Railroad’s and Suppliers can work together to reduce material and service supply delays and improve locomotive availability. With the advent of Precision Scheduled Railroading, it has made locomotive availability even more important. Parts and materials are critical to successful planning and scheduling. Not having the material or not planning the material within the required delivery results in a maintenance task that cannot be performed. The maintenance is then deferred or the locomotive is held or sometimes rework is required to be performed at a later date. All of this equates to locomotive downtime.
Meanwhile, Railroads are being asked to do more with less while Suppliers are trying to reduce inventory to reduce costs and improve their financial performance. Both the Railroad and Supplier face pressures on improving operating efficiencies and when working independently the end result can lead to disrupted service to the end customer.
When planning and forecasting materials and services we first examine the different types of maintenance:
- Scheduled/Preventative Maintenance – (On a Regular Interval while equipment still functioning)
- Predictive Maintenance – Time Based Maintenance (TBM) Form of CBM with the emergence of more remote diagnostics.
- Failure Finding Maintenance (FFM) –aimed at detecting hidden failures while something else has failed.
- Risk Based Maintenance (RBM) – preventative where the frequency and scope of maintenance activity is continuously optimized from the findings or inspection and a risk assessment made.
- Condition Based Maintenance (CBM) – not age related but there are some warning signs that failure may be about to occur. (intervening before it occurs)
- Corrective Maintenance – failure has now occurred or run to failure or as a result of unplanned failures.
The approach to Planning material or services may vary based on the type of maintenance planned. Accurate forecasting is one of the top priorities for companies today. There are many advantages that can come from forecasting in planning and maintenance. Planners and Managers wish they had a crystal ball to glimpse into the future in order to cut the complexity and uncertainty of planning materials and labor to maximize their efficiencies and make educated predictions about material sourcing, inventory levels, job allocation, transport logistics and more. With more effective production scheduling, the Railroad is able to do more with less, quicker and more cost effectually. History is often like looking in a rearview mirror and often can help determine where you are going and doesn’t necessarily help you avoid a multiple car accident up ahead. Forecasting gives companies the ability to be more effective in their production scheduling to meet customer demands and align the availability of raw materials and component parts. To better understand demand for certain parts and work more effectively with suppliers to achieve optimal inventory levels, minimize costly losses in either too much unused inventory or lengthy availability delays.
Forecasting helps companies reduce cost by providing the correct amount of material associated with job allocation reducing dwell times, improving cycle times, sourcing or ordering admin costs. Forecasting assists in optimizing transportation costs – certain volumes to specific locations, combining shipments and selecting the best mode of transportation or negotiating the best rates. Being able to create a transportation strategy to better effectively manage these costs and get the parts the fastest and cost-effective way from point to point. Making sure the right products are at the right location at the right time. Forecasting contributes to the operational, logistics and production cycle platform all aimed at increasing customer satisfaction.
The traditional approach of the Railroad and supplier working together the longer lead time the more Inventory is required to hold Inventory to minimize the risk of material Shortages. Delays can be caused by the ordering processing time, the supplier not ordering raw materials until they receive the purchase Order – which means the supplier’s lead time is added to their own lead time. Sometimes supplier’s batch up orders to run them together in a large run. Delays in arranging shipping or consolidation creates delays while goods wait to be consolidated with other goods into a single shipment. Delays can be created at Cross-docks or Ports. The traditional approach does not stress on communicating and can frequently result in short term or long-term capacity issues at the supplier.
Communication between Railroad and Supplier has never been more critical. There are steps that the Railroad and Supplier can take to reduce lead times. To begin with, in applying lean manufacturing thinking, by value stream mapping supply chain to understand the drivers of lead time. Then design a future state map to reduce factors that contribute to lead time.
Having a good Service Agreement that outlines the way to do business together. It does not need to be a legal document but more of a procedure that includes agreed on performance metrics and targets, based on mutual accountabilities and Key supply chain metrics Including lead time and material availability.
Another strategy in reducing lead time is leveling demand and level orders onto supplier to be more predictable. This can make it easier to supply, plan manpower, and the supplier can respond quicker as they are more prepared. Allowing Suppliers to order materials against forecast does require the setting of some business rules to monitor order levels, with a two -way responsibility on the material ownership. The Supplier, by creating a dedicated line focused on that one product for that customer, minimizes the allocation of capacity for conflicting requirements.
Basic Strategies in place today to improve material and service availability, that have some advantages but also some limitations. Vendor Managed Inventory or Consignment requires some sort of collaboration between the railroad and the supplier. Basic strategies focus on the availability of key components and overall collaboration is limited. It is usually focused on specific warehouses or sites and the replenishment at the item level and not focused on end goal of equipment. In some case results in reserving material at one warehouse but may cause a Shortage for another customer or available at one Railroad site but not the other. This working together is however a stepping Stone to More collaborative approach in planning material and services to minimize equipment delays.
