Indiana Rail Road intranet that features an employee database, downloadable forms, and purchase order and inventory systems enables managers to make more informed — and, so, better — decisions.

“They can look at what they purchased before, when they purchased it and see if they can get better pricing,” says Bill Carter, the regional’s director of information services.

To Jerry Gordon, the first iteration of the Paducah & Louisville Railway Inc. Web site was “static.” Not anymore.

During the past three years, the railroad “integrated the site with information system applications,” says Gordon, VP of information systems and development. Now, customers can submit information, trace cars and give switching instructions online.

“The main thing is clerical simplification, less data entry and fewer transcription errors,” adds AVP of Information Systems Bruce Huyck.

Like more and more railroads, the Paducah & Louisville is “doing away with paper and phone calls,” says Gordon. So are the folks at Farmrail System Inc. Four years ago, Farmrail — which owns two short lines — launched its Web site, through which customers can submit waybilling and release cars.

“Our administrative burden has been lightened 200 percent,” says Controller Judy Petry, a 20-year Farmrail vet. “If you come to me today and tell me to go back to the way things were, I’d retire.”

New ways to work
Petry might have plenty of company; without the Net, many railroaders would have to change the way they now manage their work lives. And they have no intention of going back to the way things were.

Morristown & Erie’s Friedland was a self-described “hold-out” when it came to buying a personal digital assistant. But he hasn’t been able to part with his Motorola Q since he broke down and bought one last summer.

“I’ve become reliant on it,” he says. “Theoretically, I can send a train crew a switch list. I couldn’t do that before.”

Paducah & Louisville’s Huyck doesn’t necessarily need to be in the office to do his job, either; thanks to the Net, he can solve IT problems from home. And when he needs to connect with colleagues, he can attend virtual “Net” meetings.

“It saves time and expenses,” Hucyk says.

For Jalene Forbis, the Net does more than that. The short-line lobbyist juggles work with her two childrens’ school activities and community events she’s involved in. A BlackBerry enables Forbis to download “that important document” wherever she might be.

“We’re all juggling so many things,” she says. “If we had to be in the office to get things done, we’d never be home.”

A newfound ability to handle more work away from the office isn’t the only way the Net has boosted capacity in a rail context.

In the freight-rail realm, getting better information faster has helped shippers and car owners boost fleet utilization and increase cycle times, says Paul Pascutti, vice president of RMI, which develops information technology services and e-commerce solutions for railroads, rail shippers and rail-car lessors.

“Railroads have the ability to handle high volumes of traffic with fewer cars,” he says. “And the railroads’ scheduled service would be difficult to implement without the Internet.”

So would other business practices. In the early 1990s, railroads began to shift engineering work to outside contractors in an effort to reduce costs. But the outsourced work proved difficult to manage, and potential savings were being “eaten away by the inefficiencies in outsourcing the work,” says 10East’s Hightower.

To 10East predecessor United Railway Signal Group, the Net was part of the solution.

“United moved from a model where our customers were expecting to receive a weekly fax that told them the status of their project to one where we issued user-names and passwords so that everyone could view their own projects on the Web,” Hightower says.

CSXT management liked the idea and “asked how we could do it for them,” Hightower says. “That became RailDOCS. We started helping railroads manage outsourcing relationships.”

In 2002, 10East introduced a mobile business platform for field workers, who primarily use the system for federally mandated signal inspections. FRA inspection requirements are pre-loaded into a PDA, so signal inspectors obtain immediate feedback on information entered into the system.

“Mobile [RailDOCS] is all we sell to short lines,” Hightower says. “They’ve really benefited from the Internet. It levels the playing field.”

On The Learning Curve
Another great leveler is education. There, too, the Net is playing an increasingly prominent role. More and more railroads are turning to online and computer-based courses to train employees and provide advanced-learning lessons.

For example, BNSF offers more than 500 computer-based programs that provide training for all crafts; employees can tap training programs 24/7 on one of 700 computers at 200 locations in 100 cities.

BNSF locomotive engineers now receive training via 22 network simulators; course coverage includes triennial recertification, fuel management and distributed power training. Technicians can control the simulators, which feature detailed graphical representations of the territories the engineers will pilot locomotives through, at BNSF’s training center or via the Web.

