Thursday, 27 December 2012

The 'big' train trap

They were the next big thing for the Australian rail industry in the 1990s - the Superfreighter - vast trains of containers sweeping from one terminal to the next doing with one train crew the work three or four might have done. It was the great cost saver - the godsend to the rail industry. Or was it? What has largely been lost in the Australian 'big train' experiment is the reason for running longer intermodal trains at all. Generally, longer trains should be the result of capacity and congestion between terminals. In Australia, as in the US, the coal and iron industry were the first to embrace the 'big' train. Bigger trains meant a given rail corridor could carry more tonnage. Bigger trains meant longer crossing loops could obviate the need for more expensive duplication. Bigger trains weren't meant to make their individual operating costs lower, they were meant to make more money per train. And then someone decided to translate the rumbling unit coal train into the freight-forwarding business. Multiple daily terminal departures were replaced with just one or two a day. CTC equipped mainlines capable of moving thirty or forty trains a day now see fewer than ten. The 'big' intermodal train didn't resolve capacity issues out on the mainline, instead it saw each train's terminal dwell time increase, it saw contingencies reduced and took away the multiple departure and arrival times customers  used - giving the freight forwarded a single departure time, convenient or not.

This is the cost of the 'big' train. The extra time it takes to unload and load reduces the utilisation of those individual wagons that are the first to be unloaded and the last to be loaded. Say - for example - a 1500m train takes three hours to unload and three hours to reload. If it were two 750m trains, the first could be departing the terminal as the other arrives, maximising rollingstock utilisation and reducing terminal dwell time.   Meanwhile, spreading arrival and departure times across terminal shifts means that instead of paying staff to work flat out for six hours and then kick dirt for the rest of their shifts. It's not rocket science - more frequent/shorter trains spreads terminal workload - in fact terminal congestion may actually be reduced by regular arrivals and departures throughout the day rather than having one or two 'big' trains arriving in the morning and then departing in the evening.

A-ha, you say, but those short trains will need more crews - so that's more cost right? Well, yes, crewing costs would rise, but terminal costs would fall. Mainline capacity is hardly an issue on any of Australia's mainline corridors, in fact most of these corridors retain legacy infrastructure from the days when they did see forty trains a day rather than the current eight. And more trains means more contingencies out on the road. In today's environment an operator's primary freight forwarding train can break down and wait a full day before the next service comes along with spare equipment or capacity. More frequent trains means more choices for  operators to prioritise a recovery.

And then there's the customer. There's almost certainly a percentage of freight now on road simply because rail arrival/departure times don't suit the freight forwarder - running those two 750m trains could mean could actually mean a third 750m train with a third departure time. Crew costs are one thing, but working out whether that's the cost a rail operator should worry about it quite another. The simple fact is, if your 'big train' isn't preventing a capacity crunch on the mainline, then it's costing you business rather than making you money.

Of course, the elephant in the room is the 'slot pricing' rail infrastructure providers expose rail operators to. Once again, the good old 'slot' rewards rail operators who run less trains. Do investors really want to hear - "We don't want growth because it costs us money" - somehow I don't think so. Perhaps now is the time for someone to find a way around 'slots' rather than just being another victim of them.

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Wednesday, 26 December 2012

Lessons from the past...yes, there are some

As I've mentioned before, this blog is not about remembering the 'good old days' - it's about pitting new and proven ideas against the entrenched ideologies of Australia's current rail executives and their industry. Still, having said that, there are some examples of rail operation dating back to the 1930s - now largely lost in the modern Australian rail freight sector - that if implemented could reduce costs, increase capacity and do so at virtually zero charge.

Let's start at the beginning. In the early 1920s, a mid-sized mid-western railroad in the United States found itself with a simple route structure, a low operating cost model and plenty of much larger competitors unable to match its service reliability. This was the New York, Chicago & St Louis Railroad - more commonly known as the Nickel Plate Road (NKP). With literally a fraction of the assets (about one ninth), the NKP was able to move 33-percent of the tonnage its largest competitor could. With almost no branchlines and very little double track, the NKP's sole focus was getting freight from its western terminals to its eastern terminals in the least amount of time. It knew what it was good at, and it stuck at it. It's busiest single track mainlines received centralised traffic control that could handle up to ninety trains a day when pressed. Rather than running long drag freights weighing over 10,000-tons, it focused on several mid-sized 4,000-ton trains leaving its terminals throughout the day - providing multiple alternatives for shippers - and powered each train at about 1hp/ton. The NKP also did its best to run all of its trains at similar speeds, to keep traffic flows fluid. And in an era when steam locomotives might travel just 100-miles a day, the NKP could service its modern fleet in fifteen minutes and haul the same tonnages with 300 locomotives that took nearly 1,000 on neighbouring railroads. And this was all happening by the mid-thirties. Fast forward to the 1990s and the great US rail renaissance relied on many of these techniques to coax time sensitive intermodal traffic off the freeways. However there was one other aspect of these operations that few US rail executives chose to replicate until the last decade. It was the NKP senior management's hyper vigilance of on-time arrivals for its most important freight services. Throughout the 1940s and 1950s, the first thing the NKP's CEO read every morning was the arrival reports for each terminal - if there was an issue causing repeated late arrivals, it was dealt with quickly - and from the top.

