Zero Based Plan Review Overview of Methodology

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Zero - Based Plan ReviewOverview of Methodology
Results
Surface Transportation

• 22 October 2008

Prepared for 2008 Users Conference Princeton NJ
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Agenda

• Network Redesign
• Undertaking a Base Plan review
• Results and Case Studies

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Network redesign requires a whole picture
approach beyond a hub strategy.Before any
network changes are made to a single production
system like wagonload, it is critical to look at
the full traffic base and the full network to
understand the reality of utilizations and the
scale of opportunity.

• Across all traffic types, what are the railways
• Total train kilometers?
• Total wagon kilometers?
• Total handlings?
• Wagon groups built each day?
• Train hours required each day?
• Locomotives, wagons, and drivers needed each day?
• ?

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How Cars Spend Their TimeGeneral service rail
cars spend the vast majority of their time in
activities other than moving in trains

• The 15 of time that rail cars are in trains is
  often the focus of railways trying to increase
  their efficiency
• The real opportunity is to reduce the dwell time
  when the rail car is not moving

Cycle Time ComponentsAll car types in general
service
Source Reebie Associates, Toward an Effective
Demurrage System, 1972
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Wagonload network redesign Hub reduction
strategy the concept.Railways often imagine
that the reduction of yards can increase rail car
productivity and reduce costs
Original Network
Redesign Network
National Hub
One yard reduction
National Hub
Regional Yards
Local Yards
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Wagonload network redesign Hub reduction
strategy potential consequences.However,
closing rail yards without regard to the overall
affects in the newly reduced network may actually
increase inefficiency and the overall wagonload
system costs.
Original Network
Redesign Network
National Hub
One yard reduction
National Hub
Regional Yards
Local Yards
Handlings
There are 5 trains and 4 handlings in the
original network.
The new network has the same number of total
handlings spread over fewer yards, creating the
perception of higher efficiency.
Kilometers per average wagon
The total kilometers traveled by wagons is often
higher than the shortest route due to the
gathering hierarchy.
Total kilometers traveled increases with the
reduction in the number of yards, which reduces
the savings from the yard closure.
Train utilization
Train capacity utilization equals Total wagon
kms Total train kms
The increase in wagon kms, while operating the
same total train kms, gives a false sense of
increased wagon utilization.
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Redesign requires an understanding of the whole
networkThe redesign of a production systems
requires a holistic analysis and understanding of
the whole network
New approach

• Reducing the number of parallel networks to
  generate overall network efficiency
• Reducing the operations in infrequent trainload
• Dissolving the strict hierarchical production
  system
• Planning based on traffic flows and not focused
  filling up trains
• Focus on a small number of KPIs
• average number of handlings per wagon for the
  whole network
• total train kilometers which links directly to
  cost and no focus on wagon kilometers
• utilization defined as length and tonnage

This approach requires powerful tools to handle
complexity and reveal hidden potentials
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Background Rethinking the Railroad Operating Plan

• Two concepts have become intertwined
• Scheduled railroad
• Zero-based operating plan development
• Driven by two beliefs
• A railroad that executes to plan will also be the
  most profitable operation
• One cannot run a scheduled railroad effectively
  if the plan is not carefully matched to the
  traffic
• Improve yields and customer service by
• Accelerating asset velocity through the network
• Reducing handlings and using the most direct
  routings
• Restructuring the yard and local train gathering
  and distribution network
• Focusing on high volume O-D pairs to simplify the
  network and improve service reliability

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Background Rethinking the Railroad Operating
PlanKey to a well tuned operating plan is to
construct the plan around the traffic

• Process of improving the efficiency and
  resiliency of an operating plan includes
• Build the operating plan around the traffic
  (customer demands)
• Use computer analysis to identify improvement
  opportunities
• Start with the classification or car routing plan
  first, build trains to support this plan
• Restructured local service improves gathering
  distribution performance
• Yard operating plans increase reliability
  reduce delays
• Key statistics such as car-days, handlings,
  gross-ton-miles, crew starts, and train miles
  should be used to benchmark plan changes
• Benefits of a Zero-Based operating plan
• Executable operating plan matched to traffic by
  day-of-week
• Allows fundamental philosophy shift in how
  service is designed(basing the plan on customer
  demand from the bottom up)
• Usually results in reductions in
  handlings,car-miles, and car days
• Can significantly improve customer service
• Signals intent to change to organization
• For North America, a well executed zero-based
  plancan result in a 2 to 5 recurring reduction
  inoperating expense

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For Carload, Minimizing Handlings, Car-Miles
Train Miles is CriticalThese factors, plus
terminal performance, train reliability local
service quality, determine product costs,
quality, asset velocity, and fleet requirements

• Handlings, local service, and train-miles are
  prime determinants of carload operating costs
• Cycle times are critical in determining
• Total fleet requirements for railcars and
  locomotives
• Customer service levels
• As the determinant of fleet requirements, cycle
  times impact millions of dollars in investment
  decisions
• Changing train speed will have little impact on
  total transit time or railcar asset requirements
• Improving local service delivery and reducing (or
  eliminating) yard time will have a much bigger
  impact as it represents a larger proportion of
  total transit time
• Improving yard connection reliability is one of
  the best ways to reduce transit time and increase
  asset velocity
• From a customers perspective, it is car or
  shipment velocity, not train speed, that matters

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The Classification (or Blocking) Plan is the Key
Determinant of a Carload Operating Plans
Efficiency

• The classification or blocking plan determines
• The efficiency of shipment routings
• The workloads by station
• The train make-up requirements
• The customer service attributes
• Thus, carload planning processes should start
  with a comprehensive review of the blocking
  plans fit to the traffic and network
• This should include both main line and local
  services
• All other plan elements are then built around the
  marshalling plan
• Understanding Marshalling or Blocking is
  critical to the process

