The global railroad industry struggles to meet the demand for rail transportation. Now is the time to invest in creating real innovation for the rail industry that needs to launch itself forward.

1. IBM Global Business Services
IBM Institute for Business Value
Travel and
Transportation
The smarter
railroad
An opportunity for the
railroad industry

2. IBM Institute for Business Value
IBM Global Business Services, through the IBM Institute for Business Value,
develops fact-based strategic insights for senior executives around critical public
and private sector issues. This executive brief is based on an in-depth study by
the Institute’s research team. It is part of an ongoing commitment by IBM Global
Business Services to provide analysis and viewpoints that help companies realize
business value. You may contact the authors or send an e-mail to iibv@us.ibm.com
for more information.

3. The smarter railroad
An opportunity for the railroad industry
By Keith Dierkx
Global demand for rail services continues to outpace available capacity
and infrastructure, while aging systems and traditional business practices
limit tangible responses to address the problem. Rail executives are being
presented with a mandate by society to build rail systems that are smarter.
By embracing new and existing technologies to acquire, associate and
analyze information across the rail network and using that information to
become more efficient and effective, they can create a more responsive
and agile operating environment.
Introduction The rail industry is not immune to recent global
The global rail industry in 2009 and beyond challenges, such as the crisis in the financial
will struggle to meet the increasing demand markets, the slowdown in the manufacturing
for freight and passenger transportation. sector across many industries and shifts in
While it is natural for business to brace itself global trade. These issues show that the world
during difficult economic times, this is actu- has become hyper-connected, economically,
ally the antithesis of what rail executives need socially and technically. We now have a set of
to be doing today. Now is the time to invest complex interrelated global systems, which are
in creating real innovation for an industry that making the world smaller.
needs to launch itself forward to meet the
However, while the world is becoming smaller,
needs of the twenty-first century.
it is also becoming smarter. Intelligence is
being infused into every system and process
that creates, sells and moves products and
people, and delivers services.
1 The smarter railroad

4. This is possible because our world is becoming more:
Instrumented
By 2010, it is estimated that the world will have produced in excess of 30 billion Radio Frequency
Identification (RFID) tags, creating the ability to track the location of cargo, the health of an opera-
1
tion and the movement of people through urban centers and travel networks.
Interconnected
Systems and objects now “speak” to each other, and these interactions create the possibility to
improve performance while also generating unprecedented amounts of data that can be shared
within a company or across ecosystems for collaboration. North American rail operations, for
example, have thousands of Automatic Equipment Identification (AEI) readers and tens of thou-
sands of wagons with RFID tags. These trackside AEI sensors provide information on the location
of the wagons and then interact with acoustic monitoring, hot box and wheel impact detection
devices to provide a more complete and comprehensive view of the conditions of the cars.
Intelligent
Instrumented and connected objects and processes are communicating with sophisticated busi-
ness systems that enable data to be mined, relationships to be analyzed and decision making to
be continuous and near realtime. By aggregating wagon information and trends for wheel fatigue,
bearing overheating or other mechanical failures, maintenance requirements can be predicted and
corrective action can be communicated rapidly based on the urgency and potential harm to the
health and safety of passengers and freight.
Building smarter rail networks makes sense not only because of the abundance of available and
affordable technology, but also because real change is required in the industry to address society’s
demands for transportation.
Instrumented Interconnected Intelligent
+ + =
An opportunity to think and act in new ways
22 IBM Global Business Services
IBM Global Business Services

