Rail networks pick up speed but challenges abound

By its very nature, the development of new and existing rail routes in the US is destined to be gradual and is at the mercy of the transport requirements of many other goods, most of them in much greater quantities than finished vehicle movements as Simon Duval Smith reports

Expansion is reportedly underway on some routes, such as the recent news that the Georgia Ports Authority (GPA) approved a $92 million, 23-mile addition to the track at its Garden City Terminal as part of the Mason Mega Rail project. This will no doubt help to build on GPA’s August 2018 record of moving 375,833 Twenty-foot Equivalent Unit containers (TEUs), an 8% increase over August 2017. In addition, the GPA handled 86,200 intermodal TEUs, a 33% jump. The project will double the Port of Savannah's annual rail capacity to one million containers and deliver the largest on-terminal rail facility in North America by 2020.

"It is no accident the GPA is constructing rail capacity as the demand for rail is growing," says GPA Board Chairman Jimmy Allgood. "As part of our strategic planning two years ago, our team identified the growing role intermodal cargo would play in GPA's long-term success and put into place this plan for expansion."

The work approved by the board includes 124,000 feet of new track, 88 automated switches and rail control devices, as well as the rail and power infrastructure to support the operation of rail-mounted gantry cranes.

The added rail capacity will better accommodate 10,000-foot long unit trains at the Garden City Terminal. These more cost-effective trains will provide faster, more frequent service over greater distances. This will extend the territory best served by the Port of Savannah along an arc of cities ranging from Memphis to St. Louis, Chicago and Cincinnati.

To gauge the current state of play of finished vehicle transportation on rail networks in North America, I spoke to Dave Fleenor, assistant vice president, Automotive Marketing at BNSF, and Kelley Anderson, Vice President Sales & Marketing Automotive at Kansas City Southern (KCS).

BNSF - finished vehicle award winning expertise

BNSF Railway Company was recently honoured by Honda for excellence in transportation. American Honda Motor Co., Inc. President and CEO Toshiaki Mikoshiba presented the company’s annual Premier Partner Awards to 15 suppliers that demonstrate excellence in quality, value and customer service. Earlier this year, Honda celebrated its 25 millionth automobile built in the US at its Ohio-based plant. Twelve different Honda and Acura models are built at five Honda auto plants located in the US. BNSF was recognised for efficient and reliable railway transport of finished vehicles. “The Premier Partner Award winners exemplify Honda’s philosophy of meeting and exceeding customer expectations,” said Charles Harmon, senior manager, Administration Division, American Honda. “They provide Honda with exceptional service each and every day, and we thank them for their continued commitment to our business.”

“BNSF is honoured to be recognised by American Honda for the eighth time since the award’s inception,” said Dave Fleenor of BNSF. 

BNSF's Logistics Park Kansas City (LPKC) Intermodal Facility in Edgerton, Kansas, opened in October 2013. LPKC is a more than 1,550-acre master-planned distribution and warehouse development anchored by BNSF's newest intermodal facility

I ask Fleenor about one of BNSF’s major Japanese transplant customers, Nissan, in the context of the increasingly high outputs from auto plants in the southern states. Nissan has established a 'logistics superhighway' with good access to rail lines and equipment, along with a highly-utilised truck network. I wondered how BNSF 'meshes' with this type of operation, with OEMS for finished vehicle deliveries. Fleenor says that BNSF’s rail network is a critical component of the North American automotive supply chain. “We ‘mesh’ in a number of different ways with our customers’ supply chains," and he says the following areas are the most critical, and he lists BNSF’s offerings as:

  • Being able to offer direct-rail service to all major US West Coast ports including exclusive access to National City, California – the largest auto import location in the west
  • Twenty auto facilities covering all major metropolitan areas in the western two-thirds of the US
  • The Birmingham, Alabama facility which is centrally located between nine OEM manufacturing facilities.

BNSF also serves numerous inland ports. Primary examples include Logistics Park Kansas City, Logistics Park Chicago, and its Logistics Park in Alliance, Texas.

Fleenor goes on to talk of the company’s commitment to service, noting that BNSF handles over one million more loads than any other rail provider in the service-sensitive intermodal market and has an automotive train network providing optimal service reliability.

