A Rail Company Re-engineers Its Operating Plan and Improves OTP

Argo helped an American passenger rail company realize annual savings of $6 million on their servicing and inspection operations. The high cost of those operations had put them at risk of losing a critical piece of business.

Situation

The 2015 federal FAST Act opened many of the company’s critical long-distance rail routes to bid. Suddenly the company would be required to bid against private competitors based on actual operating costs. Loss of the business would mean potential elimination of hundreds of jobs. To better position itself in the face of a bid, the company hired Argo to design and coordinate an ambitious improvement initiative where it would have maximum impact — at its high-volume Chicago terminal.

There were two goals: to reduce annual operating costs by $4.3 million and to improve on-time performance. The company wanted to achieve both objectives without reducing its union workforce, since anticipated retirements were already expected to cause attrition.

Actions

The Argo team helped the company implement new processes and tools focused around two scopes of work:

1. To cut costs, we took a boots-on-the-ground approach to evaluating the servicing and inspection operations work content. That included collaborating with the crafts and leadership to develop new, more efficient processes and coaching them on sustaining the change.
2. To boost on-time performance (OTP), we created decision matrices that serve to standardize how teams deal with train delays and other inevitable events. We also initiated weekly meetings that bring together leaders from mechanical, transportation, on-board services, and more to report operating metrics and daily labor numbers. When actual numbers do not meet the plan, they’re considered an exception, which requires feedback and redirection from the group. Afterwards, the meeting outcomes are published for the entire workforce to review — which builds ownership across the company — both for the numbers and any redirection.

Results

The new tools and processes helped company leaders better understand the process flow and constraints in their operations. Management credits the weekly meetings and reporting with creating positive momentum that has reduced delays and overtime.

Since engaging Argo, the company’s long-distance business has achieved the largest customer service score improvement ever. On-time performance (OTP) is up 6% over the prior year. Terminal performance is up to 97.7%, compared to 88% before.

Best of all, the target to reduce operating costs has been surpassed. The annualized prediction is that $6 million in operating costs will be saved. The company is now much better positioned to retain its rail business in the face of competitive bidding.