| DOES E-COMMERCE
HAVE A PLACE ON THE RAILROAD?
he meteoric rise of the "new economy" dot-com companies has left many railroad marketers wondering whether there is any place for them in an increasingly "wired" world. The rather prosaic fact remains that many shiny new dot-coms exist to sell products and services made by "old economy" firms like GM and DuPont. As these firms turn to the Inter
net to manage their businesses, they have less patience with suppliers - including the railroads -- that are not Net-friendly. What's one to do?
Consider that it was the railroads themselves that transformed the Industrial Revolution. In the October 1999 issue of The Atlantic Magazine Peter Drucker's article, "Beyond the Information Revolution," makes an eloquent case. He writes that although steam power changed the industrial revolution by speeding up existing processes, not much really new was created.
"Then, in 1829, came the railroad, a product truly without precedent, and it forever changed economy, society, and politics. Within five years, the Western world was engulfed by the biggest boom history had ever seen -- the railroad boom. [It] continued for thirty years, until the late 1850s, by which time most of today's major railroads had been built."
The railroads were the new application of an older technology, steam power, and made distance less important to what people thought and did. New markets were opened to regional producers of everything from pork to pig iron. Distance didn't matter quite as much any more.
Now the railroads are positioned to do it again. They can make distance largely irrelevant by using the Internet to create new services combining their own inherent economies of scale with the convenience of trucks. The railroads used steam power to change perceptions about distance and logistics a hundred years ago; they can do it again today via the Internet.
The railroads have already begun to use the Internet to do what they already do faster and more efficiently. EDI, Redi-net, on-line car ordering and billing, and shipment tracing through railroad websites are merely faster ways of doing the same old thing. But when it comes to getting a rate or buying equipment or delivering on time the process hasn't changed much since the invention of the telegraph. And that's a shame.
Today's transportation buyers have come of age in a point-and-click environment. Whether it's a pair of jeans from The Gap (www.gap.com), two tickets on American to Miami (www.aa.com), or pricing a truckload shipment (www.yellowfreight.com) it's all the same process. But to price a rail move still requires a series of phone calls and a longish time lag between ask and get. So why bother? Log onto a trucker's website, get a price, order the move, and be done with it.
Fortunately, there's hope. Tariff rates are available at www.uprr.com, and even cover non-UP origins (but you still can't point and click). CSX is working toward "laptop pricing" which will replace tariffs with public rates based on lanes and equipment availability. BNSF is setting up freightwise.com as a clearinghouse for freight shipments between customers and carriers.
There are still many key decisions to be addressed. Drew Robertson, one of the investors behind the industry's newest car supply site, www.railmatch.com, says there are three choices. Railroads can do standalone efforts like the BNSF model, they can get into cooperative projects such as Railinc's Steelroads.com, or they can work through independent providers like Railmatch or www.unirail.com.
Whatever the choice, the object remains the same: to create greater liquidity in the rail transport market. Equipment and freight services websites expand the reach of suppliers and users alike, linking many suppliers and many users through the Internet. This is clearly something new, something that could not have existed pre-Internet where every vendor had to reach every prospective user by phone, fax, direct mail, or other means. The Internet eliminates the clutter and speeds up the process by making distance between parties a non-issue.
But the time to move is clearly now. Independent Wall Street analyst Tony Hatch offered a charge to the industry at the recent Railroad Internet conference in St. Louis. Said Hatch, "It is essential that the entire rail system convert its historical business practices to the changing and dynamic real world, and do it fast, not just crow about the success, however real, of small pieces like EDI."
The biggest risk is being shortsighted or timid. An incremental approach just won't work. Standalone projects run the risk of being too limited in scope; cooperative ventures tend to the lowest common denominator. Independent providers can reach beyond the traditional rail users to the rest of the freight transport market with tools the rails could never build in-house. The means are in place, so doing nothing is not an option.
But regardless of the Internet approach selected, services must work consistently and reliably. By running a scheduled operation backed up with service guarantees the railroads once again will have created something that never existed before. Isn't it about time?