Union Pacific Delivers Internet Of Things Reality Check
U.S.'s largest railroad uses sensors and analytics to prevent derailments, but it also shows where the next wave of innovation is needed.
Technology Alongside Judgment
To grow, a railroad needs to push more freight volumes through a relatively finite network of tracks, locomotives, and railcars. IT is essential to maximizing that throughput; it's a constant balance between analytics-driven automation and human judgment.
Railroads are a growth business. After weathering the recession and a disastrous 2009, when revenue fell 21%, UP has climbed back, with revenue up 15% in 2011 to $19.6 billion. The country's seven big railroads have been benefiting from power plants' demand for coal, China's demand for U.S. crops, and recovering auto sales. Even e-commerce growth provides a lift: UP has a section of its dispatch center devoted to one customer, UPS, which is riding the growth of e-commerce home deliveries. Meantime, UP is looking to become more of an end-to-end player by partnering with local trucking and logistics companies.
But UP's core is capacity-constrained. It has one network of tracks, 32,000 miles of it, and adding new track costs about $2.5 million a mile. One new locomotive costs $2.2 million. "We can't spend enough money on capital to fulfill our growth," says Tennison, even though UP's capital spending in 2011 was $3.26 billion. "We have to get there with IT"--by steps that improve decision-making through better information.
Nearly every technology project at the railroad can be tied back to one metric: velocity.
Velocity is the amount of freight moving through the system at a time, and dispatchers talk about the track network like a giant pipeline. UP has about 3,350 trains traveling its tracks and rail yards in any given 24-hour period, and the dispatchers have to manage those trains and their crews to optimize the flow.
Mission control is UP's main dispatch center in Omaha, something of a cross between an air traffic control room and a stock exchange. LED monitors display real-time information on everything from track and train problems to train speeds and locations to fuel consumption to freight counts (the arrangements and contents of shipping containers) to adverse weather patterns specific to its exact track locations to the status of repairs in any one of the company's 120 rail yards and terminals.
To understand the constant blend of technology, automation, and human judgment, consider all of that data coming in from trackside wheel sensors. UP's custom-written software assesses more than 20 million wheel readings a day, generating about 1,500 daily alerts that employees look at. Most problems are considered "strategic"--they aren't a looming risk and just need to be addressed at some point. Fifty to 60 can wait to be checked at the final destination, 25 to 30 at the next terminal, and seven to 10 are serious enough that the driver needs to pull the train over as soon as possible for inspection.
If a train has to slow down, dispatchers must manage the ripple effect throughout the network. An executive VP of operations monitors current and projected velocity constantly, and if it's projected to decline will isolate which trains are dragging it down. And this system doesn't just monitor UP tracks--60% of company shipments spend part of their journey on another railroad's tracks.
Other railroads are doing similar wheel-sensor readings, and ideally this trending information gets shared among the railroads. Since 2006, the major U.S. railroads have had a consortium that works out how to most effectively share that data. Without that data, when a train comes onto the UP system, analysts can't tell if a wheel suddenly got much hotter or had been steaming along that way for miles.
Another trade-off between automation and judgment comes with the Optimizing Traffic Platform, decision-support software designed using an algorithm from Carnegie Mellon to optimize railroad throughput. It can be configured to maximize throughput, to maximize velocity while giving preference to certain shipments, or to stick as closely as possible to the schedule. UP was the first major railroad to use the OTP technology, in 2010, and it's now used for about 60% of the railroad's operations, with the goal of 100% within a couple of years. Without OTP, the railroad uses a rules-based planner for when trains will meet and have to pass. That planner lets people make the best local decision, but it doesn't factor in the ripple effect. The computing capacity the OTP software requires is one reason UP recently upgraded its long-running VAX 700 data center servers to clusters of Hewlett-Packard and Dell blade servers.
The Business of Going DigitalDigital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.