Expect the Web to play an even bigger role in training the next generation of railroaders.

“The people coming in are very Internet savvy, and they expect it to be part of what they do,” says Gary Wolf, president of consulting firm Rail Sciences Inc., which specializes in track and train dynamics analysis and simulation. “It’s how they want it to be.”

Wolf’s ready to oblige them. Last year, Rail Sciences launched, a Web-based training center.

“On today’s railroad, trying to get 30 people in a division together is almost impossible — they don’t have the manpower to spare,” says Wolf, who’s been conducting derailment investigation seminars for 25 years. “Sometimes when I’m teaching, people are using BlackBerrys in class — they have to because it’s their job. It’s just the way the world is wired. But you’re short-changing the training.”

Online, you can keep the short-changing to a minimum, says Wolf, who narrates Rail Sciences’ first online course offering: “Derailment Investigation & Prevention” training.

Once they’re logged in, students follow Wolf’s lead via “spoonfuls” of bullet-pointed concepts, accompanied by photos, videos, and animations. (“If you’re going to read a book, why go online?” Wolf says.) Students can ask questions at any point during the course via an email link.

“It’s self-directed,” Wolf says. “You can go at your own pace and in your own space.”

So far, a Class I has signed on to put all its operations supervisors through the course.

Wolf also custom-designed a “Derailment Awareness Training Course” for mechanical inspectors, which will be used by about 3,000 UP carmen. Wolf has other online courses in the offing, track and mechanical inspection courses among them.

“We’re still on the learning curve with where this might go,” Wolf says.

The same applies to all things steeped in Net culture, which can be a very good thing. In the Web community, there’s a “real spirit of experiment and willingness to try things,” DART’s Lyons says. “The providers and users continue to learn from each other.”

All links in the Net-enabled transport chain would be wise to continue doing the same.

“The trucking, airline, railroad and barge industries all used to operate in a vacuum. The Internet has opened all that up,” Conrail’s Batory says. “We now know a lot about each other, and we can learn from each other.”

What have the freight rails learned? Possibly, that the North American rail map ought to stay the same for another few years.

“I don’t think there’s any question that the ability to get more real-time data and exchange it quickly has helped drive service levels and increased railroads’ confidence in alliances,” says independent rail analyst Tony Hatch. “Maybe you could even suggest that it has helped forestall a rail merger.”

A Soon-to-be silent ‘e’
For now, freight and passenger railroads will stick to their Net knitting. They’ll continue to fine-tune their e-business offerings and brandish “Netiquette” standards as they see fit.

At light-rail agency DART, they’ll continue to expand and refine the use of real-time information, and the Web site trip-planning tool.

“We knew 10 years ago when we launched our site that route and schedule information was going to be the key — that hasn’t changed,”

Lyons says. “What has changed is how you deliver and present that information.”

Information delivery is equally critical for freight railroads, some of which will try to expand their capacity to connect with even more workers.

“A guy 50 miles out from the nearest outlet in the middle of nowhere in a blizzard — maybe he can’t get signal on laptop,” NS’ Werner says. “We need to push data farther and farther into the field.”

Broadband wireless technology will help, 10East’s Hightower says.

“All our big customers are experimenting with equipping workers in the field with laptops and wireless Internet,” he says. “That’s a big deal, and will really change the work paradigm a lot. More workers will have real-time connectivity.”

Meanwhile, technology will continue to give railroads more weapons to add to their e-arsenal — enough so that railroaders will designate their fax machines for the scrap heep within five years, UP’s Davis predicts.

“We’ll take a map-drawn approach to world — if you want to see if a shipment is on time, you’ll click on pop-ups to move a map and get raw data,” Davis says. “We’re already doing it, to some extent.”

And soon, just as stealthily and seamlessly as the Internet crept into the rail industry’s collective consciousness, it’ll leave the vernacular, predicts CNs Clarke.

“My contention is the ‘e’ is going to disappear from ‘e-business,’” he says. “Actually, it already has. It’s the way we do business now.”


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