5. The smarter railroad
An opportunity for the railroad industry
For global railroad A mandate for change Capacity and congestion
Morgan Stanley estimates that there will be Increasing demand for rail services is straining
executives, the top
US$300 billion worth of global investment to existing systems, requiring optimization of
industry challenges are:
upgrade, expand and initiate railway networks the existing passenger and freight rail time-
capacity and congestion, 2
during the next five years. Consistent with this tables and schedules to achieve increased
operational efficiency investment, consider the growth that is occur- throughput on existing rail infrastructure.
and reliability, structural ring across the world:
Rail freight companies are experiencing
and competition issues, • By 2012, rail industry revenue is forecast growth in trade, especially in the areas of
and safety and security. to be US$514 billion, with a 3.3 percent energy and commodities. Russian harbors,
compound annual growth rate (CAGR) from in particular, are experiencing serious bottle-
3
2007 to 2012. necks, which are resulting in issues for the
• The global rail supply market grew 9 percent railroads. Rail companies are increasing asset
from 2006 to 2007 and is expected to utilization and making significant investments
continue growing 2.0-2.5 percent over the in infrastructure to meet the capacity chal-
next nine years.
4
lenge.
• Asia Pacific will grow at 6 percent average Operational efficiency and reliability
CAGR, while China alone will grow 11.8 Aging IT systems limit the efficiency of
5
percent CAGR from 2007 to 2012. resources and reliability in established
• U.S. freight railroad demand will increase rail markets and prevent companies from
88 percent by 2035, requiring an estimated responding quickly to changing needs; new
US$148 billion of investment for existing markets have the opportunity to adopt newer,
lines.
6 more flexible technology infrastructures, leap-
frogging current practices.
• Europe’s passenger railway market will
have a value of US$116.5 billion in 2012, an Network failures and systems outages can
increase of 19.3 percent from 2007 and a have a large domino effect that impacts
7
CAGR of 3.6 percent. customer satisfaction. Many current IT systems
are old and complex, making the sharing of
If the rail industry is to meet this projected
data difficult. They are also unable to cope
growth, it needs to solve substantial, even
with the scale of growth predicted over the
transformational, business issues and chal-
next few years. Upgrades and improvements
lenges. Based on an independent study
to ticketing and reservation systems are
commissioned by IBM in 2008, the top four
ongoing in most markets.
challenges cited by global rail executives
were capacity and congestion, operational
efficiency and reliability, structural and compe-
8
tition issues, and safety and security.
3 The smarter railroad

6. Structural and competition issues With significant opportunity for railroad execu-
Recent liberalization and privatization in some tives to bring change to the global economy,
markets is forcing railroads to restructure their imagine:
operations; structural limitations exacerbate
• If passengers could manage their entire
the strain of capacity.
door-to-door journey on their mobile
In North America, freight and passenger devices, receiving continually updated
railroads are entirely separate entities, which suggestions for more convenient routes
causes control issues for the passenger side based on their own travel history and prefer-
because of lack of ownership of the tracks. In ences.
addition, the passenger services are quasi- • If rail companies could better identify and
governmental organizations that rely heavily on optimize the profitability or cost to serve
government subsidies. a customer and plan asset utilization and
pricing in realtime.
In Russia, road haulage firms are increas-
ingly competing with railroads for mid-range • If rail companies could reduce capital
transport. Similarly, China is seeing a shift from expenditure and improve utilization.
the rail tracks to automobiles as the wealth of • If unnecessary mainline train stoppages
urban populations increases. Optimizing busi- could be reduced because systems are
ness processes and systems and improving smart enough to identify real mechanical
customer service will enable stronger competi- problems and failures.
tion and pricing.
• If schedules and capacity could be
Safety and security dynamically adjusted to cope with irregular
As the rail networks become an even more operations, such as holiday festivals and
attractive alternative to other modes of trans- weather outages.
portation, stricter requirements are being • If rail companies could increase network
placed on railroads to help ensure safety. velocity, capacity and revenue through
reduced congestion and increased utiliza-
In North America, political scrutiny and regu-
tion, without adding locomotives.
latory oversight is increasing, with legislation
enacted in October 2008 requiring Positive All of these scenarios are possible in a
Train Control (PTC) systems by the end of 2015. smarter rail industry. As intelligence is infused
Predictive maintenance and data analysis is into rail systems and decision making, the
being used for accident prevention. Ultimately, industry will benefit from:
improving safety standards can drive large
cost savings for railroad operators.
4 IBM Global Business Services

