Tranz Rail moves deliver gains

By NOEL COOM*

When I came to Tranz Rail just over two years ago it became apparent very quickly that the company had to change or face a long, slow decline.

It was unable to meet the demands of clients as:

* Trains ran at close to a 40 per cent on-time performance

* There was an inability to track customer freight.

* Wagons would stockpile at lesser-used sites as we ran out of rolling stock at busy terminals.

* Company's would use the wagons as additional storage.

* Assets such as rolling stock and locomotives were coming to the end of their useful lives.

* We carried some freight at little or negative returns.

Clearly we had to restructure our business to meet the requirements of customers and find a way of increasing the margins on the increasing volumes of freight being carried.

Since 1993 the tonnage carried on the network has increased from around 8.5 million tonnes to around the 14 million tonne level for each of the past three years, as volumes of coal, logs, dairy products and container traffic have increased.

But revenues were not showing the same growth and we had to look at how we could change that. The key to that was what we called the Intermodal Transformation Project (ITP).

ITP has a number of different elements but its main thrusts were:

* Making sure our rail business in particular met customer needs.

* Emphasising containerisation.

* Ensuring our processes and IT functions made life easier for customers and staff and met our business needs.

* Driving revenue growth through profitable business.

* Adopting preventative maintenance.

* Culling out-of-date or worn-out assets.

* Doing away with some marginal freight as the need for asset replacement made that business unprofitable.

That last point reduced the company's wagon fleet by about 600 as old unsafe rolling stock was made redundant. This rolling stock, mainly produced between 1968 and 1980, was incapable of being safely used at more than 50 kp/h - the average speed we want to run trains at is 80 kp/h with sprint trains running at 90 kp/h - and they were beyond reconditioning. The good components were salvaged and the rest scrapped.

The result is we are running the same or larger volumes of freight on a reduced number of wagons.

The results of the programme have been better use of assets, faster turnaround times and customers recognising the advantages of our fixed capacity, point-to-point services.

Those fixed capacity services mean that wagons move constantly between the destinations instead of stockpiling in, say, Napier and then having to be returned to Auckland.

We've always moved empty wagons around the system - you have to, to ensure rolling stock is available where needed, but now we do it more effectively.

The issue of marginal freight was also dealt with by assessing the costs of replacement rolling stock, looking at the returns on that new investment and, where necessary, deciding to drop that business.

Those cases were not common but we did drop some business, most notably pulp and tissue.

Our emphasis on containerisation, alongside our bulk freight business is also paying dividends and changing the look of our business.

Container handling is mainly carried out by forklifts with many shunting staff being retrained to move freight and 40-year-old shunt engines retired or used for spare parts.

The move to consolidating container freight at 15 sites around the country has reduced the number of working sidings from around 1250 to about 300, with the bulk of those mothballed but still available for future use.

In a couple of cases old marshalling yards have been replaced with sealed Container Terminal (CT) sites.

The fresh emphasis on containerisation has grown volume for IMEX, our import/export container business.

The emphasis in on-time performance, now around 80 per cent, was a key factor in Tranz Rail being in a position to benefit from recent changes to port calls by the major shipping lines.

The changes favouring Timaru, Napier and Dunedin will, in some cases, increase volumes on those rail corridors by more than 30 per cent. That will involve over 20,000 containers moving on rail that would otherwise move on the roads.

Shipping companies would not have looked at Tranz Rail as a viable land transport option unless they were confident that we could deliver to meet all important port calls to minimise their turnaround time and port charges.

Other service changes such as the 11-hour sprint service between Auckland and Wellington and the 29-hour sprint service from Auckland to Christchurch, cater for the freight forwarding and other specialist markets the exist between those centres. Another important factor in our plans for growth is an IT system that fits with our business needs and the needs of our customers.

AMICUS, the current system, was purchased from the United States as an off-the-shelf package introduced in 1989, and never really performed as expected. We are now in the process of introducing new IT systems that are designed and built to meet the specific needs of our business and our customers.

We are moving to a system that puts containers straight into the system without waybills and by tracking containers we've automatically ended a practice that left large numbers of containers travelling for free. In the past we only tracked wagons, which meant two 20-foot containers could travel on one wagon.

Because we may have had only one recorded wagon movement but carried two containers we no doubt sometimes endeared ourselves to customers but that didn't help revenue.

Tranz Rail has made many changes in the past two years and is a very different company to the business familiar to many of its previous followers.

It is a freight business that aims to win new container business and grow its bulk business through better service and performance. The results of this are just beginning to show, as with our first-quarter performance.

The business is now in a position to continue to be a sustainable link within New Zealand's land transport network and to contribute to the country's economic growth.

* Noel Coom is Tranz Rail's group general manager rail services group.

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