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It's been a long and difficult road for Union Pacific since President Abraham Lincoln signed the Pacific Railroad Act in 1862, approving financing for the first transcontinental railroad. Writer Jeffrey Rothfeder asked UP CIO L. Merill Bryan Jr. how technology will help the railroad stay on track.
Can you characterize the impact of technology at Union Pacific?
Technology is pervasive throughout our company and vital to the railroad's day-to-day operations. You would be hard-pressed to find any task that doesn't rely on technology in one form or another. For instance, there's the industry's first car-scheduling system, which is representative of the fundamental change in the way we use technology. Instead of just reporting what has occurred during a trip, we now have the opportunity of providing information as to what is going to happen. We create a complete door-to-door trip plan for every shipment. We automatically generate work orders on how to handle the shipment, the labor needed and the maintenance required, and we provide data and tools for advanced planning. You can see the current situation in terms of cars deployed and cars needed, and what's it going to be in four hours, tomorrow, or the next day. We've also put into place applications to support national customer service center operations, and we've implemented an automated voice response system and Web access for our customers.
We've worked extremely hard to automate, capture and process incident data about train performance through trackside devices like our automatic equipment identification technology. We were the first railroad to deploy robust data warehousing to support data analysis and decision-making. Our objective with data analysis is: "Any user, any question, any data, any time." We are deploying logistics systems with the automakers, helping to cut down on the time it takes to ship vehicles from factory to dealer and cutting their costs. Those are just a few of dozens of initiatives.
You and CEO Dick Davidson talk at analyst meetings and in other speeches about Union Pacific's Yield Strategy as being at the center of the company's business model. Can you explain what the Yield Strategy is and what role technology plays in it?
The Yield Strategy encompasses two ideas: First, drive revenue up through new products, and make it easier to do business with us. Second, drive cost down by removing performance variability, improving our ability to recover from incidents, making better use of our assets and continually improving our processes. As we see it, technology enables both parts of our Yield Strategy and, in the process, promotes innovation. In IT, we translate the business requirements of increasing revenue through improved dependability, attractive new services, customer relations management, and better sales and marketing support into system solutions. And we also help cut costs by developing technology that makes doing business more efficient. It's our success in the two key areas of the Yield Strategy that has driven Union Pacific's performance in the last few years.
What is the biggest challenge for Union Pacific?
There's a huge opportunity right now for us to take away business from trucks. We operate in high-growth areas of the U.S. from the West Coast to the Gulf Coast, and we serve all the ports. This is a tremendous franchise with a wide commodity mix of products that need to be shipped. But to get that business away from trucks, we have to be service-sensitive, and it takes excellent systems to accomplish that. Railroads neglect this part of their business too often, but our technology initiatives are an attempt to change that.
What could, pardon the expression, derail your plans?
We could get tied up dealing with the threat of government reregulation, and moratoriums on railroad mergers and other issues that could lead to forced access to privately owned rail lines. Those issues could threaten our ability to attract capital to finance and maintain our infrastructure, something that trucking companies don't have to worry about. Spending too much time on issues such as reregulation just keeps us from paying attention to innovation and new products for the future.
The one thing, though, that railroads have not been good at and have to become better at is to develop and implement systems that are able to communicate with each other using common standards. Without that, the railroads become inefficient and a headache for customers. One shipment may have to travel over any number of railroads, and if we don't make that trip seamlessthat is, without delays when we change rail lines, which requires syncing operations, and with good access to data about where the cargo is at all timesthe shipper might elect to go by truck. We have to build technology that fosters cooperation among railroads.
That's the main requirementand in the past a neglected onefor the complex rail transportation system to operate at peak efficiency.