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Commentary: Management ‘by surprise’

Reversing rail’s slow adoption of customer inventory visibility

Between 1992 and 1994, three Class I railroads united to provide freight car location messaging. (Photo: Jim Allen/FreightWaves)

Did you know that the U.S. rail industry had a chance to be the freight industry leader in offering customers a robust cargo tracking and shipment exception service?

Yes. Between 1992 and 1994, three of the largest Class I railroads were united with American President Lines and Amtech Logistics Corp. in a venture to capture car movement data and package it for their customers’ supply chain management needs. It would have provided “freight car location messaging” (CLM in railroading terminology) with a steroid-quality improvement as to timeliness.

Over a four-year stretch, this small company developed the AEI tag software applications to take captured remote car movement data, sort it and then mix the AEI data set with other customer and railroad datasets. We had help from well-informed logisticians like Northwestern’s professor Marvin Manheim.

Yes, Amtech Logistics Corp. demonstrated a proof-of-business concept for its owners by the year 1993. Our working products included hardware, software and communications links between in-the-field AEI scanners and the company’s Dallas-located servers. 

The captured carload-level data movements became a near-real-time car location application for our customers’ computers. Live testing with one of the major tank car hazardous materials customers showed that monitoring and then sending a projected ETA update could be achieved with excellent reliability.

We could track and then trace car movements with exact clock times recorded with 99.999% accuracy as trains passed the scanner and interrogated the RFID tags on each car — recorded to the second. We were producing time series of such AEI car-level movements into a statistical predictive forecast of final car delivery to the actual preferred at customer car tracks.

With a shared network of reader access, track “ownership” was no longer an information barrier. To the data, it was as if the separate railroads had been merged as a single information enterprise.

Then, “poof”: In 1995 it was gone. Why?

Two of the rail partners believed that they could separately do this alone. They didn’t see the power of a network. Some of them thought the AEI rail car tags represented private proprietary advantage to the railroad company.

The power of a networked series of automatic identification tag radio frequency “scanners” to pick up the movement of the nation’s (plus Canada’s and Mexico’s) railroad moving cars and locomotives was not valued by a majority of that era’s senior rail carrier management. 

AEI shared data had champions, but not enough. Instead of a customer value-added service, too many senior executives viewed transparency of cargo movement as an expense. They expected customers to pay for the value added. Giving it away as an inducement to grow our business was not their path forward.

At the time, few railroad executives saw that a phone in a truck driver’s tractor unit would represent an eventual stunning GPS locational advantage for shippers that used trucks. Getting a car location message (CLM) that might be hours to sometimes several days after a car movement event was to be “good enough.” 

Maybe that was a safe financial decision way back then. But it was a blown strategic opportunity to change and become much more relevant at the time to the customers’ supply chain.

What happened next?

The pace of R&D to support a more gradual railroad transparency offering slowed. 

What happened to the1995 proof-of-concept software when we closed the joint venture?

It was given away to Conrail. I took it back from Texas on an American Airlines flight. Conrail’s information technology group still had an AEI multidepartment team trying to develop such customer- and car-level tracking and alert service applications.

But within 18 months, the mega merger breakup of Conrail started. And like the scene in “Raiders of the Lost Ark,” the Amtech Logistics proof-of-concept advanced AEI-based CLM software disappeared into a warehouse.

Traffic overall boomed mostly until 2006. Higher rail profits distracted rail managers from their previous car-level improved transparency mission. 

Jump ahead two decades — first to Europe 

Yes, sometimes a product or a new service is offered “before it is time.” Perhaps both AEI Tag Tracing and Tracking and even positive train control (PTC) got caught in such a vortex.

So where are the railroads today, in terms of expediting the movement of their customers’ valuable cargos? How good or bad is the car-level or container-level movement information situation?

In Europe, it was apparently a lot worse than in North America.

Here is an example from a now-retired railroad colleague, Bryan Stone. Old timers from IANA and many railroads like Norfolk Southern will remember Stone from his participation in North American intermodal functions during the time of heavy intermodal growth between about 1985 and 2000.

Bryan was, among other roles, the research and strategy manager for Intercontainer (IC). That was the European railways’ intermodal company. They organized intermodal operations for more than 15 of their European, mostly nationalized rail members.

Stone got into serious trouble by suggesting that in the future, shippers would demand transparency of information about their car,

At that time, the European railways had almost nothing as to locational customer or train car information.

