The government tabled proposed amendments to the shipper protection provisions of the Canada Transportation Act (CTA) on May 30, 2007. At the same time, it announced a commitment to commence a review of railway service within 30 days of the passage of the amendments. Bill C-8 received Royal Assent on February 28, 2008.
The objective of this paper is to describe the scope and approach for conducting a review of the performance of the rail freight transportation supply chain and its impact on rail service to shippers in Canada.CONSIDERATIONS
The review will take into consideration that:
The review will address such issues as:Shipper size : The review will address the needs of shippers of all sizes - small, medium, and large - across all sectors, including shippers with particular needs, e.g. dangerous commodities. The review will consider how shipper size impacts supply chain efficiency and capacity.
The second cause of a surge in demand for capacity is related to the interruption of the smooth flow of operations; alterations in capacity demand that come about because of system failures which may be attributable to a number of causes, some of which are within the railways' control and others which are not (weather, labour disruptions, marine vessel arrival schedules and poor performance by shippers or terminals). The management of regular capacity must take into account both causes of surges in demand for service so as to allow for adequate service during market-driven surges and a rapid return to normal service when the demand surge related to operational problems is over. The review will identify best practices that facilitate quick recovery as well as the contingency and recovery plans that are deployed by the railways, shippers, and terminal operators; the effectiveness and adequacy of these plans; and additional cost-effective measures and resources (i.e. people, equipment, and facilities) that could be considered.Transportation Alternatives - The review will examine the extent to which service issues are a function of practical transportation alternatives, or lack thereof, that are available to shippers.
OBJECTIVES OF THE REVIEW
The objectives are to:
The review will examine the full logistics cycle from customer/railway demand forecasting; customer demand for service (e.g. car or train orders); railway acceptance and commitment to demand, to the spotting, loading, release and pickup of cars at origin; the movement of loaded cars to destination (including the switching of cars between CN, CPR and shortlines); the spotting, emptying, release and pickup of cars at destination; and the return of empty cars for loading at origin. It will examine the interaction between railways and other logistics stakeholders (e.g. shippers and domestic end users, terminal operators, ports, and vessel operators) and the effect of third parties on operations and capacity.APPROACH
The review be conducted in two stages. The first stage will consist of quantitative and analytical work. In the second stage, draft recommendations will be developed by a Panel of three eminent persons based on the results of the analytical phase and any other relevant information that is available. The Panel will consult stakeholders on the draft recommendations and submit a final report to the Minister of Transport, Infrastructure and Communities.PHASE 1: ANALYTICAL WORK
The analytical phase will consist of four projects:
1) Data gathering and analysis;
2) Assessment of logistics system operational issues;
3) Survey on railway best practices and issues; and
4) Assessment of how service issues are addressed in other transportation sectors and in regulated industries in Canada and the United States.
Consultants will be engaged to conduct the work under the first three projects. Transport Canada will undertake the work on the fourth one. This work is expected to take a minimum of six months, depending on the availability of required data and the extent of cooperation from railways, shippers, and terminal operators in providing such data.1) Data Gathering and Analysis Project
This project is expected to be the most challenging, expensive, and time-consuming. The data phase is intended to help identify and quantify the magnitude of the problems with rail service and other elements of the logistics chain so that appropriate solutions can be developed. Good data analysis will be essential and will complement anecdotal information.
The intention is to assess historical information over a two to three year period for a broad range of commodities. (See proposed commodity list in Annex 1.) Sampling techniques will be used as appropriate to minimize costs, ensure data reliability, and address biases.
It is assumed that, from a shipper's perspective, good service consists of two main components - i) providing sufficient and consistent supply (track capacity, cars, locomotives, and crews) to meet shipper demand in a reasonable manner; and ii) moving traffic in an efficient, timely, orderly and reliable manner.
With respect to demand, key indicators include: number of cars required by shippers (i.e. car orders), number of cars committed by the railway, and number of cars actually delivered. The review will assess whether car order and allocation systems impact the railways' ability to meet shipper forecast demand in a reasonable manner.