• Definition of a block a group of railcars with
  diverse origins and destinations that move
  together between a pair of locations
• The composition of a trains is based on what
  blocks it carries
• The purpose of a classification yard is to make
  blocks

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Blocking Plan Improvement Strategies
Bypass Opportunities - Identify pairs (or
sequences) of blocks with common traffic and
volume high enough to justify a direct block
If 25 of the wagons in the A-C block enter the
C-D block, build a direct A-D block, saving wagon
handlings at C
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Blocking Plan Improvement Strategies

• Circuity Measures difference between shortest
  distance and distance traversed in accordance
  with wagons block sequence
• Validates and optimizes to identify missing
  blocks and opportunities to reduce wagon-kms
• Direct route is not always best choice

Direct route exists from A to B but blocking plan
forces traffic through C
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Agenda

• Network Redesign
• Undertaking a Base Plan review
• Results and Case Studies

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Methodology Designing the Blocking PlanThe key
to improving operational efficiency is to start
with customer demand (traffic), and develop the
blocking or routing plan based on the traffic.

Create initial plan

Sequence traffic over blocks

• KPIs
• Intermediate handlings
• Tonne-kms
• Wagon - kms
• Wagons handled by yard
• Shunting groups by yard

Revise blocking plan
Identify circuity issues
Find bypasses
This process can be automated to improve key
performance indicators (KPIs)
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Methodology Designing the TrainsBy building the
trains based on the blocks, we continue the
process of designing the plan based on customer
demand and ensuring a match to network flow
patterns
Estimate volumes

• KPIs
• Train-kms
• Wagons/train
• Crew starts
• Enroute work events

Select largest unassigned blocks
Set train frequency
Examine connections
Build trains around selected blocks
Assign other blocks to balance train size
Adjust arrival departure times
Examine volumes
Set crew locomotive
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Agenda

• Network Redesign
• Undertaking a Base Plan review
• Results and Case Studies

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Significant operational improvements have been
achieved Railways that have undertaken a base
plan review have accomplished significant
improvements in the key cost drivers with
impressive results
Intermediate handlings
Wagon routing inefficiency
Local delivery costs
Average Handlings per wagon
Euros per delivered wagon
Percent of excessive kms
The focus on network operations allows for the
stabilizing of local operations reducing costs to
critical levels for viable wagonload
The use of multi-block trains allowed for the
large improvement in wagon routing leading to a
reduction in train kilometers operated
The reduction in intermediate handlings allowed
for the reduction in yards and an increase in
average speed quality
Source Oliver Wyman Analysis
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Service quality and financial returns have
improved The improvements in network design
coupled with the enhanced operational performance
has allowed for quality service increased returns
Delivery Quality
Loadings per wagon
On time delivery lt1 hour
Percent of excessive kms
The increasing stability of daily operations on
top of using the power of the network allows for
impressive increases in quality
High quality service and stable operations has
allowed for consistent improvements in wagon
utilization increasing the returns from wagonload
Source Oliver Wyman Analysis
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Case Study Canadian Pacific RailThe redesign of
the production architecture and the single wagon
traffic led to significant reductions both in
the transit time and production costs for CP Rail
Project Genesis
Relative Changes in the Key Performance
Indicators for CP Rail
Project Genesis, started in 1998, focused on the
redesign of the single wagon network with the
help of MultiRail by creating multi-block trains
and block swaps

• Wagon velocity increased up to 45
• Train weights increased up to 8
• Train velocities slowed marginally due to
  increased yard dwell

Key Concepts

• Anchor Blocks
• Redesign of yard hierarchy a strict yard
  hierarchy leads to excessive yard costs and
  dwells
• Lengthening of unit trains Adding wagon load
  blocks to units trains increases length and
  reduces loco requirements .. (e.g. UK coal
  trains have gone from 600m to 1400m in past 5
  years)

Project was awarded the 2003 Franz Edelman Prize
for the best example of applied operations
research by the Institute for Operations Research
and Management Science
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NS Thoroughbred Operating Plan

• Zero-based plan created during first half of 2001
• Six month phased implementation processcompleted
  at the end of January, 2002.
• Significant reduction in car hire
  costs/improvedcar velocity
• Modest reductions in handlings and car-miles
• No change in average train sizes
• Strong improvement in customer service
• Work continued through 2004 focusing on
  interlineservice studies and yard closures.
• Estimated savings in excess of 150 million/year

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CSX ONE Plan MandateFocus primarily on carload
and automotive services, creating a clean sheet
or zero-based plan

• Reduce car handlings car miles
• Move towards a scheduled railroad
• Improve reliability
• Improve plan responsiveness to changing needs
• Build plan from ground up based on traffic
• Simplify plan
• Improve operational resilience
• Operability
• Recoverability
• Tighten yard performance through yard operating
  plans
• Review and adjust local services to extent
  possible
• Ultimately reduce train-miles, but only after
  operations stabilized

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Case Study SNCF Frét MultiRail is now the
integrated planning platform for SNCF Frét

• Mercer MultiModal is providing SNCF with its
  primary production planning system for the "Plan
  de Transport" 
• MultiRail Enterprise Edition is being integrated
  with SNCF Fréts existing systems including
  direct transfer of data (trains, blocks, traffic)
• System installed in production in Lyon and used
  in multiple locations throughout France
• The current wagon load restructuring at SNCF was
  done using MultiRail to design the new operating
  plan
• Used to evaluate three successive semi-annual
  plans
• Multiple special studies also undertaken for
  specific parts of the business
• MultiRail provides SNCF with a complete
  representation of its operating plan and has
  become the common language for discussing
  operational issues throughout the organization

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