Train And A Control Centre example essay topic

We are in July 1990, and the senior executives of Burlington Northern (BN) are about to decide about investing or not in Advanced Railroad Electronics System (ARES), an electronic system that will change the whole BN organization. The implementation of this system has been considered and tested for nine years, and is expected to cost $350 million. Burlington Northern Railroad Burlington Northern Railroad was formed in 1970 and is the outcome of the merger of four different railroads. The company as formed owns extensive land grant holdings including minerals, timber, and oil and gas. In 1989, up to 800 trains daily run on BN routes generating revenues of $4606 million and net income of $242 million. Total assets equaled $6146 million, and 1989 capital expenditures were $465 million.

BN's diverse operations and staffs were headquartered in Fort Worth, Texas, Overland Park, Kansas, and St. Paul, Minnesota. Since 1981, BN managers had begun to consider whether automated control technology could be applied to the railroad. In July 1990 BN's senior executives were deciding whether to invest in ARES (Advanced Railroad Electronics System), an automated railroad control system. The potential implications of ARES acquisition were so extensive that they affected virtually all parts of the BN company. ARES, is a project that is expected to cost $350 million. This huge amount of cash outflow divides managers as to whether the project should be continued.

BN's revenues came from seven primary and diverse segments: coal, agricultural commodities, industrial products, intermodal, forest products, food and consumer products, and automotive products. Coal was BN's largest source of revenue representing 32% of total revenue. Respectively the other segments produced 15%, 14%, 14%, 10%, 9%, and 6% of the total revenue. Over 90% of coal carried by BN originated in the Powder River Basin. Due to positive legislation towards low-sulphur coal (as from PRB), coal business was expected to increase substantially.

Furthermore, managers believed that Powder River coal had promising export potential to Japan and other Pacific Rim nations from the West Coast ports served by BN. Coal as business was simple. In order to assure good asset utilization, cycle time was important. A reduction in the average cycle time reduced the number of sets required to carry a given amount of coal, and hence, reduced the capital investment in coal cars, most of which were owned by customers.

Thus, unit coal trains never stopped, and the coal business was almost totally predictable. Although, sensitive to cycle time, the coal business was not sensitive to arrival time precision, as coal could be dumped on the ground without waiting for special unloading facilities or warehouse space. Even electric utilities, however, were becoming aware of just-in time delivery benefits. BN's major competition in coal was other railroads, especially the Union Pacific (UP). UP had made substantial investments in heavy-duty double track and in new-technology, fuel-efficient engines for carrying coal.

BN management believed UP had excess capacity whereas BN, with its single track lines, was running close to capacity on its coal trains. Grain business was also a business where trains competed, however it was highly unpredictable and with a much higher time precision sensitivity. The other five segments of BN's business were strongly service sensitive and consequently there was much competition by trucks. Trucks at that time had a 90-95% time precision while trains had 75-80%. The trend towards just-in-time deliveries made service time more valuable.

Existing operations and problems In 1990, up to 800 trains traveled approximately 200,000 train miles on BN routes. The possible distinct routing's were 25 million and the number of meets and passes of the trains was estimated to be 10,000 per day. And here we come with some descriptive elements of the operations, which show that the whole system could take a lot of improvements: - The dispatchers, still utilizing technology developed around 1920, were responsible for controlling the trains, each one in a territory. The problem was that one dispatcher could control effectively up to 7 trains, but he was responsible for up to 20 or 30 trains. Also each dispatcher had information only for the trains of his territory. So, a train that had delayed in a territory and just entered a new one was not getting the priority needed.

All the above had of course as a result great loss of time during the transportation of the goods. And just a train running off schedule could affect many other trains because of the limited number of tracks. - Another responsibility of the dispatchers was to schedule maintenance-of-way (MOW) crews. But due to the fact that it was difficult to establish communication with MOW workers, there were long waits and delays until the MOW vehicles were able to get permission from the dispatcher to get into a track. - A very important flaw of the system was that current information about railroad operations was difficult to obtain. For example, nobody could know exactly how much fuel was available in a locomotive or could predict a failure or breakdown.

This of course resulted also in serious delays. - Information about the location of cars and trains was also subject to delay or error, because clerks who recorded the arrivals of trains could be busy and enter an arrival as a fact one hour later than the real time. All those problems where taking place in Burlington Northern's operations, when the railroad industry was facing two major challenges: service and capital intensity. So something should definitely be done to: 1) Improve service, because then there would rise opportunities to raise volume and price 2) Improve utilization of assets in order to reduce the capital investment required Also a new investment in this industry had many possibilities to be fruitful because: - Demand for the Powder River coal (90 percent of the coal carried by BN) was expected to increase substantially in the future and also it had promising export potential to Japan and other Pacific Rim nations - BN expected the segment of grain to grow significantly in future years because of the change in economic policies in Eastern Europe would raise the standard of living in these countries.

