The latest quarterly earnings reports from the major U.S. railroads again reflect that shipment volumes and profits are on the rise, but behind the scenes, customer service and asset management remain a bit of challenge.

As an example, CSX posted a 13 percent gain in revenues and a 30 percent boost in Q1 profits.  CSX noted higher shipments in autos, auto parts and construction materials. Where the railroad once had 700 idle locomotives at the depths of the global recession, that number is down to 290.

Similarly, Union Pacific reported gains amounting to 13 percent in revenues and 24 percent in profits with a corresponding 5 percent gain in freight volumes.

Last week, an article published in the Wall Street Journal (paid subscription required) noted that U.S. auto makers are struggling to get finished automobiles and trucks to their respective dealers because of a shortage of railcars.  Chrysler, Ford and General Motors have been storing finished vehicles in temporary storage lots awaiting the scheduling and arrival of railcars for shipment.  This shortage of railcars has added days to expected dealer receipts and consequent sales. The article notes that now that U.S. manufacturing volumes are on the rise, the rail carriers do not seem to have enough active rolling stock in circulation to accommodate on-time deliveries.  Interesting enough, CSX acknowledged that the shortage of available railcars has had an impact on the carrier ability to transport finished vehicles from production sites to dealer locations.

We recently penned a guest commentary on the Infosys SCM blog noting how the past global recession has brought forward the critical importance of enterprise asset management (EAM) for asset-intensive industries such as railroads or utilities. As an example, U.S. industry shipments of railcars declined by 64% in 2009.  According to the Association of American Railroads, 2009 was the worst year for freight rail traffic, reaching its lowest levels since 1988.  In that same year, 28 percent of rail fleets were parked in storage, and one estimate noted that there were $43 billion in idle assets representing both leased and owned locomotives and railcars.  The BNSF railroad alone had rail cars that sat idle for up to three years on unused track stretching more than 30 miles in some places.  It seemed like every available rail spur was utilized as a storage location, a virtual real estate warehouse, as it were. As observers, we speculated on how railroads were able to track and account for all of these scattered idle assets.

Now that manufacturing is surging in the U.S. these same railroads are under pressure to accommodate increased service requirements, but that leads to challenges of locating idle assets, checking and inspecting equipment and sequencing locomotives and railcars into normalized train schedules.

While the financial numbers for U.S. railroads are steadily improving, the operational challenges of customer service as back once again.  In the backdrop lies the importance of integrated and timely inventory and scheduling of assets. That may well be the most important lesson for U.S. railroads and other asset-intensive industry.

Bob Ferrari

The following Supply Chain Matters guest commentary is contributed by Praveen Kumar Agrawal, Principal Consultant, SCM Practice, Enterprise Solutions, Infosys Technologies Ltd.

A classic but important debate concerning ERP vs. Enterprise Asset Management (EAM) systems keeps coming up in some of my client interactions within Infosys. I see this debate coming from two different types of client situations: (i) Clients currently using ERP systems but not as yet implementing any asset management functions who are now evaluating either asset management module of existing ERP or a best of breed EAM package, and (ii) Clients using a best of breed EAM package along with ERP for a considerable amount of time. Due to older versions of the technology, these clients now look for upgrading their ERP & EAM, and are considering whether to replace their EAM by ERP or upgrade EAM and ERP both.

I see this debate coming from two different functional viewpoints; IT and Business. The IT department does not want to handle multiple packages, multiple vendors, and undertake multiple system integration issues. Business, of course, needs the solution which is best suited to them in terms of meeting their business needs, usability, adaptability etc without caring much about ERP, EAM of any other jargon.

