Norfolk Southern grabs the carload visibility bull by the horns

Posted by Bill Stephens
on Tuesday, December 1, 2020

Michael R. McClellan, vice president of strategic planning at Norfolk Southern.
The railroad industry owes a debt of gratitude to Norfolk Southern and its vice president of strategic planning, Michael McClellan, for getting the ball rolling on interline tracking of freight cars.

The Class I railroads do a decent job providing shippers with car location on their own systems. But roughly half of carload traffic originates on one railroad and terminates on another. Visibility is lost upon interchange, particularly with the short lines that nurture new carload traffic, and this forces shippers to jump from website to website if they want to find their cars. 

The lack of visibility is a huge competitive disadvantage compared to truck. And it is an obstacle to the growth of merchandise traffic that provides two-thirds of Class I revenue. So the Holy Grail for railroads should be providing shippers with one-stop shopping for real-time car location – no matter where their freight is on the North American rail network. 

You’d think that the rail industry would be keen to develop interline visibility tools that can lead to volume, revenue, and market share growth for merchandise traffic. Yet the entire rail industry – Class I railroads, short lines, railcar owners, and lessors – had been reluctant to work together on a solution.

This is where McClellan filled the leadership void. 

McClellan spearheaded the creation of Rail Pulse, a joint venture includes NS, short line holding companies Genesee & Wyoming and Watco, railcar leasing company GATX Corp., and railcar manufacturer and leaser Trinity Rail. The Pennsylvania Department of Transportation jumped on board, too, which helped the coalition land a grant from the Federal Railroad Administration.

The goal: Develop a GPS-based system to track and monitor freight cars, along with an online portal that shippers can use to find their stuff. It’s supposed to debut in late 2022. The founding companies, which own 20% of the 1.6 million freight cars in North America, hope all of the Class I railroads and car owners ultimately will join the neutral platform for car data.

“Mike personally gets a huge amount of credit. He’s a very innovative guy. I heard him once referred to as a free radical in a corporate structure. He’s been very engaged in these conversations for years,” says Chuck Baker, president of the American Short Line and Regional Railroad Association.  

“NS gets a ton of credit in my book for being supportive of him and doing this at the same time they’re right in the midst of doing a gigantic [Precision Scheduled Railroading] transition,” Baker adds.

What’s exciting about Rail Pulse, Baker says, is that it will help improve the customer experience for all short lines, whether they’re a part of a sophisticated holding company or a mom-and-pop operation with just a handful of customers.

NS, of course, stands to benefit from better visibility of carload shipments moving in interline service. It connects with 250 or so short lines and regional railroads – more than any other Class I.

“The concept of visibility for your customers and a more truck competitive customer service is essential for really every short line and the entire freight railroad network,” Baker says, noting that railroads have been struggling to maintain market share in most carload freight segments.

“The dominant reason for that is we’re not as easy to work with as we should be,” Baker says. “The customer feels like once their stuff is on the freight network it’s lost in this black hole. That’s becomes less and less OK by the day.”

The Rail Pulse system will use GPS devices to track railcars in real time and monitor their health. Shippers will be able to trace their cars via a single online portal.
Todd Tranausky, a rail and intermodal analyst at freight forecasting firm FTR Transportation Intelligence, says better railcar tracking is crucial for railroads to remain competitive. “Systems that improve shipment visibility top the list of things shippers want more of in the rail industry, so anything that can provide that would be a benefit to carload markets,” he says.

Stefan Loeb, chief commercial officer at Watco, has been banging the visibility drum for years. But having a short line lead an interline visibility effort is like the tail wagging the dog, so Loeb was glad to see Norfolk Southern step up.

“Rail Pulse’s progress to date as well as its bright future could not have happened without Mike’s leadership and vision backed by Norfolk Southern’s unwavering support,” Loeb says. “His inclusive and relationship driven approach of working with car owners, other railroads, and the government is really what lifted this project off the launch pad. NS’s understanding that this is as much about relationships and solutions versus just data and technology will, in the end, make Rail Pulse go beyond any other solutions presented to the industry so far.”

GATX says it has received positive feedback from its customers about telematics, and aims to shape the Rail Pulse program to protect the interests of car owners and shippers.

“The coalition believes that the industry cannot fully maximize the value of today’s technology without involvement from all the necessary stakeholders, especially the Class I railroads,” says Shari Hellerman, director of investor relations at GATX. “Needless to say, GATX is thrilled to have NS as a partner in Rail Pulse and applauds NS’s leadership on this critical project.”

And make no mistake: The NS leadership was essential. At railroad conferences over the past five years, Class I and short line officials all said that the industry needs better visibility for carload traffic. Everyone would nod in agreement, but nothing got done – until now.

You can reach Bill Stephens at bybillstephens@gmail.com and follow him on twitter @bybillstephens

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