Some Intercontainer members favored a solution requiring a more complex RFID tag than the simple one favored in the Americas. 

Instead of deploying a basic license plate or serial car number RFID car-mounted tag, many Europeans favored a tag that would have to be reloaded with data before each journey began. 

Others favored a tag that would, as in North America, be a simple, easy-to-maintain and -interrogate device. Sort of dumb. It could be interrogated via its inside-the-tag antenna. It wasn’t a smart tag and it really did not send out messages. But if you had a scanner, it could be interrogated anywhere. On a ship. In a port. Anywhere.

And it was relatively cheap to buy and easy to install onto a car or a locomotive. Heck, many of us today have a similar RFID-designed tag on our car windshield as a toll tag. 

Simple and affordable.

Yet, back then, Bryan sadly recalls that sharing rail movement data with customers was heretical thinking.

At one conference, Bryan recalls how a rail spokesperson lamented that too many train movements would arrive at the next interline partner’s tracks as an unexpected movement. 

One DB senior executive a few decades ago admitted sadly …

Back in North America

The North American UMLER fleet of over 1.6 million railroad cars were all fitted with one RFID tag on each opposite side car end. That in-the-field and on-the-car part of AEI was executed, essentially by 1995.

What did the program cost? 

About a quarter to a third of a billion dollars for the tagging part. Add in the cost of perhaps by now more than 5,000 RFID railroad tag and intermodal tag “wayside readers,” and the investment likely exceeded a half-billion dollars. Add in software systems and in today’s dollars the total CAPEX probably exceeds the billion-buck range.

That’s serious money. That is the equivalent of about:

  • 300-plus brand new diesel-electric locomotives or
  • 8,000-plus brand new railroad freight cars.

So could the railroads get more leveraged returns from that capital investment? Yes. They could.

An AEI Simple ID Tag is visible on a North American railcar.

It is not too late

Looking forward, here is the transparency future if current railroad executives step up.

Rail freight needs to become more truck-like as to timely inventory reporting.

The railroads could pivot R&D into providing applications that communicate car location messaging and next movement arrival ETA directly to their customers’ transportation management and inventory data systems.

As Michigan State’s Nick Little says, “Responsiveness, flexibility and quick reaction to changing demand signals are the name of the game in today’s supply chain management. Sensing and reacting to what is happening now are critical inputs to how it will impact a business.”

With the now-sunk investment cost into the PTC-enabled locomotives — plus the robust private PTC communications data network — the railroads could quickly reenter the logistics game.

They could buy and install more expensive smart tags. But that bypasses the simplicity of using the sunk AEI tag investment.

CFOs hate to write capex checks to add more assets to the balance sheet. That’s almost forbidden under many PSR business formulas.

Instead, the smart play is probably to build upon the vast new private rail communications broadband network that came along with the near-$12 billion reported cost for installing PTC. 

Figure out how to use software as a substitute for smarter, all-new sensors or tags. Then use database matching with the PTC communications from the locomotives to deliver the data for further processing.

Stick to the simplicity approach. Squeeze more out of the assets already owned.

Colleagues, if we change the fortune of railroading with more cargo transparency, we will awaken Bryan Stone’s interest. This week Bryan told me, “This correspondence topic has made me want to leap up, get back to work and shout, ‘That’s what we always said, now let’s get started.’”

Which railroad executive will act first?

As always, if you have a contrary opinion, please, share it.


— Research papers from Kant Rao, MIT; and Penn State University School of Logistics

— Amtech Logistics suite of AEI monitoring, reporting and predictive applications. championed by Richard Andino, Rick Hill and others from the Maritime Academy and APL Lines

— Private notes and papers authored by Jim McClellan, NS; and Steve Ditmeyer, FRA and independent PTC expert

— Nick Little, Michigan State University, managing director, Railway Management Program, Eli Broad College of Business

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Jim Blaze

Jim Blaze is a railroad career economist with an engineering background and a strategic analysis outlook. Jim’s career spans 21 years with Consolidated Rail Corporation (CONRAIL), 17 years with the rail engineering firm Zeta Tech Associates, 7 years with the State of Illinois Department of Transportation in Chicago urban goods movement research, and two years studying what to do with the seven bankrupt and unrecognizable Northeast railroads at the federal agency USRA. Now primarily a teacher and writer, Jim likes to focus on contrarian aspects of the railroad industry.