Innovation and collaboration

BNSF has deployed numerous technological upgrades across its automotive network to improve supply chain fluidity and consistency. E-PoD, GeoBaying, and Automated Gate Systems (AGS) are a few key examples:

  • Electronic Proof of Delivery (E-PoD) - eliminates the paper load sheet and provides carriers with the ability to submit damage details electronically
  • Automated Gate Systems (AGS) – unmanned gates with 360-degree cameras allow truckers to get a comprehensive in-gate and out-gate inspection at a fraction of the time compared to conventional processes
  • Geo-Baying – electronic assignment of parking bays by OEM, destination and haul-away allow for quicker and safer truck operations inside BNSF’s facilities.

Communication is key to any effective supply chain management system and Dave Fleenor says, “We’ve enhanced our online tools (Automotive Portal) to provide OEMs and truckers better transparency to their freight. We communicate with our OEMs and supply chain partners regularly. We conduct regular OEM and haul-away summits to understand challenges and push for collaborative solutions.”

Infrastructure challenges and solutions
Dave Fleenor

Dave Fleenor

Some of the interviews have I made with OEMs and other players for this issue of the magazine brought up bottlenecks in rail as a major bugbear so I asked Kelly Anderson of KCS and Dave Fleenor of BNSF what they see as their greatest challenges in shipping finished vehicles within the US. Are they due to infrastructure, shortage of rolling stock, shortage of train drivers etc? Kelley Anderson says that there is a troubling imbalance on different routes. “Most of KCS’ automotive operation takes place from Mexico to the US. There is an imbalance between finished vehicles moving to the US market versus finished vehicles exported to Mexico. 

“At times, this creates challenges relying on empty equipment provided from the US railroads. We maintain a strong relationship with connecting railroads to help our customers achieve their goals.”

Dave Fleenor lists key areas where BNSF would like to see improvement improvement for the automotive supply chain as: “Increased haulaway capacity; the shift in sales from passenger cars to trucks/SUVs has impacted the average load factor of haulaway trucks. Many truckers have seen load factors decrease from eight to nine loads per truck to five or six. Even without sales growth in the industry, this effect is having a material impact to truck capacity.

“Freight smoothing; there is a great deal of seasonality associated with vehicle shipments (bulges of freight at end of quarter, end of month, end of week). These freight bulges stress available rail and truck capacity. Smoothing freight demand patterns will allow us to take advantage of available capacity and improve delivery times.

“Expanded dealer delivery windows – OEMs, truckers, and railroads are primarily 24 x 7 operators. Many dealers, however, are not, causing back-ups, dwell and lost productivity. Expanding dealer delivery times to nights and weekends, for example, could significantly improve the overall finished vehicle supply chain.”

Mexico - vehicle volume and size pressures
Dave Fleenor

Kelley Anderson

There are some infrastructure and capacity limits in Mexico, including congestion at the border and across the rail network. There are also questions around port handling and space in places like Veracruz and I ask Dave Fleenor for his take on the limits of finished vehicle transportation out of Mexico, especially considering the growth in the sizes of vehicles that are being made there. He says that BNSF is seeing higher finished vehicle volumes in and out of Mexico and, “We expect this growth to continue. Mexican railroads are making the necessary investments in their networks and border crossings to handle this growth. We have heard from our customers about the growing capacity issues at Mexican ports. Adding port capacity is not a short term fix, so rail transport from Mexico should continue to see strong gains as a result.”

Kelley Anderson of KCS says that the growth of automotive production in Mexico has been a subject of study for KCS for quite some time. “Over the last several years, our strategic planning teams have addressed capacity on our lines by building a new switching yard, adding new sidings, shunting yards, creating new service designs, and improving border-crossing services. We have also acquired rail equipment as needed to supply our customers with the assets needed for consistent and reliable service.

“Constant communication with the OEMs and market research has put us in a good position to handle the current growth, while we continue to prepare for future production growth.”

