Written by BSM, a Geotab Company
on March 11, 2019

Boost Railway Freight By Right-Sizing Your Railcar Fleet

The key to rail profitability and efficiency is a railcar fleet that's exactly the right-size to meet your railway freight demand without overwhelming your operations.  Too many railcars can result in higher drayage fees, longer routing and ultimately lost business.

Today, many railcar fleets are just too large for their own good and railcar surfeits are becoming a norm.  Having the right technology to evaluate demand accurately and understand associated operational requirements, will enable rail fleet managers to make the right decisions about how to right-size their business.

How Surpluses Affect Operations and Costs

Toward the end of 2016, railway shipping orders increased significantly. Many rail companies began adding new cars without retiring any of their older cars, in order to meet the demand.

To the dismay of many fleet managers, however, this trend of rising shipping orders didn't continue into 2017. As a result, many rail companies now have an oversupply of rail cars. These cars are incurring increasing maintenance costs, insurance and leasing fees, not to mention the drayage fees that occur when railcars are overcrowding a switch yard.

Due to lowered demand and increased cost of operations, rail companies are not transporting as many goods.  Thus, profits are going down.

Looking back in history, fleet managers will recollect a similarly dramatic surplus impacted the rail industry in 2009.  The companies found storage spaces to house extra train cars. Not long after, even the storage spaces became hard to find and, rental fees increased as a result.

As well, with an excess of cars, rail traffic ultimately slows down. Switching yards and short lines have to take more time moving cards from one line to another. Rail yards are often overwhelmed. Therefore, loading and unloading can take significantly longer to process.  The slowdown impacts customers directly, causing them to turn to other means to ship their freight, such as the trucking industry, thus impacting fleet revenue.

5 Steps to the Right-Sized Railcar Fleet

Fortunately, BSM, a Geotab Company, Rail Solution – an industry leading GPS-based fleet management software - can make right-sizing a rail fleet simpler. You can easily determine the optimal size for your business needs using the following steps:

1. Make Use of Utilization Data

Fleet managers should develop a goal for how many miles they want each railcar to travel over a certain period of time -- a week, month or year - using the basic premise of balancing the profit each car delivers via shipments vs. the maintenance costs over the number of miles driven.

Fleet managers should then look at the utilization rate for each vehicle, easily provided through the BSM solution’s dashboard. Cars with mileages that are considerably below expectations should be retired and when utilization rates are too high, fleet managers will be notified that new cars are needed.

2. Look for Consolidation Opportunities

If a rail company has two underutilized cars with similar or overlapping routes, it might be feasible to sell one and give both routes to the remaining vehicle. Similarly, there may be ways to plan routes differently in order to save on the costs of operating and maintaining railcars.  BSM has a market-leading fleet analytics platform that is enabling us to easily help you schedule efficient routes with long-range planning.

3. Consider Smaller, Lighter Cars

Accessing the right data can help fleet managers find railcars that are just the right height and weight for the assignments they handle. Obviously, larger and heavier shipments require larger and heavier vehicles. However, if a company uses a certain route for shipping lighter materials, it might assign lighter railcars for it. That way, fuel costs can be saved. Lighter cars can move faster, too, and are able to take more trips.

4. Get Everyone on Board

Once a company's managers have determined which cars to retire, it's important to communicate the decisions to all employees, help them understand that data was used to help make the right decisions to improve operations, and to answer all of their questions.

5. Keep an Eye on Those Reports

Right-sizing should be an ongoing activity. After a manager's initial plan has been enacted, he or she should continually monitor railcar utilization and idling rates. It's important to keep fine-tuning the size of the fleet and to continue the practice of retiring and acquiring cars as needed.

In the end, with the right fleet management technology in place, specifically designed for the rail industry, managers never have to wonder if their fleets are poised for maximum efficiency.

 

For information about  IoT connects shippers and railroads, download our free whitepaper.

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