7. Smarter rail systems • Increased capacity of freight and passenger As the world becomes smarter, customer
rail, with reduced capital expenditures interactions with rail companies will change.
are highly instrumented,
With the recent emergence of Web 2.0 appli-
extremely interconnected • Seamless transportation for both passen-
cations and the proliferation of mobile and
and far more intelligent. gers and freight
smart devices, customers are becoming more
• Quicker, safer rail service informed and want more control of their travel,
• Increased velocity of the rail network shopping and interaction with railroads. In the
future, it will matter less which company gets
• Further leveraging of rail’s environmental
them from point A to point B; they will care
and energy advantages
more about how quick, cost effective or easy it
• Improved passenger service, loyalty and was to plan and manage the journey. Similarly,
ability to tailor to preferences suppliers will want to book their own freight
• A flexible rail operation that can expand and have it moved directly from manufacturing
rapidly to meet growth requirements. to stores, regardless of carrier. They will self-
select their transit options by cost, efficiency
Building a smarter rail system and impact to the environment as required
The smarter railroad requires an intelligence by their customers. Railroads will need to
that is networked, communicating and aware develop new networks across ecosystems
across the rail ecosystem. It requires informa- and channels as a result of advanced network
tion to be shared across the enterprise and technologies and increasing customer
among many different stakeholders, including demands.
the rail company, shippers, car owners, travel
The volume and variety of data and the
agents, municipalities, intermodal carriers and
interconnectivity among data sources will
customers.
increase decision-making velocity. Data will be
used in a way that enables the agenda to be
The rail ecosystem is a highly complex global
shifted from simply managing assets to situ-
system comprising the internal rail network
ational awareness, prediction and planning.
and the external rail network. The internal rail
This will allow traditional rail business models
network is made up of assets, infrastructure
and employees. The external rail network
to be revolutionized, with rail operators and
comprises the broader network of travel partners, customers becoming more empowered and
suppliers, logistics service providers, intermodal informed. Investments, therefore, will need to
carriers, regulatory agencies and customers. be made in not only collecting the data, but
Rail companies of the twenty-first century will also in its collation and analysis in order to
collaborate and extend their networks across drive practical action.
wider ecosystems.
5 The smarter railroad

8. Instrumented between the wayside and the station, they
Systems and solutions are just now begin- enable remote diagnostics and realtime moni-
ning to allow the health of the operation to toring. Benefits include improvements to the
be measured, sensed or seen across supply operational efficiency of a railroad’s business,
chains, processes and infrastructures. Trillions as well as the opportunity to improve network
of sensors are now deployed in our everyday velocity, asset utilization, return on assets
life. Events, actions and objects are being and operating ratio. Similarly, the use of video
sensed in ways we never imagined. Today, surveillance, enabled by transmission from the
trackside devices monitor acoustic signatures train to a control center, may also be leveraged
and heat and wheel impact at most North to improve passenger and car security.
American and many European railroads. RFID
tags, read by fixed infrastructure along the Although not new, mobile devices are
wayside, help identify rail cars, while wireless certainly getting smarter, offering Global
networks and video systems provide moni- Positioning Systems (GPS) and other location-
toring of assets in rail yards. These discrete based capabilities that can be exploited by
solutions are helping rail companies collect passenger rail operators to create new pricing
information and track the location of assets, and revenue models based upon actual
which can improve productivity while providing usage. For example, instead of passengers
increased safety and security for travelers. purchasing cards or tickets for intended future
travel from a desk or booth, passengers may
Instrumentation helps rail New developments in technology are creating instead use stored-value cards or devices and
companies collect new new business models. For example, main- be charged based on usage. This would have
tenance may be proactively initiated based the additional benefit of freeing up terminal
information to monitor
on prediction of failure rather than regulatory floor space for use by shops and other
operations more closely schedule, and passengers can be billed for revenue-generating opportunities.
and act more proactively. travel based on actual usage. Rail systems can
be more fully optimized with deployed instru- The full extent of the smarter railroad enables
mentation technologies, such as the European an operator to know the location, state and
Rail Traffic Management Signal (ERTMS) condition of every asset within the entire
system, which is being developed across network – a powerful set of data indeed.
Europe. What makes ERTMS technology
Handheld devices used by way crews can
impactful to the industry is that its specifica-
improve freight maintenance with near realtime
tions are publicly available, enabling more
data capture of work progress. This enables
consistent standards among rail systems and
the railroad to free up track sooner, increasing
suppliers, and creating an environment condu-
network velocity. Workers can also update asset
cive to greater collaboration and a broader
9 inventory and realtime replenishment information,
ecosystem of service providers.
which facilitates having the right product at the
Intelligent cameras and video systems are right moment and can reduce inventory carrying
now being piloted in rail and intermodal yards costs and safety stock.
in the United States and Canada. Located
6 IBM Global Business Services

