AT THE BEGINNING of this year, Japan Freight Railway began rolling out its Trace consignment tracking system at 130 of its principal terminals across the country. The ¥6bn investment is the latest development in a five-stage programme to revive the company's fortunes and bring it back into profitability.
Senior Adviser Katsuji Iwasa, who was the freight operator's Senior Executive Director until he retired last year, says JR Freight had been profitable for the first six years after it was set up in 1987 during the break-up of Japanese National Railways. Economic decline and fierce competition from other modes pushed the business into loss for much of the 1990s, but adoption of the 'New Challenge 21' business plan has brought it back to profitability for the last three years.
Essential to the plan's success is the concept of 'Service Kaizen'; encouraging all staff throughout the company to look at ways of improving performance. This has brought forward a whole mix of large and small initiatives from adjusting local working arrangements to complete renewal of the rolling stock fleet and investing in information technology.
A competitive market
Rail's share of the Japanese freight market is relatively small, largely for geographical reasons, and Iwasa admits that there has been a 'big argument' over the future of rail freight in the light of recent government investment in road and port facilities. Nevertheless, he believes that 'there is a growing recognition of the importance of having a national rail freight network' and that there is scope to expand the business, particularly in an era of increased environmental awareness.
'We expect everyone to understand the importance of rail freight in the right circumstances', Iwasa emphasises. 'There are a lot of problems with environmental issues if Japan is to realise the targets in the Kyoto protocol.' He is optimistic about the implications for JR Freight. 'A lot of big companies in Japan are keen to use rail, to demonstrate their environmental concern.'
Japan's manufacturing industries are heavily dependent on imported raw materials and fuels, so most production plants are located along the coasts where they can be fed directly by sea. Domestic freight transport is predominantly agricultural produce, manufactured goods and consumer products.
Economic stagnation has seen a fall in freight volumes in recent years. Combined with progressive deregulation of the transport sector, this has led to overcapacity and reduced rates as road, rail and coastal shipping battle for market share (Table I). This is driving JR Freight to improve the quality and efficiency of its operations.
Recognising that rail's main selling points are speed and convenience, Iwasa says JR Freight has targeted the medium to long-distance market over 500 km. The longest routes cover distances in excess of 2000 km, with journey times of up to 48h.
The company has streamlined its operations into a network of 77 corridors totalling 8680route-km. These run over the 1067 cm gauge tracks of the six JR Group passenger companies, which total more than 20000 route-km. JR Freight owns 308 terminals, of which around 140 account for 85% of the business.
To maximise the efficiency with which the railway handles a diverse range of traffics (Table II), JR Freight has largely concentrated on container transport. Iwasa says that intermodal trains now account for 86% of annual tonne-km and 84% of operating revenues. Container traffic accounts for 429 out of the 672 freight trains operated each day.
The remaining services are block trains of bulk freight, such as cement and fuel oil; wagonload operations have been eliminated since 1987. These conventional trains have much shorter runs - the average movement is just 140 km, and Iwasa says they are difficult to manage, with lots of non-standard features. However, they are very profitable; the unit price per tonne is 3·8 times higher than that for containers.
In the financial year to March 31 2004, JR Freight handled 22·6 billion tonne-km, of which 19·7 billion was container traffic, equivalent to 4·17 million 12ft units. Average container haul is around 900 km, and the maximum train length is 550m, formed of 26 wagons grossing 1300 tonnes. Container train punctuality is around 97% of trains arriving within 30 min of scheduled time.
The bulk of the traffic moves in small 12 ft boxes, which have a capacity of 17m3, and are designed to suit the 1100 cm2 Japan Industrial Standard pallet. These are carried in batches of five on a standard 60ft flat wagon. There are also some 20ft containers with a 10 tonnes payload, and bigger 31ft boxes which are becoming the new standard for consolidated loads of small consignments. Iwasa says that less-than-containerload traffic has been growing in recent years, driven by road forwarding agents.
Planning for growth
Like the three smaller JR Group passenger companies, JR Freight is still wholly-owned by the Japanese government, although it is structured to give the management a high degree of autonomy.
According to Iwasa, JR Freight believes financial independence is very important, and that the company should not expect government assistance. Hence the imperative to get the business back into profit. New Challenge 21 includes five measures to improve the competitiveness of the company's container operations:
- introduction of high-performance rolling stock to accelerate services;
- remodelling intermodal terminals for more effective throughput;
- development of the world's first freight EMU;
- introduction of larger containers for specific traffics;
- upgrading and expansion of the consignment tracking system.
