Commtrex and Rockwood Steel study addresses operations gaps in freight railroad sector

Commodities shippers that typically move freight via railroad carriers can face different challenges on a day-to-day basis for things like service issues and asset management, among others.

A recent study issued by Houston-based Comtrex Inc., an open electronic railroad marketplace focused on bringing transparency and analytics to commercial transactions between rail shipper storage providers asset owners, and service providers, in conjunction with Rockwood Steel, a full service railroad management consulting firm, entitled “2017 Market Insight Report: Rail Asset Management Ranks High Among Operational Resource Priorities,” takes a deep dive into capturing insight regarding how the commodity shipping industry places a high priority on transportation management initiatives as they related to buying, selling storing, and servicing railcars.

A key objective of this research, which was based on online feedback from 52 rail commodity shippers, was to understand supply chain workload levels and efficiency when utilizing rail transportation.

The report is replete with key takeaways addressing this objective, including:

• only one in three shippers are willing to integrate new technologies to improve workflow processes;
• the most beneficial services for shippers include rail assets marketplace, historical freight rates and trends and operations dashboards;
• on average, 83.5 hours per month is spent procuring rail services for existing assets, and rail movement operations take an average of 127.9 hours per month
• operationally, management desires more data-driven tools for making transportation decisions. This includes transparency and completeness around freight rates, real-time operational dashboards, and an open marketplace to support rail asset management. To support their interest, they would allocate fifty-seven percent of their funds to resolve these needs; and
• due to the lack of automation efficiencies or effective software, fifty-four percent of operational teams rely upon consultants, 3PL, and brokers to provide these financial-related insights, among others

In an interview with LM, Comtrex Founder and CEO Martin Lew explained the impetus for this research was based on an investment thesis focused on how there is a tremendously wide space in the North American rail market, with the need for a way to bridge the “old school way of things” in rail with technology.

“It is really about the intersection of creating that efficiency, transparency, and connectivity, which had not really been done,” he said. “In the past there had been things like message boards and classified listings to do this, but nobody had really tried to build a cloud-based solution that can on the front end handle connectivity and on the back end aggregate analytics. That was the investment thesis so the real [focus] was to prove out the hypothesis to the investment thesis.”

Lew added that while there is some anecdotal rail information and data, it is very limited in the form of AAR data, earnings reports, and consultant studies, and white papers, while there has not been a true study on how freight and operations managers spend their time, what they spend their time doing, and how they think about their time and how they allocate their resources.

Addressing some of the research’s key findings, the study noted that rail shippers rely heavily on external contractors and human resources to complete operational tasks while simultaneously spending a lot of time on operations and procurement, whereas effectively utilizing technology would result in a major reduction in terms of time savings, as well as free up resources to focus on “higher value” activities like reducing freight rate costs and transportation asset expenses.

Lew explained that this speaks to a generational transition shift in the workforce, which shows that people that have been in the industry for 20 or more years are retiring and being replaced by millenials, the most active users of technology. But those retirees also built longstanding customer relationships, but in order for a tech-savvy millennial rail employee to leverage that going forward, efficient and effective technology usage is required. 

As for beneficial rail shipper services like rail assets marketplace, historical freight rates and trends, and operations dashboards, which don’t every truly fade from focus, Lew pointed out that these things are directly related to the biggest line items on rail shipper budgets.

“It speaks to an uncertainty as to how data-driven decisions have been made over the last 15-20 years or so,” he said. “If you are, for example, negotiating with a Class I railroad, how much data are you actually gathering before you go to the negotiation? Many shippers rely a lot on consultants, brokers, and 3PLs. For negotiating freight rates and trends, they probably rely more on consultants because they may not have the resources or access to the data or may not want or desire to use this data when negotiating freight rates. This means that data is becoming a larger part of the decision-making process. With an operations dashboard, it provides an aggregated [tool] in which shippers can see all the data points they want on a single screen. But there are not too many out there today, and these platforms are not the most user-friendly and may be lacking key data. This shows that there is a lot of room for growth.”

The research’s findings that on average 83.5 hours per month is spent procuring rail services for existing assets and rail movement operations take an average of 127.9 hours per month each came in higher than expected, said Lew.

“On a day-to-day basis, one would think that for someone that has done this for a long time that he would have a pretty good idea of how to procure rail services or track assets as he has been doing it for a long time,” he said. “And because of that many of them say they don’t need help, but the data shows that a ton of time is being spent on these things on a monthly basis.”

To access a copy of the “2017 Market Insight Report: Rail Asset Management Ranks High Among Operational Resource Priorities,” click here.