9. Interconnected • Seamless freight delivery is possible
When instrumented transportation systems when freight operators allow inventory and
work together, dynamically connecting across schedules to be accessed by customers
the internal rail network or across external rail and interconnecting transit carriers.
networks, the flow of data and information can
• iTransit and Google Transit are examples of
be highly leveraged. The railroads can offer
“mash-ups,” interconnected Web sites that
improved and timely decision making for the
pull information from various sources and
internal railroad regarding asset deployment,
allow a person to navigate public transporta-
utilization, maintenance and, for the external
tion systems, with several options offered,
railroad, regarding schedule changes and
such as pedestrian routes, subways and
services for customers, partners and suppliers.
trains. The next wave of innovation will
With greater interconnectivity, business model be for customers to purchase tickets via
transformation is possible and is already their mobile devices and use the boarding
occurring in a number of ways: barcode they receive to pass through
security checkpoints and ticket gates.
• Block train scheduling for passenger and
This type of customer accessibility can
freight rail creates greater utilization of
be applied in the freight market too. It is
assets and capacity on shared lines by
possible customers could use data or voice
shortening the block distance between
input (such as Google’s new voice search
trains. Open sharing and connectivity of
for the Apple iPhone) to log a shipment’s
Through greater operational data and systems is essential to
start and end point and then book based on
interconnectivity, increase train velocity and reduce waiting
such factors as time, cost and even carbon
railroads can exchange times during intermodal connections.
impact, which are calculated for multiple
information more • High-speed passenger rail connectivity is transit options.
broadly and make better, being developed across Europe through
Railteam, a network of high-speed rail The benefit for customers in all of this is that
faster decisions. their needs are accommodated intelligently,
operators that bring together schedules,
ticketing and services to offer customers a while distribution, scheduling and pricing
broader network, similar to alliance networks management systems are brought together
across the airline industry. This kind of
10 seamlessly in the background. The benefit for
interconnection can also be deployed in the rail operators is the ability to fully utilize their
developing world in China, Russia, India and networks and assets.
South America.
These examples of interconnectivity rely on an
• Seamless passenger travel is possible by open software architecture, which provides the
decoupling sales systems’ business logic flexibility to support new, best-of-breed appli-
from distribution channels so passenger cations as well as legacy systems and enables
travel can be booked end to end, including future growth in the business. This supports
regional rail, airline, hotel and bus. business applications at the enterprise level
including master data and asset management,
resource planning, application integration and
business process modeling.
7 The smarter railroad