Security and damage challenges

Theft and damage has traditionally been a major problem with vehicles travelling by rail generally, and particularly to and from Mexico and I ask Kelley Anderson for KCS’s policy on this areas. “Security is a big component for OEMs’ decision-making with regard to choosing their mode of transportation in Mexico,” he says, adding: “KCS prides itself on providing a formidable obstacle to automotive vehicle threats versus competitive rail and different modes of transportation. KCS has made significant investments in the last few years in security, rail infrastructure, equipment, etc. to increase the quality of service we offer our customers. Rail can move a large quantity of vehicles in an efficient and economical fashion. As a result, vandalism on KCS de Mexico is not an issue as theft and damage rates are at 0.3%.

Dave Fleenor says that BNSF has made considerable investments in improving security but he won’t quote figures. “We recognise that a safe and secure railroad network is important to our stakeholders. Our automotive facilities are designed with security in mind. BNSF has the best incident-free rate in the industry.”

Kansas City Southern's routes “Most of KCS’ automotive operation takes place from Mexico to the US. There is an imbalance between finished vehicles moving to the US market versus finished vehicles exported to Mexico.” - Kelley Anderson, Kansas City Southern

KCS has set up a new secondary examination station at Laredo and I ask Kelley Anderson about the strategy behind this move. “The Secondary Examination Station is part of the ‘Secure Corridor’ cross-border rail operations strategy, which is intended to strengthen security, reduce blocked crossing time, and create better fluidity by removing current operating obstacles to the non-stop movement of trains across the border between the US and Mexico. This Secondary Examination Station is used for all traffic crossing the border,” he says.

Network planning and IT

Many industry executives and observers - some might say critics - often say that the automotive supply chain, particularly on the outbound side, lags behind the rest of the automotive industry in harnessing the power of IT. I ask Kelley Anderson what sophisticated network planning tools, systems and IT is KCS is and will in the future use maximise the usage of its trains and other assets. He says that KCS uses a variety of tools to optimise the use of its rail assets, including track, locomotives and rail car assets and uses simulation and modelling tools for strategic network planning and tactical execution. “An example is the Berkeley Rail Traffic Controller software, which simulates the movement of trains through the network. This tool allows our network planning team the opportunity to develop service plans and model what-if scenarios. The objective is to continuously improve rail operations, service, and asset utilisation, as well as to plan capacity investments in track infrastructure.”

KCS has also partnered with Biarri, a cloud based platform for scalable railroad and rail shipper planning, scheduling and operations software, to develop a strategic locomotive planning tool, as Anderson tells me: “This tool takes into account numerous variables and creates a power or locomotive plan to help ensure we have the right number of locomotives at the right place and time to efficiently move our trains."

He goes on to explain how KCS’s IT systems 'mesh' with its customers' and ongoing transporters and what needs to improve to create a seamless 'end to end' transport network that never runs empty or inefficiently. “KCS customers depend upon reliable services to efficiently manage their supply chains. Efficient and timely communication is a key component in developing and executing our operational plans and providing excellent customer service. KCS relies heavily on the electronic collection, processing, and sharing of information to meet our service objectives. This is most often accomplished with the use of EDI, APIs and web services. “A basic, but important, example includes sharing customer shipment status information. This information may be critical in identifying exceptions and supporting timely decision-making. Another more complex example is the extensive information sharing that is needed to efficiently handle a multi-modal shipment moving between countries, through brokers and between customs agencies. There are certainly opportunities to improve the type, frequency and quality of information being shared. With respect to the latter example, KCS is conducting a blockchain pilot with IBM.

“In addition, KCS continues to deploy and gather sensor data (IoT devices) in an opportunity to reduce unintended down time. Real time, accurate communication between KCS and its customers and partners is a priority. Information sharing is a critically important aspect of ensuring a supply chain never runs empty or inefficiently.”

Customer relations and rolling stock

Some OEMs say that there been resistance from the rail companies to 'wholesale' their services to them as single large OEM customers, they have said that they are more accustomed to dealing with logistics companies. I ask Dave Fleenor whether this attitude is changing as volumes increase and thus OEMs can offer greater and longer contracts. “BNSF does business with OEMs, motor carriers, and logistics companies across the entire spectrum of the automotive supply chain. BNSF’s customer interactions are dictated by the mode of transport selected (autorack, boxcar, container/trailer, etc.),” he says.

