How IT is Helping the Railroad Industry Improve Efficiency and Service

Railroads are poised for a comeback, thanks to rising fuel prices. IT provides the linchpin for a shipping model that integrates ships, trucks and trains.

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The IT projects in the Norfolk Southern pipeline are focused on increasing overall productivity and decreasing costs. These include a new dispatch and traffic-control system to improve scheduling, transit times and service, as well as the next generation of a tool to optimize railcar-trip planning and provide dynamic routing (to be rolled out during the next year). The railroads would need to integrate even more with each other to improve the overall flow of the rail network, analysts say. Although the Class 1s have negotiated rights on each other's tracks, traveling on track they don't own can be more costly. And for the most part, the railroads choose the lowest-cost—not shortest-distance—route, often to the detriment of their customers, says Tanowitz.

Some wonder whether the railroads want to improve their services to compete more directly with trucking companies. "Investment in a truly integrated intermodal supply chain has been a lot of talk but not a whole lot of investment," Rutchik says. "The question is whether this is an incremental change based on an exceptional spike in fuel prices or this is an area they're going to really invest in and become a more viable third-party logistics provider."

The numbers tell the story, counters Butler of Norfolk Southern. "If customers didn't see value in intermodal as it exists today, they wouldn't be using it," she says. "We have the capacity and it's lower cost. Rail does not move as fast, in general, as highway traffic, and we have a lot of work to do. But our expectation is for continued intermodal growth."

Although improved service and increased capacity may enable the railroads to take business away from the $150 billion trucking industry, there's one thing everyone agrees on: Rail will never fully replace long-haul trucking. "You would have to increase (rail) capacity by far more than economically could be justified," says AAR's White. "But long-haul transportation may increasingly move more by rail, and it will continue to be the key to our growth."

Stephanie Overby is a freelance writer based in Boston.


Copyright © 2008 IDG Communications, Inc.

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