A couple of years ago, regarding this same subject, I made a presentation to a group of maintenance and IT managers from some renowned Indian government organizations and here is the gist of the articulated needs:

• Managing financials, supply chain and physical assets is a high priority for most organizations
• ERP systems were originally built to manage all of these but now have enterprise class asset management tools also built-in
• For a CIO: Single system is a tempting prospect which leads to financial savings and operational efficiencies
• For a CEO: Assets equate to a whole range of the organization’s assets; IT Assets, Fleet Assets, Building and of course production machineries

Businesses always complain about delays in getting the desired results from their ERP implementation considering the huge scope and multiple departments involved. This can often lead to a long implementation cycle. By the time that internal ERP consultants finish financials, manufacturing, inventory & procurement system functions it is time to upgrade. This leaves little time to think about overall asset management in the context of its dependencies upon inventory, manufacturing and financial modules in ERP. Then another long upgrade cycle begins and the asset management business benefits would still lag behind.

For ERP systems, asset management is just one module of very larger business problem which does get implemented only during end of ERP implementation; while for best of breed EAMs it is the area of business they are designed to address. Also, different industries have different asset management priorities and requirements:

• Oil & Gas industry has an emphasis on safety & regulatory compliance
• The Energy and Utilities industry would need GIS, Compatible Unit estimation etc
• Pharmaceutical industry has an emphasis on regulatory compliance and  auditing
• Fleet Management will emphasize mobile and quick solutions
• Governmental agencies emphasize regulations, property management and service desk

But at the same time, EAMs would not have solutions to cover all the business processes of financials, manufacturing, budgeting. Hence EAM alone is not the solution for the bigger problem.

In the end, the recommendations I provide clients would include:

• Go ahead with ERP. Take the advantage of its long implementation time by installing a best-of-breed EAM solution. This best of breed solution would give you instant benefits.
• Reap the benefits of best-of-breed Asset Management solution while your ERP is getting implemented and matured.
• Then either integrate to ERP or change over to full ERP solution.

The discussion often moves into the next mode – how to decide on the integration vs. the changeover. The most important points to consider should be:

• Business Process fit – Select the product which is best fit for the requirements.
• Usability – Should be easy to use considering not much IT savvy maintenance users.
• Product Roadmap – Product should have a long history in the market and in the domain. It should be compatible with organization’s other software solutions. The software vendor should have a clear vision on future releases/upgrades.
• Wider Scope –Managing assets simply does not mean managing some heavy production machines. An asset management solution should be able to manage all types of organizational assets like buildings, machines, IT assets, fleets etc.

If you have positive considerations about all of these above four points, then consider integrating EAM with ERP otherwise replace.

Earlier, on the Infosys SCM blog, I have written another blog on a very similar topic Will best of breed EAM packages be taken over by ERPs? Please read that as well for more insight.

About the Author: Praveen Kumar Agrawal is an Infosys SCM consultant with 13 years of experience in the IT industry. Praveen was part of the initial team which started the Maximo implementation practice within the Supply Chain Management (SCM). He is associated with Enterprise Asset Management (EAM) domain for the last decade, and has played key roles in product development and implementation for multiple EAM packages. Praveen shares his insights and viewpoints on current and future trends in asset management at www.infosysblogs.com/supply-chain

Further Disclosure: Infosys Technologies is one of other noted sponsors of the Supply Chain Matters blog.

Source: Getty Images

Supply chain professionals may visually recall that in 2009, at the height of the financial driven crisis and global recession, production and transportation volumes were dramatically impacted.  Significant value-chain activities became idle in a matter of weeks.   In that same year, 28 percent of rail fleets were parked in storage, and one estimate noted that there were $43 billion in idle railroad assets parked in any available storage location.  As noted in our pictorial, some railroads such as the Burlington Northern Santa Fe (BNSF) had idle railcars placed on unused track stretching for up to 30 miles.

As these and other assets are being re-activated, there are some important reminders on the changing scope and requirements for enterprise asset management.

In a current guest posting on the Infosys Supply Chain Management blog, I outline the important considerations that teams in asset-intensive industries should consider in their business process and supporting information technology strategies related to this topic.

I encourage readers to add their perspectives on this important topic.

Bob Ferrari