With the current state of planning there are typically multiple, independent demand forecasts, for various purposes. Such as the Maintenance Plan or the operating budget. It is usually done at a high level of detail and focuses on the annual budget by locomotive type or region or for a Period. The forecast accuracy is rarely measured or shared with the Supplier and not time phased across the value chain. It pushes the inventory to the stocking centers based on inventory parameters, is transactional based and driven by traditional or historical information.
Traditional Planning and Forecasting uses information from historical usage (EAU), programs and rebuilds, contracts or commitments to Suppliers. Information sharing is unofficial or done by verbal updates. The material is planned based off of standard lead times. Many are of the belief that maintenance can’t be forecasted.
Collaborative Planning, Forecasting and Replenishment (CPFR) is Supply Chain Collaboration (SCC) and has become vitally important for companies seeking to achieve a competitive advantage. SCC is a process where both the Customer and Supplier work together to improve performance over working alone. It is a process that promotes inter-organizational cooperation, knowledge sharing and customer-supplier intimacy. Collaborative Planning, Forecasting and Replenishment (CPFR) is a process of jointly forecasting demand and scheduling production. It is aimed at creating a competitive advantage by Improving the Customer and Supplier relationship through sharing of information, risks, benefits, costs and synchronized forecasts. It eliminates supply/demand uncertainty through Improved communications and collaboration. Exchanging Maintenance/Production Plan and order forecasts, that are continuously corrected and adjusted to develop an ongoing unique forecast. It allows the supplier to allocate production capacity against demand. The efficient flow of material and product based on this adjusted demand. Ultimately the result is an improved service level and reduction in locomotive dwell times.
The key elements in CPFR is a greater Integration and cooperation among Supplier and Customer. A collaborative performance system with performance metrics and information sharing. There is an alignment of Supplier and Customer sharing in risks and benefits. It encourages an environment based on trust and technology. Information sharing quality Is the most critical factor in achieving success. Support of top management is paramount and generally requires a commitment and investment in technology to facilitate the exchange of information sharing.
In surveying some of the Railroad’s today we look at what Information is Shared with Global Rail Suppliers currently and how does the Railroad approach their material and service requirements to minimize locomotive dwell time and improve locomotive availability. Locomotives out of Service drew a high level of visibility and Waiting Material delays was the highest priority, other than safety. The number one railroad indicator is Locomotive Availability and Reliability. When a Locomotive is held due to material the Issue, locomotive and part/service and Supplier gets the attention of CMO.
Materials and Services required for Capital Program (Rebuild Program) are forecasted and is budgeted internally at the Railroad but no formal process to share the information with the Supplier. Material for unscheduled failures are held in inventory based on stocking parameters, Min/Max, lead Time, and historical failure rates. CBM and Run to Failure Maintenance type was handled similarly and this info not systematically shared with the supplier. Few Railroad’s had any Technology in place to share the data. One Railroad has invested in the technology that provides a Supplier Portal and provides performance measurements on delivery as well as item forecast in the system. Quantity on hand, lead time and forecast information is shared electronically. The RR is able to work with their value-add Supplier to drive down the safety stock required to be held on hand by the Railroad. The demand by Type of Maintenance is visible to the Supplier. There is little two wat communication in sharing information or flagging when forecasts are modified.
Capital Overhaul Program (Rebuild Program) material is forecasted and budgeted Internally and shared with the Supplier 3 to 4 months before the year begins. Orders and Service Agreements are placed for these Major items and scheduled. Weekly conference calls with service shops on Locomotives are held and schedules and status is revised from there. This Information is not transferred via a System Technology.
One Railroad’s approach is to smoothen out the production of the service shops and major material by balancing the load for the year. The goal is to allow Suppliers to hire, plan capacity, train and retain capacity levels while improving cycle times on Services and materials.
RR’s have consolidated their supply base, have entered Into Agreements and have established performance metrics in place for monitoring and driving performance. Risk and benefit sharing is evident. Changes to the schedule are communicated Informally. The Intent is for the information from the Railroad to be seamless. There are plans for investment in technology to facilitate the sharing of information but not yet in place. The program is in its early adoption phase.
Final Words …
There is pressure on both the Railroads and the Supplier to improve their business metrics. Railroads and Suppliers are focused on Increasing customer satisfaction. Currently planning is done at a high level and is budget focused. We are beginning to see a more collaborative approach to planning and forecasting between the Railroad and Supplier The performance is improved by inter-organizational cooperation, sharing of information and this new customer/supplier intimacy. Top Management is beginning to support these concepts and new processes where risk/reward and required investment in Technology is critical to facilitate the information sharing and adjusting of the time phased demand over time.
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