There are a couple of demand-related issues that need to be addressed - "phantom" orders (ordering more cars than required in anticipation that less than 100 percent of the orders will be filled) and the availability of reliable and verifiable demand information.
Movement indicators are more readily available and will answer questions such as:
The analysis will indicate that problems occur from time to time. It would be unfair to assume that the railways are responsible for all problems in transit or that shippers and receivers, terminal operators, ports, or vessel operators are similarly responsible for all problems at the facilities where goods are loaded or unloaded. The analysis will have to include an assessment of the cause of the problems. This may be challenging since determining cause can be very subjective. However, it should be possible to identify disruption factors such as derailments, accidents, weather events, lack of vessels at port, strikes, and system outages that would have severe impacts on system performance.
A final report will indicate where there were service problems (nature, frequency and magnitude), causes (railway performance, weather, other stakeholder performance, etc.) and how they were addressed by the various parties.
The report will also describe the types of financial impacts that are experienced as the result of poor performance, including impacts on shippers, terminal operators, railways and others. Selective examples may be provided for illustrative purposes.
This information should be helpful in developing recommendations as part of the second phase related to the effectiveness of system recovery procedures.
This work will be conducted by consultants with experience in collecting and analyzing complex data from shippers and carriers and a thorough understanding of the supply chain from origin to destination.2) Logistics System Operational Issues
A separate project will examine the operating practices of railways, shippers, vessel operators and terminal operators and assess the extent to which they create service problems. For example, while long block trains are assembled at origin, some trains are broken up on route and, as a result, some cars do not arrive at destination in the same block as they were loaded. This can potentially create handling and operational problems within a port if all the cars in a block are required at the same time to meet a particular vessel.
The fact that CN and CP operate different lengths and configurations of trains can create problems in ensuring equitable treatment under their co-production agreements. This also creates operational problems at the port. However, co-production appears to have improved some operating efficiencies. How can these problems be addressed? Could this concept be expanded elsewhere? Are there labour implications associated with changing operational practices?
Railway and shipper/receiver resource levels have been changing over time, e.g. number of locomotives, storage capacity at destination, number of cars by category, and number of employees by category. How has this affected railway service?
This project will be conducted by consultants familiar with railway operations. The consultants will identify potential adverse impacts of operational practices within the logistics chain, in particular railway practices, on service to shippers and consult with shippers, railways, and terminals on the impacts and possible solutions. A report on findings and recommendations will be prepared for Transport Canada.3) Survey of Railway Best Practices and Issues
A representative sample of shippers and terminal operators will be surveyed about their views on railway service and the performance of the logistics chain. This will include views on key service concerns as well as best practices of the railways and others who are part of the logistics chain. The survey will seek views on the nature and extent of accountability that exists for the various stakeholders within the logistics system. The survey will also seek views on the frequency that CTA remedies are contemplated and used and on their effectiveness, as well as commercial dispute resolution mechanisms.
Work will be done by a consultant and a report prepared for Transport Canada. The consultant will be asked to propose the best approach for obtaining this information.
This information will be instrumental for Phase 2 to help narrow down the key system issues that need to be addressed.4) Service Issues in Other Regulated Industries
A review will be conducted on how complaints about service are addressed in other modes of transport, in regulated network industries such as telephone, television, gas, hydro-electricity, etc., and in the United States (rail). The study will look into the process/structure for handling complaints and the remedies that are available to determine if there is anything that may be applicable to railway service in Canada.
This study will be done by Transport Canada officials unless workload pressures require that a consultant be engaged.PHASE 2: RECOMMENDATIONS STAGE
This stage will commence about one month before the data project report is submitted and will be led by a panel of three eminent persons, preferably consisting of one member with a railway background, one with a shipper background, and one member that is "neutral". This phase will last about 6 months.
Draft recommendations will be developed based on the results of the analytical projects. In addition, interested parties will be invited to submit comments on railway service and other logistics chain issues, which the panel will also take into consideration.
The draft recommendations and reports from the analytical stage will be circulated to interested parties. The Panel will consult with stakeholders after these documents are circulated. A final report will be submitted to the Minister after the consultations were completed.