Investing to Grow

Railroads are romantic. My own brother took a perfectly good education from Northwestern University and parlayed it into a job as a brakeman on the Chicago North Western Railway (too much Kerouac during his formative years). Of course, the move has long since paid off; after going back to school for a master’s in business administration, he went on to become an executive there and at other railroad companies.

So when I began my travels this year to meet with CIOs in their offices, one visit I was really excited about was BNSF. There’s nothing like a locomotive and miles of track through remote country to ignite the imagination! What I didn’t expect to find was a lot of sophisticated IT. Yet that icon of the American past, the iron horse, has incorporated technology into just about everything it does, as Stephanie Overby found in reporting our cover story, “Investing for the Long Haul.”

IT helps the railroads route trains more efficiently, letting them increase capacity virtually without spending as much to lay new track. Fuel-optimization systems calculate the best speed at which to operate the train, based on many variables. Sensors reveal if any wheels have warped, increasing safety and fuel efficiency.

At intermodal terminals, there’s software to manage millions of “lifts” (the movement of a container or trailer to or from a railroad car), scheduling movements efficiently and keeping shippers and receivers informed of the boxes’ whereabouts. Automated gate systems use optical character recognition, digital cameras and VoIP-enabled communications kiosks to help truck drivers get their containers to the right train on time, improve safety, reduce gate processing time and reduce the time drivers (and idling trucks) spend inside the terminal. And there’s more.

What’s driving the industry’s embrace of IT is not just the desire to increase operating efficiency today but also the need to support continued growth tomorrow. Therein lies the challenge. Railroads have to increase their earnings now to justify large capital investments. IT can help accelerate those earnings and mitigate some of the need for big investments by creating more virtual capacity.

Railroads are unique in that they spend more on capital improvements than many other businesses (17 percent of revenue, compared with just 3 percent for the average retailer, for example). Yet in one regard, they are the same: How they leverage technology today will determine how strongly they’ll roll into the future.