Delays are an everyday distraction for rail operators the world over, however containing them, and avoiding them is something largely lapsed in Australian intermodal operations. If the CEOs of Pacific National and Aurizon read the daily reports for terminal arrival times there's not a lot of evidence they do much about delays. A train that fails between Melbourne and Sydney might spend 24-hours awaiting rescue. If trains run endlessly late due to an infrastructure provider's assets, they might do so for months without any apparent direct attention from senior management. Frankly, its not good enough. For some seventy years the NKP has equipped the rail industry with a model for providing the fastest and most efficient means of delivering rail freight - yet in Australia it is a model consigned to the history books. Well, PN and Aurizon, its time to dust off those books. If the NKP could achieve the shareholder returns it did with a fraction of the technology now available, what should PN and Aurizon investors be expecting in return? If you want to know more, then call me...I actually own the book.

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Sunday, 16 December 2012

Terminal and Urban shortlines - the better way to share assets

In a rail market place dominated by two national operators with several large niche players specialising in specific corridors, what happens when they find themselves in the same urban environment? Well, it's competition, right, so any thoughts of market cooperation through interchange goes out the window in favour of undercutting each other for a few 'inland port' containers. Is fighting over scraps sustainable? Of course it isn't. And the fact a smaller operator could entwine its operations with those servicing multiple corridors appears to be lost in the current environment. Even in locations where shared rail assets literally beg for a common terminal rail-operator are completely ignored. A case in point is the Brisbane Multi-user terminal at Acacia Ridge. Here the two big players, PN and Aurizon compete for terminal space that is overseen by P&O - yet despite the latter being a significant rail operator in it's own right, it does not provide terminal shunting or servicing for it's tenant operators. Instead, Aurizon and PN must both provide crews and shunt locos, plus service their own equipment - adding considerably to their own costs and duplicating terminal operations. If P&O provided all terminal services, it could be argued the operation at Acacia Ridge would be significantly streamlined...and this is important. This 300,000 TEU yard is facing severe capacity constraints, preventing corridor growth between Brisbane and Sydney. A more effectively used yard could increase capacity without needing PN or Aurizon to slug it out over who ought to pay for expansions...or new yards.

Could a common terminal operator work elsewhere? There's no reason why it wouldn't. Dotted up and down Australia's rail corridors are towns and traffic originating regions that have been abandoned by larger operators who are largely disinterested in the expense of gathering shorter haul traffic? But what if someone else did it for them? In Queensland, traffic originating locations such as Gympie, Maryborough and Bundaberg have seen all their freight outputs converted to road in the last decade, even though most industries retain rail access or access to an unused terminal. A low cost shortline terminal operator could be the answer for all of these cities, and revitalise wagonload freight (or at least that which could fit in a container) without PN or Aurizon having to invest any of their own capital or time. All that's needed is a will to instigate the concept of interchange. And this really isn't a big step. Aurizon and PN already 'interchange' with rubber-tyred operators at each of their terminals, so why would a steel-wheeled interchange be such a giant leap? It's time for terminal connections to find space in this open-access world and realise that once something is on a truck there's a good chance it's going to stay there for the entire journey.

Sunday, 2 December 2012

Interchange - Australia's forgotten traffic potential

One of the unfortunate side-effects of National Rail's formation in the early-nineties was the abandonment of interchange traffic between Freightcorp, V/line, Westrail and AN. Prior to NR's arrival, the state systems and Australian National had cooperated together, sharing rollingstock and moving each others traffic from one side of Australia to the other. A single interstate operator ended this, and now it appears open access is perpetuating the situation. So what's so good about interchange? Well, think of it this way. These days if an operator finds a traffic flow from Point A to Point B, that traffic must be large enough to generate a profitable trainload. If it isn't it may not make its way onto rail. Why? Well, if the primary corridor operator at Point A doesn't run any trains to Point B it may not be interested in the task...the rail operator at Point B could well share the same view. But what if both operators met at Point C? On paper, this would appear to be a viable point for interchange - with the operators sharing the rollingstock and profits from a single traffic flow. The trouble is, the Australian tradition of mutual cooperation has been lost in the last twenty years. There's no environment for interchange, nor are there any hard and fast rules laid down for sharing freight tasks. This could be a lack of historical awareness at a corporate level, or genuine preference to avoid sharing a limited traffic flow simply out of corporate spite. Again what appears to be lost on operators is that volume is volume. Filling your trains on your primary corridor should be more important than running a half-empty train across the country just because you're the competitor in an open access environment.