ARES program history in BN: In the beginnings of the project, the BN collaborated with the Collins Air Transport Division of Rockwell International in order to apply the aircraft technology to the rail industry. By the end of 1983 they implemented an electronic unit, constituted by a GPS receiver, which offered a significant improvement calculating the train's position and speed too, thus they could develop a communications network to carry information back and forth between the train and a control centre. In 1985 the senior executives agreed to fund a prototype system which included the equipment of 17 locomotives on BN's Minnesota Iron Range, putting the data segment in place in the Iron Range and building those elements of the control centre that would permit BN to communicate with and control the locomotives from the Minneapolis control centre. By 1986 the ARES project had included the operation departments of dispatching, mechanical, maintenance of way, control systems and communications, freight car management, and information system services, allowing the operations managers to see the ARES as a means to accomplish key goals of service improvements, operating efficiencies and improved capital utilization. Finally, the ARES prototype was installed on the Iron Range in 1987. The ARES concept evolved to a full command, control, communications and information system (C 3-I) that would enable BN to gain additional control over its operations, using high-speed computing, digital communications, and state of the art electronics could generate efficient traffic plans, convert those plans into movement instructions for individual trains and MOW units and display those instructions to engine-crews.

By knowing the position and speed of trains and other equipment on the tracks, ARES could automatically detect deviations from plan or potential problems and communicate these exceptions to control centre dispatchers who are responsible to determine the corrective action required and use the ARES to send and confirm new movement instructions to trains. ARES eventually consisted of three segments: Control, Data and Vehicle. The Control segment was responsible: O to produce schedules and to check that vehicles followed proper operating procedures, O to warn the dispatchers of violations to limits of authority and speed and produced authorities and checked them for conflict, O to schedule the MOW crews to get much higher utilization of MOW equipment and labour time, O to display for the dispatchers the activity in their territories, and finally, O to supply information about consists, crews and work orders for any train. The Data segment was responsible: O to communicate data back and forth between the Control segment and locomotives, MOW vehicles, and track monitoring and control equipment. The Vehicle segment was responsible: O to provide information from the Control centre, O to communicate back to the dispatcher, O to monitor various aspects of locomotive performance O to stop the train if the crew became disabled, violated its movement authorities or if communication with the ARES was lost, O to recommend a train speed that met the service requirements while minimizing fuel consumption and providing good train-handling characteristics. The Vehicle segment also included the Locomotive Analysis and Reporting System (LARS), which was responsible: O to monitor the health and efficiency of locomotives and O to provide early warning signals about potential failures Alternative's evaluation- Recommendations Before analyzing the different opinions explained in the case we must state that a company that wants to be sustainable and competitive throughout the years must develop and adapt continuously to the changing demands of the market.

For that reason proposals that believe "that improved discipline and reporting could enhance service without large capital investments" and " we can obtain 80% benefit with 20% of the cost" are to be omitted because they suffer from marketing myopia. They are only short run solutions that don't follow the vision of the company. The elasticity of demand seems to favor the implementation of ARES project. Customers can recognize and value improvement of the service provided. Executives on the other hand have doubts, but a survey taken from an agency weights more than the opinion of people who were not there from the beginning of the project. The fact that ARES improves service is unquestionable.

As Mark Cane stated: ARES would bring higher reliability to the railroad, improve the mechanical quality, though fewer engine breakdowns. It could improve reliability in terms of consistent arrival time through dispatching and schedule discipline. It could also increase the capacity of the physical plant by tightening the spacing between trains, thus allowing more trains to travel on the existing truck. Given the fact that future market estimates show an increase in coal and grain market (the two larger segments of BN), ARES program will offer a significant advantage. Time of launching the program plays major role in the market. By being first BN can "transform" ARES features into benefits for the customer (better service), so attaining another competitive advantage.

Another BN's problem that ARES will solve is asset utilization. As Joe Gal assis stated: "we will be better able to control assets by scheduling locomotives and cars more precisely and getting better productivity out of the assets". One of the points that must have special attention is the fact that " technology alone does not deliver the benefits". That implies that apart to software and hardware instalments the work force must be trained accordingly in order to be able to use the new system.

Without good training seminars for the personnel, the implementation can have disastrous effects. A pilot-testing program could be useful. As far as labor force reactions are concerned, the majority of employees want ARES because they feel more secure with ARES. The safety that ARES provides makes them feel more comfortable and their job easier.

On the other hand, in the case of conductors (that they feel they will loose their job), the company can make a good communication program in order to convince them that nobody would get fired, so as to reduce their dissatisfaction. Also the company should focus on how to absorb the conductors that are not needed after launching ARES into new positions. Last but not least we have to mention the dispute concerning the cost. The estimation is around $350 million, but as managers stated there are some other hidden costs that may be rise, and payback period would be much larger than projected.

But managers hadn't taken into account that whether you are in the "train" of technology, innovation and progress, or you are not. That means that they haven't calculated the money lost year by year (in the long run), when competitors apply new models and techniques to gain market share. If you don't risk hard, your fate is to be always the follower and run to catch the leaders.