INTERNET-BASED INTERNATIONAL RAIL FREIGHT ...

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RailTrace, the renewed tracking and monitoring system improves the information exchange between the ... extensive full-service packages to their customers.
INTERNET-BASED INTERNATIONAL RAIL FREIGHT MONITORING – THE RailTrace SYSTEM Pekka Leviäkangas Corporate Analyst, VR-Group Ltd Sirkka-Leena Holmberg Project Coordinator, VR-Cargo P.O.Box 488 FIN-00101, Helsinki, FINLAND Tel: +358-307 10 Fax: +358-307 21 176 E-mails: [email protected], [email protected]

SUMMARY The purpose of this paper is to describe a system which attempts to streamline a part of the international rail transport process, a part of the transport “pipeline”. Technically, the RailTrace system can be regarded as a very typical example of any Internet application, where particular information provided by one party can be utilized by all the other relevant parties. RailTrace, the renewed tracking and monitoring system improves the information exchange between the parties involved in the logistic chain, simplifies customs procedures and provides real time consignment monitoring possibility for consignors, consignees, transport operators and different service providers. VR (Finnish Railways) is the main promoter and host of the system. Keywords: freight monitoring, Internet applications, rail freight, consignment tracking

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INTRODUCTION The international rail freight traffic still today suffers from many shortcomings when compared to optimal logistic chain and the operations carried out within the chain. These shortcomings may typified as follows: - large number of different operators, especially when multi-modal transport is considered, each with their own interests and managing their own tailored systems - the obvious inefficiency when the same data is typed in several times in a row - due to the aforementioned shortcomings, the unsatisfied customer at the very end of the logistic chain, unhappy with the speed and quality of the delivery. The reasons behind the problems include several items. First, especially in multi-modal transport, nobody has really assumed responsibility for the end-customer satisfaction. Rail transport can seldom offer door-to-door services unless rail transport companies construct extensive full-service packages to their customers. Carrying freight across the borders results in an even greater distance between end-customers and logistic operators. Secondly, one has in many cases assumed the role of a subcontractor due to the nature of rail transport, i.e. being unable to supply door-to-door services. Thirdly, there has been a poor, or at least insufficient, co-operation between the logistic operators not to speak about co-operation between the operators of different countries. Unbundling the problem reveals how the customer’s logistic chain, which can be regarded also as a value chain (see e.g. Porter, 1985), looks more complicated when rail transport is considered. A simplified example is shown below: Road – Ship – Road: 1)Pick-up from origin => 2) Road transport => 3) Loading ship => 4) Marine transport => 5) Unloading ship => 6) Road transport => 7) Delivery at destination Road – Rail – Ship – Rail – Road: 1)Pick-up from origin => 2) Road transport => 3) Unloading truck => 4) Loading train => 5) Rail transport => 6) Loading ship => 7) Marine transport => 8) Unloading ship => 9) Rail transport => 10) Unloading train => 11) Loading truck => 12) Road transport => 13) Delivery at destination Cross-border transport by no means simplify the chain, data management nor documentation. It is easy to understand individual customers, when they seek for appropriate transport service, that they in many cases prefer a) simplicity over price and b) overall efficiency over the environmental aspects of the logistic chain. In sum, customers tend to choose simple and full service transport packages. The purpose of this paper is to describe a project which attempts to streamline the international rail transport process. The project is aimed at improving the quality and reliability of the data and materials flow (related to each consignment) between Europe and Russia and CIS (Commonwealth of Independent States) countries. First, the current state-ofthe-art consignment practices are described in brief and the relevant problems are identified. Then the RailTrace project is presented and thereafter its expected benefits are shown and evaluated. The paper discusses briefly on one hand the business economic impacts of the project and on the other hand the embraces on aggregate level the socio-economic benefits. A short discussion of the long-term implications is provided as well. Finally, the paper is concluded and the most critical issues are discussed in brief.

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CURRENT CONSIGNMENT PRACTICES Let us assume a down-to-earth case which describes the delivery from Milan (Italy) to St. Petersburg (Russia) (Mickelsson, 1997). Goods are loaded into Railship wagons in Milan, transferred through Switzerland to Travemunde (Germany), carried over the Baltic Sea to Turku (Finland), and finally transported over the border to St. Petersburg. Table 1 (in the end of the paper) robustly describes the whole logistic chain, as well as the different operators and their role. It is easy to observe the complexity of the chain. The following bottlenecks and shortcomings can be pointed out: • The consignee receives the information about the shipment arriving not until the goods are in St. Petersburg • The customs servants cannot plan their operations in advance which yields to non-optimal use of resources • None of the rail transport providers are able to optimize their resources and routes in view to the arriving wagons and their destinations These shortcomings and bottlenecks can be eliminated, at least partly, by providing real time information on consignment movements and likely arrivals. Furthermore, this information is valuable to the consignee, who can appropriately plan his actions according to the arrival of the goods. A marginal improvement in the efficiency of the operations of different parties lead to significant aggregate level benefits.