10. Intelligent These new intelligent technologies can signifi-
Business becomes smarter when relevant cantly reduce the need for fixed infrastructure
information is available to sense, analyze and along the wayside and provide a smarter,
act upon. More information on its own doesn’t more flexible and predominantly mobile infra-
add insight; it needs to be transformed to structure. Fixed infrastructure is expensive to
allow for better planning, decision making, install and maintain, and difficult to update. A
alerts and proactive execution. Every insight mobile, train-based system can mitigate signifi-
of the smarter railroad should result in actions cant capital expenditures over time, providing
that create new value for the internal and greater flexibility to take advantage of both
external railroad networks. evolutionary and revolutionary technology
improvements. Train-based systems could
As rail distribution and transport management
sense changes in infrastructure, such as metal
systems become more flexible, informative
fatigue in overpasses and concrete fissures
and easily accessed, customers and compa-
in ties, and notify work crews, procurement
nies will choose rail because it is simply good
offices and public entities. These systems are
business and adheres to suppliers’ increasing
programmable and have the ability to change
requirements for transport that is cost effec-
their reporting based on their physical loca-
tive, reliable, timely and socially responsible.
tions as they cross borders, city boundaries or
Customers will choose passenger rail because
other municipalities.
it is convenient to book with other travel and is
accessible via multiple self-service channels. Both passenger and freight enterprises can
operate with flexibility and responsiveness
Mobile condition-based monitoring systems
when information from operating systems
will provide railroads with more intelligence
across the business is leveraged for decision
through continuous realtime capture and
making, thus operating more intelligently. For
analysis of critical data, such as the health
example, when inventory – whether it be freight
of a car (air pressure and brake monitoring,
forward loads or passenger forward book-
wheel bearing temperature, engine perfor-
ings – is integrated with scheduling, cars can
mance) as well as operational data (manifest
be added and removed from lines based on
verification, “dark car” identification, time-
need. Crew scheduling can be optimized and
stamping of car spotting, freight condition,
adjusted when crew management systems are
intrusion detection and hazardous materials).
similarly integrated. This type of business intel-
Mote-based sensors mounted on the cars
ligence is supported by analytics.
trigger messages based on decision modeling
and analytics that interpret the information. A key benefit of condition-based monitoring
Autonomic routines built into this system will is a transformational shift from tracking cars
distribute information, dispatch service, order with transponders to proactive monitoring
parts, schedule maintenance and perform of events, conditions and health of cars. As
remote diagnostics. mentioned earlier, predictive maintenance can be
implemented with greater assurances – a result of
more, better and timely information that has been
collected and analyzed.
8 IBM Global Business Services

11. Information integration, Analytics are fundamental for bringing Creating a smarter railroad
together and making sense of valuable A smarter railroad will not be built overnight.
sophisticated analytics
sources of data about the operation and its But it does require bold steps, investments
and data modeling can
customers. Customers’ use of online travel and the will to create real transformation. Rail
infuse strategic and booking tools and transit sites create very rich executives should consider these questions in
operational decision data about their purchasing habits and how planning the path to a smarter railroad:
making with an entirely they travel. The benefit for rail operators is the • Can the health of the operation be
new level of intelligence. ability to directly capture customer informa- measured, sensed and incorporated into
tion that may be used to better understand near realtime decision making?
travel patterns, intermodal utilization and route
• Are your business functions flexible enough
preferences. The analysis of such rich data
to meet changing customer demands?
enables a company to gain insights into maxi-
mizing revenue with intelligent pricing and • Can you predict your maintenance needs
yield models and to make better decisions based on actual conditions?
about asset utilization, retailing and sales. • Do you know the value, location, availability
and condition of all your spare parts across
When operational data is brought together
the network?
from across the enterprise, such as sched-
uling, crew optimization, maintenance, sales, • Are your systems fully integrated with
revenue management and inventory, the rail- those of external suppliers, customers and
road can use analytics to make informed and partners to leverage your combined assets,
near realtime decisions about the operation. capacity and services?
For example: • Have you conducted an analysis of your
• How will a schedule change impact core competencies versus business
revenue, crew and capacity? functions that could be done elsewhere?
• How can empty wagons be better utilized • Are you using your best talent to become
and turned into revenue opportunities or instrumented, interconnected and intelligent?
redeployed?
• How will we forecast and respond to shifts
in supply chain requirements?
• How can we better serve the secondary
cities that airlines no longer serve (a more
common occurrence in the United States),
or open up new territories such as in China
or Russia?
9 The smarter railroad

