CSX Corp: Track Changes

Keith Triplett was clearly agitated.

In his 26th year on the job, the dispatcher for freight train operator CSX Corp. was worked up about losing one-third of the capacity at a key rail yard in his territory. Every day, the main track gets stopped up when a Chicago train pulls in, offloads its crew and then awaits new instructions. For hours on end.

Triplett has to figure out where to shunt trains bearing down on that track. Five more trains in a couple of hours, seven more behind those. He calls this “the Willard Shuffle,” because the problem occurs at the rail yard in Willard, Ohio.

It’s a dance Triplett thought should end with the advent of the company’s new efficiency initiative, the One Plan.

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“You have something to do with One Plan?” he calls out to a visitor inquiring about the program at CSX’ operations center in Jacksonville, Fla., which controls movements on 80% of the carrier’s rail network. “Why do we have to do all the switching off the main track at Willard?”

This is the kind of problem the One Plan is supposed to resolve. For the first time, CSX is putting in place a series of software programs that are designed to end the improvisational artistry of fabled dispatchers such as Roy Thigpen and Charlie Grady. These legends, whose idea it was to create a single dispatch center out of 33 spread across the country, could take any set of circumstances—such as the Willard blockage—figure out choices in their heads and remedy the problem.

The new math-driven approach intends to make CSX a regularly scheduled railroad, albeit for freight instead of passengers. Instead of making trains as long as possible and running the fewest crews possible, the rail operator has made discipline—overall efficiency—its basic goal since the fall of 2003. One network, one schedule, one plan.

“The company’s long-term success is dependent on demonstrating the ability to provide reliable service to our customers,” chairman and CEO Michael Ward said in January, when he discussed CSX’ status at the end of last year.

Using historical statistics and forecasts of traffic for the immediate future, the software will figure out what “blocks” of traffic can be expected between any two points at any given time, the most effective sequence of blocks to send down any piece of track, and what each rail yard can handle effectively. It then creates an intelligent and repeatable schedule that maximizes throughput and minimizes waste. Every day.

The building blocks are, in fact, called blocks. A block can be as few as two train cars moving from point A to point B. The trick, in railroad efficiency, is to have the most blocks move the most distance without “pulling pins” and transferring the blocks to other trains headed for other destinations.

This is no mean task. CSX—and dispatchers like Triplett—must juggle 20,000 carloads a day, involving 4,000 locomotives and 100,000 freight cars, to satisfy customers. These loads must move across 23,000 miles of track and deal with the idiosyncrasies of 166 rail terminals, 70 ports, 45 automobile distribution centers, 127 active coal mines and 105 coal-fired power plants.

Using code from the University of Florida, software specialist MultiModal Applied Systems and other sources, the One Plan uses an “optimal blocking model” to figure out the size of blocks it must deal with and the volumes each yard can handle. Then, using algorithms that track each class of freight, it creates “traffic block sequences” and uploads them to a mainframe that can keep track of details on how traffic should flow.

Then, MultiModal’s MultiRail software figures out which blocks should be assigned to what train, each day of the week. And CSX’ Intelligent Train Scheduling System determines feasible train schedules that it can publish and stick to.

Which is all well and good, in theory. But Ward, speaking to financial analysts in January, noted that the company’s operating performance was “not where we want it to be yet.

“We remain very optimistic that the One Plan and the opportunity it holds for the company is going to deliver great results for our shareholders going forward,” he said.

But better service to customers has yet to arrive. Railroad industry analyst Donald Broughton of A.G. Edwards in St. Louis says the One Plan “is not yet working. We see no evidence of it working yet.”

Nor is the company gaining kudos for its safety. Last month, the company agreed to pay $1 million to the state of New York for failure to fix hundreds of warning signals.

That isn’t stopping CSX. Demand for rail transportation is strong, and so are the company’s results. CSX’ net income from continuing operations more than doubled in 2004, to $418 million, from $194 million in 2003, on revenue of $8.0 billion, up from $7.4 billion. Its core earnings from rail operations were up for the fourth quarter in a row, and revenue for the 11th consecutive quarter, Ward noted.

But that doesn’t mean One Plan is contributing to the gains.