RAIL FREIGHT TECHNOLOGY FOR COMPETITIVE ADVANTAGE

Transcription

1 RAIL FREIGHT TECHNOLOGY FOR COMPETITIVE ADVANTAGE To give railways a bigger share of the freight market Deliver at The World Bank, March 31,2006 Jim Blaze Director of Strategic Planning ZETA-TECH Associates Inc. Cherry Hill, New Jersey USA blaze@zetatech.com 1

2 To compete against trucks, ships and pipelines rail freight needs to be be cost competitive Why? Because freight shippers buy cheap The top three reasons shippers will or will not choose rail freight are: 1) The price they have to pay 2) The reliability of your delivery time -- not the speed 3) The availability of wagons to haul their goods 2

3 As rail providers this is what you must do You have to provide a product and a service at the right price that gives them Dependable delivery to their destination With the correct wagon equipment available when they want to load it at origin 3

4 Technology Can Help You To get this rail freight business. and increase your profits 4

5 This morning I will discuss Train Operating Technologies Jonathan will discuss Motive Power and Rolling stock (Wagons), and Steve will discuss Train Control and Information Technology 5

6 You Can Gain Market Share from Better Train Operating Technology Heavy haul bulk freight operations Intermodal container services Intermodal rail terminals 6

7 Heavy haul bulk freight operations Long, heavy, high axle loading bulk train on the very profitable Norfolk Southern 7

8 North American Railroads Survived & Now Prosper By Increasing Axle Loads METRIC TONS PER AXLE s 1990 s 8

9 Yet opportunity exists because most of the world s railway managers would have to double their axle loads to equal North America METRIC TONS PER AXLE MISSED MARKET SHARE OPPORTUNITY W. Europe Compared to the US & Canada 9

10 Heavy Axles even in Alaska s Cold 30 and 33 ton axle loads in Brazil & in South Africa 30 ton axle loads in Sweden on the Malmbanan Route 10

11 1997 ZETA-TECH Study Confirmed HAL Economic Benefits in Norway 12 to 13 Daily Trains now reduced to just 7 from INTEGRATED benefits of longer and heavier freight train increasing profits and saving a mine and all of its jobs 11

12 YES you must increase track maintenance expenses in your annual budget when you adopt heavy axle loads % Increase In Track Costs as Weight increases 40 36% % Axle Load (Tonnes)

13 BUT Overall rail freight profits will increase ZETA-TECH studies show NET TOTAL BENEFITS for HAL up to 18% This includes the impact after increasing track and structures maintenance costs by a range of 5% to 26% 13

14 Part of the Secret is in managing the change in Net to Tare Ratio 22,800 KGS Net Cargo 22,800 / 16,600 = 1.4 net to tare ratio 14

15 35 USA Net to Tare Ratio Change Net to Tare Ratio Metric Ton Axle Load s 1990 s Change Over Time 15

16 12000 Here is a practical example of what this means Graph shows the net coal tons per train to serve the same power plant with and without HAL Tons Per Train ASIA Model BNSF & NS Model 16

17 The high cost Asia Railway must run 2.4 times more Coal Trains to move the same tonnage to the power plant Asia HIGHER BAR MEANS More train starts More equipment miles More equipment costs Less train paths for other trains Efficient HAL 0 versus adopting the efficient big train BNSF Business Practice 17

18 Russian Oil Tank Wagons in Mongolia Jan Other commodities also need to adopt train technology efficiencies 18

19 What about improving intermodal train technology? 19

20 Intermodal Container Train Technology In the past 20 years doublestacking has allowed three North American railroads to finally earn their cost of capital BUT this required management and technology integration It required no government policy action 20

21 Intermodal Container Service BIG BIG BIG TRAINS LONG HEAVY HIGH up to 20.5 foot clearance Up to 315,000 pound axle loads 21

22 What is a Super Efficient Doublestack Container Train? 320 TEU s or 160 FEU s per train (40-ft units) 4,648 foot or 1,417 meter train length 5,900 gross metric tons train weight 15,000 train horsepower with 2 to 4 diesel locomotives 22

23 And why is this super efficient? 23

24 Look at the resulting low direct variable DOUBLESTACK TRAIN COSTS Using ZETA-TECH Variable Cost Computer Model Loco Ownership $ 1,000 Loco Maintenance $ 4,700 Freight Car Ownership $ 800 Freight Car Maintenance $ 1,000 Track Maintenance $ 11,000 Fuel $ 8,000 Crew $ 3,000 Example for one eastern USA 1,500 Kilometer Corridor Total $ 29,500 Market price charged to shippers is much higher to earn a rail freight profit 24

25 Which is more profitable? This? 25

26 Or This? 26

27 Or This? SINGLE STACK RAILWAY FEU S lack North America s Efficiency and are simply not efficient in the long run against modern ships and trucks -- Jim Blaze Typical Russian-Mongolia Intermodal Wagon with a 40-ft Container 27

28 Remember please that efficient Intermodal is linked to Heavy Axle Train Technology 28

29 Intermodal Consequences TRAILERS-ON-FLAT CARS NOW A MINOR BUSINESS The cost per trailer is too high -- no productivity gains No trailers allowed on CP RR west of Calgary TEU s are being displaced 48 foot and 53 foot containers are the shippers choice New loading and terminal pattern emerging 29

30 Intermodal Terminal Technology Big Hub Terminals are the pattern today for rail 2,000 or more lifts per day Shift to suburb locations near off-rail industry customers Cost per lift a critical price factor for market share Parking charges assessed on many containers 30

31 Intermodal Terminal Technology Hundreds of small terminals closed across the USA A terminal with 5,000 FEU s per year is too small Newest yards are 40 to 70 miles west of Chicago $25 or less as the price target for each box lift 31

32 Intermodal Terminal & Train Technology Results Effectively, the USA freight railroads handled the equivalent of more than 20,000,000 TEU s a year EUROPE reportedly less than 7 Million TEU s AND the US railroad business process earns huge intermodal train profits using technology for sustainable market advantage 32

33 Are You Ready to Change? You can manage and adapt You can integrate technology You can reap the financial benefits Or you can continue with business as usual 33

34 Thank you for listening Good luck to you in your journey of improving rail freight with technology and management I yield the floor to my fellow speakers Jim Blaze blaze@zetatech.com 34