THE RAILTRACE PROJECT The specification of the RailTrace project started in September 1997. It is carried out as a part of a larger-scale telematics program TEDIM (=Telematics in Foreign Trade Logistics and Delivery Management). RailTrace is an information system that integrates, processes and disseminates delivery management information - waybill information about wagons, multimodal transportation and container consignments - to different parties and operators globally via Internet. The present status of the RailTrace has advanced to the technical specification phase and the detailed engineering of the system started in the end of year 1998. The system is expected to be in testing phase by the end of 1999 and fully in operation in the Autumn of 2000. The RailTrace’s objectives were deduced from the following needs that were identified on the basis of an interview of a) the operative sales personnel of the Finnish Railways and Railship (a rail-sea transport service provider), and b) the customers of the both companies. The following needs were identified (Mickelsson, 1997): 1) need for more effective planning of wagon capacity; 2) need for quicker response to customers’ requests on wagon status; 3) need to track consignments rather than wagons; 4) need to improve deviations reporting; 5) need to integrate separate systems in order to simplify tracking procedures; 6) need to improve control over transport in Russia. It was defined, as project goals, that the renewed tracking and monitoring system should possess the following qualities: - an advanced wagon and consignment tracking and monitoring system, yet that was simple to operate - simplified customs procedures at the Finnish-Russian border

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- reports on deviations - improved information exchange between the parties involved. As a direct result, the project should yield to improved customer service, more efficient wagon capacity planning, and last, but not least, time savings in cross-border formalities, which on aggregate level lead to quantifiable socio-economic benefits. So far, the RailTrace project includes several parties with full or preliminary commitments: - VR (Finnish Railways), the main promoter and host of the final system - Finncarriers, i.e. Railship, European traffic information provider - Finnish Customs Administration - Finnish Ministry of Transport and Communication, main financial promoter - EDI Management Finland, project management - Swedish Railways (SJ), information provider from Scandinavian railways - Deutsche Bahn (DB), information provider from German railways - Orfeus (Raildata) – EU, information provider from European railways - North-West Russian Customs Administration - Northwestern Railways (October Railways) (Russia), information provider - Russian Ministry of Railways, information provider (Russia and CIS countries). In a nutshell, the RailTrace system is shown in figure 1. The RailTrace system can be regarded as a very typical example of any Internet application, where particular information provided by one party can be utilized by all the other relevant parties. A comparison to the present and near future situation (i.e. RailTrace in operation) is visualized in figure 2. Each party on the logistic chain receives “discrete” real time information as the consignment status is updated to RailTrace. (In fact, integrating RailTrace and GPS monitoring systems would create a fully real time consignment tracking system).

VR

Logistics services

EU railways

RailTrace core system

Internet Firewall

Customers and other interested parties

Figure 1. RailTrace system (Mickelsson, 1997).

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Russian/CIS railways

Internet RailTrace

Material flow Information flow

Figure 2. Traditional information systems (left) and Internet systems (right). The RailTrace project is broke down to the following critical steps (Mickelsson, 1997): 1)general functional specification (done), 2)information specification (done), 3)core system functional specification (done), 4)selecting core system provider (under work), 5)selecting Internet interface provider, 6)core system technical specification, 7)Internet interface specification, 8)core system pilot ready, 9)Internet interface pilot ready, 10)pilot system testing with selected companies, 11)system adjustments, 12)full implementation and marketing. Each step requires a specific carry-out plan of its own.

EXPECTED RESULTS AND BENEFITS The following evaluation of the expected results and benefits is based on the viewpoint of VR. There is good reason to anticipate that the effects are multiplied according to the number of participants and according to their role in the total logistic chain. It was estimated that the time savings due to RailTrace for the logistic chain would be roughly 5%. If VR’s costs per wagon or consignment were compared to the 5% time savings for VR, the investment’s profitability ratio would be far more than 10, i.e. the benefit-cost ratio of the discounted cash flows. The benefits for the Finnish Customs Administration, other Finnish transporters and reduction in storage volumes would be the items to be included in the socioeconomic cost-benefit calculus. The investment cost for these parties, however, would be practically zero. Thus, it follows that the expected socio-economic cost-benefit ratio would seem to yield to a significant figure. The risks of the project and its profitability are mainly the following: - technical difficulties in the build-up of the system which will inevitably affect on investment cost - organizational difficulties relating to the implementation (will the people learn the system?) and operation (will the people use the system?) of the system affects on the realization of the expected benefits and on the commercial viability of the project - technical difficulties in the operation of the system; if the reliability of the system is insufficient, the demand for the services will ultimately decline.

