Framework for Railcar Maintenance Management

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Framework for Railcar Maintenance Management

• Risks of Not Maintaining a Healthy Railcar,
• From a Fleet Managers ViewpointKen Henman

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Risks of Not Maintaining a Healthy Railcar

• Direct Costs
• Maintenance and meeting regulatory requirements
• FRA, Federal Railroad Administration
• AAR, Association of American Railroads

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FRA- Code of Federal Regulations 49 Parts 215,
231 and 232

• Part 215 Freight Car Safety Standards applies to
  all railroads that operate freight train service
  which is part of the general railroad system and
  includes
• Instructions for movement of defective cars
• Designation of qualified persons for inspection
• Requirements for pre-departure train inspection
• Requirements for initial periodic inspection
• Requirements for inspection and identifying
  defects for freight car components as follows
  Suspension, Car Bodies, Draft System, Restricted
  Equipment, Stenciling
• Part 231 Railroad Safety Appliance Standards
  applies to all railroads that operate freight
  train service which is part of the general
  railroad system and includes
• Minimum mechanical requirements for handbrakes,
  brake steps, running boards, sill steps, ladders,
  handholds, uncoupling levers for all railroad
  equipment
• Part 232 Brake System Safety Standards applies to
  all railroads that operate freight train service
  which is part of the general railroad system and
  includes
• Federal safety standards for train brake systems
  and equipment

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FRA- Code of Federal Regulations 49 Parts 215,
231 and 232

• From CFR 49 Parts 215, 231 232
• Any person who violates any requirement of
  this part or causes the violation of any such
  requirement is subject to civil penalty of at
  least 550 and not more that 11,000 per
  violation, except that Penalties may be assessed
  against individuals only for willful violations,
  and, where a grossly negligent violation or a
  pattern of repeated violations has created an
  imminent hazard of death or injury to persons, or
  has caused death or injury, a penalty not to
  exceed 27,000 per violation may be assessed.
  Each day a violation continues shall constitute a
  separate offense.

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AAR- Association of American Railroads
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AAR- Association of American Railroads

• Field Manual and Office Manual of the Interchange
  Rules, Safety and Operations Rules and Standards
• AAR Field Manual Rule A (paraphrased)
• These Rules apply only to subscribers and are
  formulated in two manuals designated AAR Field
  Manual and AAR Office Manual, as a guide to
  the fair and proper handling of all matters
  contained therein for the interchange of freight
  traffic, with the intent of
• 1.a. Making car owners responsible for and
  therefore chargeable with the repairs to their
  cars necessitated by ordinary wear and tear in
  fair service, safety requirements and by the
  Standards of the Association of American
  Railroads
• 2. All freight railroads and interchange
  freight car owners must subscribe to the AAR
  Interchange Rules

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Direct Maintenance Costs

• These are minimum mechanical requirements as set
  by the Department of Transportation Federal
  Railroad Administration and the Association of
  American Railroads
• Railroads and Car Owners must comply with these
  requirements as an absolute minimum
• This is reactive maintenance, corrective
  maintenance, repair of failures, which is
  essentially emergency maintenance

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The Iceberg of Maintenance Management
Direct Maintenance Costs FRA and AAR
Repairs Loading and Unloading Equipment
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Direct Costs FRA and AAR Repairs Loading and
Unloading Equipment
Indirect Costs Costs of Under Maintaining Loss of
Deliveries/Sales Opportunity Loss Out of Service
- Reduced Utilization Cost of Additional Short
Term Capacity Cost of Unplanned Maintenance Cost
of Deferring Maintenance Reduced Asset Life Cost
of Replacements Safety Casualty Loss
Liabilities
Cost of Doing Nothing
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Understanding Indirect Costs

• Opportunity Cost / Opportunity Loss
• Deliveries missed /Direct sales missed
• Cost of inactive inventory
• Compounded by sales intervention from competition

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Understanding Indirect Costs

• Out of service-reduced utilization
• Preserving asset value and the function of that
  asset as intended
• Return on Assets Revenue/Asset Value
• Revenue Price x Volume
• Volume Maximum Capacity x Overall Equipment
  Effectiveness (Reliability)
• Reliability increases revenues due to increasing
  equipment utilization and performance

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Understanding Indirect Costs

• Cost of additional short term capacity
• Effort to protect against opportunity loss
• Short term/trip lease tends to be expensive
• Time consuming efforts can be better directed
• Reliability risk remains for unfamiliar equipment

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Understanding Indirect Costs

• Cost of unplanned maintenance
• The delta between corrective maintenance and
  planned maintenance
• AAR Office Manual pricing matrix, current labor
  rate 94.81
• Short term need without negotiating efficiencies

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Understanding Indirect Costs

• Cost of deferring maintenance
• Historical increases past to present
• 26 increase in AAR labor rate since 2003
• 66 increase in AAR wheel material costs since
  2003
• Strain on condition of associated components
• No opportunity for root cause analysis and
  avoidance of repeat repair
• Maintenance recovery cost

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Understanding Indirect Costs

• Reduced asset life
• Preserving asset value
• Asset value initial cost life cycle cost
• Inadequate or insufficient maintenance viewed as
  cause of failures
• Cost of replacements and/or capital upgrades
• Comparison of maintenance cost and/or capital
  upgrade to asset replacement

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Understanding Indirect Costs

• Safety and casualty loss liabilities
• Not only FRA and AAR but OSHA
• Direct and indirect costs of workmens
  compensation
• Negative effect on customer-supplier relations
• Handling line personnel and property damages

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Cost of Doing Nothing

• Status Quo- The Truth
• Safe, accepted alternative
• Avoids professional risk
• Comfortable, simple solution
• Defers responsibility
• Cost cutting cure-all
• Spend to save?
• Procrastination or organizational fatigue
• Organizationally overwhelmed
• Staff inexperience
• Inability to make informed and effective
  decisions

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Cost of Doing Nothing

• Status Quo- The Consequences
• Reliability
• Missed deliveries
• Opportunity cost-loss
• Opportunity for competition
• Perception of asset value
• ROA
• Higher cost of unplanned maintenance
• Total cost delta
• Cost of deferring maintenance
• Multiplied 3-10 times

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Cost of Doing Nothing

• Status Quo- The Consequences
• Effect on asset life
• Reduced life expectation
• Uncontrolled maintenance and capital budget
• Forced realignment of capital reducing growth
  opportunities
• Cost of replacements or capital upgrade
• Inefficient and unexpected use of capital
• Casualty loss liabilities
• Expense of risk

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Costs of Over Maintaining

• Uninformed decisions
• Justified repairs?
• Poor planning
• Effect on deliveries
• Shortened component life
• Too soon/Too late
• Unnecessary out of service
• Reduced utilization

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Summary

• Keys to a successful maintenance program
• Reliability
• Cost control, spend to save
• Attention to sustained asset utilization
• Risk management and loss control
• Maintenance has a role in any complete asset
  management plan
• Maintenance must be viewed as a contributor to
  long term profitability