12. Leaders will use this Conclusion Appendix 1 – Smarter railroads
time of economic Rail executives must meet society’s demand around the world
challenge to invest in
for rail systems that are integrated into our China
global economy, competitive with other trans- The forecasted growth in passenger and
making their businesses portation systems and flexible to meet global freight rail in China is driving the need for
smarter so that they trade and passenger demands. The current increased capacity for both existing rights of
emerge from this economic slowdown provides a window of way and new lines. In the Chinese govern-
period stronger and opportunity for making these investments; ment’s last five-year plan (2006-2010), US$182
railroads should use this time to begin the billion was allocated for the development
more competitively
transformation rather than being forced to do of railways between the years of 2010 and
positioned.
so in crisis mode. 11
2020. In November 2008, the government
announced an economic stimulus package
For first movers, becoming a smarter railroad
centered on rail construction that will speed up
can help create important competitive advan-
this investment and bring its schedule ahead
tages – an expanded rail ecosystem, asset 12
to potentially 2012-2015.
optimization, new revenue model opportuni-
ties and new ways to serve customers. These China is planning to build 17 ,000 kilometers of
advantages resonate with the global social new rail lines by the end of 2010. Of that, 7,500
movements that have emerged: railroads are kilometers will be built for passenger transport,
“green,” railroads are efficient, and railroads and 5,500 kilometers will be built or upgraded
are economical. 13
to high-speed rail lines. Large investments
in predictive maintenance systems and traffic
For operators in expansion mode, smarter
control are currently underway and will be
railroads can help reduce new line and
critical to managing growth.
rolling stock costs and significantly increase
customer service in a capacity-constrained The advantage of China’s sizable new infra-
environment. structure growth may not be dissimilar to when
developing nations leaped from no telephony
As the rail industry becomes more instru-
infrastructure to cellular/mobile technology,
mented, interconnected and intelligent,
bypassing land-line telephone networks histor-
business model innovation becomes more
ically built on copper wire. China’s rail system
attainable. For rail executives to capitalize on
has a similar opportunity to leapfrog current
such change, they need to accelerate invest-
rail infrastructure systems with new smarter
ment in new intelligence. Building a smarter rail
capabilities.
industry will not be a one-size-fits-all approach
for everyone. The path to transformation for
each railroad will depend on the maturity of
the existing rail system, current capabilities
and market demands.
10 IBM Global Business Services