On the subject of finished vehicle railcars ; these have traditionally taken a long time to be built and certified. I ask Fleenor about the current situation and whether it is improving. He says rolling stock makers are more motivated than ever. “We have ordered and received all 1,800 of our new autoracks in the last 18 months on schedule. Car builders are motivated to get equipment to market as fast as possible, so improvement in turn times will happen as advances in processes and technology occur, and BNSF acquires cars from all the major North American railcar manufacturers.”

OEMs have and increasingly are moving production sites to the southern states, along with incoming European and Japanese and Korean carmakers. Kelley Anderson says that the changing profile of OEM plant locations has some effect on the flow of rolling stock: “When new plants are established, it affects the flow of empty and loaded rail cars in the railroad network. Since the railroads pool equipment, this could affect railcar supply.”

While on the subject of railcars, Anderson is keen to point out that KCS has no open car carrying rail cars. “Our entire finished vehicle rail car fleet is enclosed to protect our customers’ product,” he says.

Owning versus leasing and manpower

The ownership versus leasing models of car carrying rolling stock have varied a great deal over the years and I ask Anderson what is the mix of self-owned rolling stock and stock that KCS and its customers routinely lease. He says that sharing is key to a successful utilisation model. “KCS owns and leases 100% of the automotive rolling stock we provide in the automotive railroad pool. They consist of bi-levels, tri-levels and Automax equipment. Given the automotive industry pools equipment, it is shared on an equity basis between participating railroads.”

Many areas of the automotive industry are coming up against manpower shortages, from truck drivers, rail drivers to line operatives in assembly plants. Dave Fleenor says BNSF is being proactive in this area. “In most cases, the crews at our automotive facilities are third-party contractors who flex their manpower based on the demand. BNSF has a hiring plan in place to onboard 4,500 new mechanical, TY&E (transportation, yard, engine) and engineering employees in 2018.”

EVs and hybrids

EVs and hybrids are increasing in every OEM's line-up of new vehicles. I ask Kelley Anderson what special policies/systems does he and will he have to adopt for safety with these new vehicles. “KCS works very close with the OEM and the Association of American Railroads to coordinate new products and provide specific training to employees at all KCS ramps, even though the volume of these types of vehicles is still very low,” he says.

Investment and environmental concerns

KCS recently announced that it has invested in 50 locomotives from GE, and I ask Anderson which elements of the business is this in response to and how many of these will pull finished vehicles on the rails? He says that this recent acquisition of this equipment is to support the growth of all KCS’s business segments, including energy, grain, intermodal and automotive.

As petrol prices have fallen so demand for SUVs and larger vehicles has increased in the US. I ask Dave Fleenor what effect has this had on BNSF’s finished vehicle rail infrastructure, given that it could mean less vehicles per load. “Consumers continue to buy SUVs, crossovers and pickups,” he says, adding: “As a result, the volume of finished vehicles we move in bi-level railcars is up, yet overall vehicle sales are relatively flat. BNSF has invested significantly in bi-level auto racks in the past year. We have sized our fleet and facilities to support the business levels we are seeing.”

The environment is of increasing concern to all of society, cars and trucks and SUVs are increasingly cleaner on emissions and lower on fuel consumption and I ask Anderson how well does he think the rail industry is keeping up in the race for greener transport. He says that KCS recognises its environmental responsibilities as a corporate citizen. “We work to achieve high standards in fuel efficiency and in reduce, reuse and recycle programs. Additionally, we have aligned ourselves with a number of organisations established to help ensure a cleaner environment and public safety.

“A train can haul one ton of freight 480 miles on only one gallon of fuel. That efficiency means better fuel economy, fewer greenhouse gas emissions and a more sustainable future.

“KCS owns one the youngest locomotive fleets in the industry, which includes new and overhauled locomotives for emissions reduction and fuel efficiency. 

“KCS participates in cross-functional committees focused on fuel efficiency and conservation to set standards, publish guidelines and monitor locomotive fueling, fuel consumption, train handling, and shutdown and isolation procedures as well as evaluate new technologies and promote efficiency efforts among employees.” 

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