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FUTURE IMPLICATIONS From the viewpoint of international parties, the rough 5% time savings rule applies. Consequently, as their investment cost is insignificant, their expected benefits are substantial. This naturally creates a promising market for the services that can be provided via RailTrace. However, the RailTrace should rather be seen as a strategic investment in order to supply real time consignment tracking information to different customers than an operative cash flow generating investment. There is no doubt, that similar systems are developed all around the world and these systems may have to compete for the same customers. Those service providers, who can offer the most economical, most flexible and most reliable transport services for their customers are likely to succeed and stay in the business. RailTrace is one such competitive edge creating system.

CONCLUDING REMARKS The above description of the RailTrace project can be concluded as follows: 1) The RailTrace system can be regarded as a typical representative of an Internet-based application, where the Internet provides a common data source for a number of parties 2) The project in itself leads to substantial socio-economic benefits, mainly as a result of the time savings in different operations and documentation procedures 3) The system possesses a substantial market value as the demand for real time freight monitoring is high 4) The project has great socio-economic potential despite the potential risks concerning the design and operation of the system 5) Systems of this kind will probably compete against each other in the future as they become more abundant and the market evolves more saturated. Finally, as rail freight competes with the truck transport on some market segments, the rail industry is compelled to develop its services, including freight monitoring. Road transport is taking rapid steps in adopting new technology to increase its efficiency and improve its services – rail transport industry simply has no alternative but to do the same. The overall strategies must be increasingly inclined towards the needs and satisfaction of the endcustomers. At the same time, the strategies must aim at internally more efficient logistic chains. RailTrace service will be available in the Autumn of 2000. RailTrace system can be viewed from web-site: www.railtrace.com.

REFERENCES Porter, Michael (1985). Competitive Advantage – Creating and Sustaining Superior Performance. Mickelsson, Ina (1997). Project Plan (1), RailTrack. Unpublished working document. EDI Management Finland Ltd. Mäkinen, Kari & Holmberg, Sirkka-Leena (1998). Hankeperustelu (Investment appraisal). Unpublished working document. In Finnish only. VR Cargo.

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Table 1. Case delivery from Milan (Italy) to St. Petersburg (Russia). Wagon route Milan (Italy)

Operator

Role

Operations

Italian consignor

Consignor Dispatches the goods

Railship agent in Milan

Service provider

Italian railways

Transport provider

Chiasso Swiss (Italian-Swiss customs border) authority Swiss railways

Public authority

Friedrichshafe German n (Swisscustoms German authority border) German railways (DB) Travemunde Railship Port office in (Germany) Travemunde Baltic Sea Railship vessel Turku Port Railship office in Turku VR (Finnish Railways)

Public authority

Buslovskaja (FinnishRussian border)

Russian customs authority

Public authority

October Railways Railship agent or partner in St. Petersburg

Transport provider Service provider

St. Petersburg Russian consignee

Transport provider

Books the wagon, informs the Travemunde office of the coming wagon Loads the wagon and transports it to the border Tolling procedures

Present data flow / Documents Prepares the railway consignment note Fax or telephone information to Railship office in Travemunde

RailTrace data flow RAILTRACE

No reports

DATA

BRINGS THE RELEVANT

AVAILABLE No reports AT ALL

Transports the wagon through the country Tolling procedures

No reports

TIMES TO ALL

No reports

RAILTRACE PARTNERS

Transport provider Service provider Transport provider Service provider Transport provider

Transports the wagon through the country Manages the loading of the ship Transports the goods over the sea Manages the unloading of the ship Transports the wagon through the country Tolling procedures

No reports

INCLUDING

Prepares maritime CUSTOMERS, documentation CUSTOMS OFFICIALS No reports Fax or telephone confirmation to Milan agent No reports

No reports

AND PARTIES INVOLVED IN THE LOGISTIC

Transports the goods in Russia Receives the goods, informs the Milan agent and delivers the goods to the end customer Consignee Receives the goods

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No reports Fax or telephone confirmation to Milan agent

CHAIN. RAILTRACE ID-CODE NEEDED.

No reports