13. Examples of potential performance improve- North America
ment: For the U.S. freight rail industry to meet
demand and growth forecasts, significant
• Safety and preventative maintenance –
investments will need to be made to existing
Smarter capabilities can help to prevent
and new infrastructure and rolling stock. The
accidents, collisions and derailments.
U.S. Department of Transportation forecasts
Sensor-based early detection of potential
that freight railroad demand will increase 88
equipment failures, which enables condition- 14
percent by 2035.
based monitoring and a better predictive
maintenance scheme, and various moni- The American Association of Railroads esti-
toring capabilities for rail infrastructure, such mates that US$148 billion of investment is
as track and bridge inspections, can reduce required to meet 2035 volumes based on
disruptions to passenger and freight service. existing lines. This estimate pertains only
• Reduce congestion – Capturing realtime to the expansion of lines and facilities and
data in intelligent, world-aware systems, does not account for maintenance of lines or
the smarter railroad will be a safer, higher stock. Capital, maintenance and infrastructure
performance railroad. Continual perfor- expenditure made up nearly 40 cents on every
mance optimization can help reduce rail revenue dollar U.S. railroads spent to keep up
15
freight and container congestion. with capacity from 1980-2007 .
• Customer service – Using intelligent aggre- To meet this capacity shortage, U.S. rail
gation of data, a smarter railroad can gain companies are going to be reliant on produc-
new insights to enable process transforma- tivity improvements and technological
tions that result in improved efficiencies, advances not accounted for in investment
increased effectiveness and new business estimates, as well as further developing
capabilities. With event information such successful public-private partnerships. A
as train delays, perishable expiration dates, recent example of this is the planned California
unauthorized asset moves, critical late parts, High-Speed Rail Network connecting San
and service levels or quality of service not Francisco to San Diego. Funding will largely
met, the railroad can evaluate, correlate and come from a combination of state and federal
respond dynamically. funds as well as other public-private partner-
16
ships.
The U.S. Rail Safety Improvement Act of 2008
(RSIA) mandates that Positive Train Control
must be installed on all rail main lines used to
carry passengers or certain highly hazardous
materials by December 31, 2015. This and
other elements of the RSIA present significant
challenges for the U.S. rail industry.
11 The smarter railroad

14. Russia movement of intermodal and commodity
Liberalization and privatization is driving large- freight (timber and coal) into Europe will offer
scale structural reform within Russian Railways, an alternative to maritime movements. In early
the wholly government-owned rail system. 2008, Russia was part of a first-of-a-kind pilot
Rapid growth in both freight and passenger for a direct rail line from Beijing to Hamburg,
rail, along with plans to separate the freight crossing through Mongolia, Russia, Belarus
and passenger businesses, require both and Poland. The freight moved in 15 days, a
19
modernization of infrastructure, railcars and vast improvement from 45 days by sea.
locomotives as well as expansion of rail lines
to support multimodal transport logistics and Europe
passenger services. Russian Railways plans The European railroads are continuing to
to invest US$50 million by 2010 and US$390 evolve and become smarter, raising the bar
17
billion by 2030. A sizable focus on intercon- for all participants in their ecosystem. The
nectivity will be required to manage the many European railroads are leading the world
private rail operators and integration into the in how they interoperate and connect with
passenger and freight networks of Western each other and their customers. Due to its
Europe. geographic nature, reliance on cross-border
trade and passenger travel and recent liber-
Moving manufactured consumer goods via alization, Europe’s mature rail industry has
intermodal containers from European and invested more in the interconnectivity of rail
Baltic ports requires tighter integration with the networks than other global regions. Examples
transportation and logistics networks. Further, of this include the ERTMS project, which is
Russian Railway’s potential injection of capital establishing a standard for signaling systems
into providers such as Deutsche Bahn will across Europe (see page 6), and Railteam,
18
require smarter rail capabilities from Russia. which is building a network of already estab-
Interchanging rail cars between Russian Rail lished high-speed rail operators (see page 7).
and the European rail networks will require
assurances related to the health and safety of High rail utilization across most of Europe is
the wagons, integration with condition-based increasing the need for dynamic freight sched-
monitoring systems and tight delivery sched- uling and block train scheduling for freight and
ules in performance based logistics contracts passenger lines as well as creating growth in
that require smooth rail yard performance and high-speed rail.
interchange. New and evolving regulations DB Schenker Rail is an example of how inter-
on the movement of hazardous materials will connectivity may work successfully across
require implementation of railcar instrumenta- borders and varied systems. Operating across
tion and providing reliable information and five countries – Germany, Netherlands, Italy,
connection to rail, government and municipal Switzerland and Denmark – 60 percent of its
agencies. freight volume crosses international borders.
Looking east, Russia has the opportunity to The company offers block train, single freight
link Asian manufacturing capabilities with and combined transport services from a single
20
European consumer markets. Trans-Siberian source, with a focus on road-to-rail transport.
12 IBM Global Business Services

15. About the author Contributors
Keith Dierkx is Director of the IBM Global Rail Charles Vincent is a Partner leading the Travel
Innovation Center. He has worked with rail- and Transportation practice in IBM Global
roads for over 22 years, primarily in logistics Business Services in Southwest Europe.
and information technology. He has been Charles may be reached at charles.vincent@
CIO of a global transportation company, nl.ibm.com.
and Vice President of a successful Silicon Domenico Balzano is a Business Development
Valley technology startup. Keith is currently Executive for railroads in IBM Global Business
on the Business Advisory Board at the San Services. Domenico may be reached at
Francisco State School of Business and is domenico_balzano@it.ibm.com.
a past Technology Board member at the
Tom Liebtag is the Industry Marketing
Auto-ID Center at the Massachusetts Institute
Manager for Transportation for IBM. Tom may
of Technology. Keith may be reached at
be reached at twliebt@us.ibm.com.
kwdierkx@us.ibm.com.
13 The smarter railroad

16. The right partner for a changing References
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4
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5
Ibid.
6
“National Rail Freight Infrastructure Capacity
and Investment Study.” Cambridge
Systematics, Inc. for the American Association
of Railroads. September 2007 http://www.
.
camsys.com/pubs/AAR_Nat_%20Rail_Cap_
Study.pdf
7
“Passenger Railways in Europe.” Datamonitor.
November 6, 2008. For this statistic, Europe
comprises Belgium, the Czech Republic,
Denmark, France, Germany, Hungary, Italy,
Netherlands, Norway, Poland, Russia, Spain,
Sweden and the U.K.
14 IBM Global Business Services

17. 8 14
Study conducted by OC&C Strategy “National Rail Freight Infrastructure Capacity
Consultants on behalf of IBM in June 2008. and Investment Study.” Cambridge
Safety was identified as a business challenge Systematics, Inc. for the American Association
of high importance in North America, with of Railroads. September 2007 http://www.
.
potential to drive significant cost savings, but camsys.com/pubs/AAR_Nat_%20Rail_Cap_
was not identified as one of the most important Study.pdf
challenges in other markets. Customer Service 15
Ibid.
was rated as “somewhat important” in all 16
“Financing California’s High-Speed Train
markets. Interviews highlighted that the focus
System.” California High-Speed Rail Authority.
on passenger service is largely driven by the
http://www.cahighspeedrail.ca.gov/news/
need to garner greater cost efficiencies.
9
FUNDING_lr.pdf
Wright, Robert. “Road Congestion and Oil Price 17
“GEM’s Equity Strategy. Railways: Global
Invigorate Price.” Financial Times. September
Spending Boom to Upgrade, Expand and
22, 2008.
10
Initiate Rail Networks.” Morgan Stanley.
“European high speed rail operators launch February 7 2008.
,
Railteam.” Railteam press release. July 2, 2007. 18
Wiesmann, Gerrit. “German State Railway IPO
http://www.railteam.co.uk/News/Press-corner
11
to Go Ahead.” Financial Times. September
Anderlini, Jamil. “Trains carry China growth 26, 2008. Partial privatization of German’s
hopes.” Financial Times. November 3, 2008 Deutsche Bahn is attracting interest from
12
Tabeta, Shunsuke. “China To Build High-Speed Russian Rail who reportedly would like to
Railway Network To Prop Up Economy.” The secure 5 percent equity.
Nikkei. February 3, 2009. 19
Lyons, Patrick J. “A Railroad Rarity: Train Arrives
13
Anderlini, Jamil. “Trains carry China growth Five Days Early.” The New York Times. January
hopes.” Financial Times. November 3, 2008 25, 2008.
20
“The entire world of rail freight transport.” DB
Schenker Rail. http://www.rail.dbschenker.be/
site/logistics/railion/railionbelgienluxemburg/en/
profile/portrait/portrait.html
15 The smarter railroad

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