In addition, JR Freight has been pursuing opportunities for cost reduction. Iwasa says staff costs have been cut from 43% of operating expenses in 1997 to 34% in 2004. This reduction was all achieved through natural wastage, with no compulsory redundancies. There has also been some outsourcing of non-core activities.
As railway revenues have continued to decline because of the economic recession, Iwasa explains that JR Freight has boosted its profitability by developing its non-rail revenues. Key among these have been property development and warehousing rentals. Three years ago the company rearranged its terminals in Tokyo, freeing up the goods yard site at Iidabashi in the heart of the capital. This is now the site of a very large - and very profitable - office complex.
Emphasis on investment
Iwasa says that ensuring a steady level of investment in trains and facilities has been 'very important' from the formation of the company. 'Rail is a service industry; without innovation and new services, we cannot compete effectively with road', he explains.
JR Freight inherited a relatively old fleet from JNR, and Iwasa says there has been a constant process of locomotive and rolling stock renewal, helping to achieve lower operating and maintenance costs. Top priority is to replace the bulk of the container wagon fleet by high-performance vehicles able to carry larger and heavier containers and run at higher speeds; Iwasa says that by the end of 2004, 4500 out of 7900 container wagons had been replaced.
With the introduction of new rolling stock, JR Freight has been able to accelerate its premium trains and make them more competitive in the time-sensitive market for food and perishable goods. Iwasa says that around 60 of the top 180 trains have now been accelerated to run at 100 or 110 km/h. All long-distance container traffic operates overnight, and most trains depart around midnight. The faster maximum speed means that services running up to about 600 km arrive at their destination during the morning and longer-distance trains the following afternoon.
However, Iwasa concedes that introduction of more energy-efficient locomotives 'is not progressing as fast as expected' due to the limited availability of funding. Nevertheless, JR Freight is continuing to place orders for small numbers of new locos, and last year it took delivery of two EH200 electric locos from Toshiba, two DF200 diesel locos from Kawasaki, two EF210 and three EF510 electric locos from Mitsubishi and five EH500 electric locos from Toshiba. The company is also making efforts to refurbish many of its existing locos.
Further expenditure is being channelled into remodelling the key container terminals under the Effective & Speedy programme. By the end of 2004 26 terminals had been remodelled and work was in progress on another one, with 33 more in the pipeline.
By replacing single-ended loading sidings with through arrival/departure lines, E&S is intended to eliminate the delays incurred while arriving trains are broken up and shunted into the crane roads and departing trains are reassembled for dispatch. Iwasa says that this can save up to an hour on a typical overnight journey, allowing later cut-off and earlier release times for collection and delivery companies. It also simplifies arrangements when through trains make calls at intermediate terminals.
The through lines are electrified so that the train loco can remain attached, but this requires special precautions to permit loading and unloading of containers on live tracks. The contact wires are raised to the maximum permitted height, and the mobile Top Lifters used to lift the loads on and off from hard standing beside the wagons are fitted with an over-height safety interlock.
EMUs and bigger boxes
Another innovation has been the two Super Rail Cargo M250 freight EMUs, which have now been running between Tokyo and Osaka for two years (RG 5.03 p263). The 130 km/h trains leave from both terminals at 23.10 each night, and cover the 560 km in 6h 10min. This offers a commercial average of 91 km/h, including two intermediate stops to change drivers.
Each 16-car trainset has two power cars at each end of a rake of 12 trailers, and can carry 28 large containers. These 31ft long boxes offer a payload volume of 54m3, equivalent to a large lorry. The overnight trains are run as a dedicated charter service for logistics company Sagawa Express, which is responsible for retailing the space on the train and for undertaking collection and delivery.
Iwasa confirms that Super Rail Cargo has proved extremely successful, running fully loaded every night and saving the annual equivalent of 14000 tonnes of CO2 emissions in lorry journeys avoided.
The 31ft boxes used on the EMUs reflect JR Freight's ongoing programme to introduce bigger container sizes tailored to the differing logistics requirements of its customers. Whilst the 12ft container remains the most appropriate for small and frequent consignments, the 20ft and 31ft boxes have proved very popular for the movement of small and lightweight packages. These are generally stuffed and unstuffed by third-party companies and delivered to JR Freight ready for dispatch.
To increase payload volume, JR Freight has also introduced high-cube boxes with hydraulic wing-type doors for easy access. Refrigerated containers for perishable traffic are equipped with a radio data link and GPS location system, so that their temperature can be monitored and adjusted remotely. Another innovation currently being tested is a 40ft ISO compatible 'flatrack' marine container which can carry three 12ft domestic boxes on international routes.
Track and trace
JR Freight has been using a nationwide container tracking system for around 10 years, but Iwasa says it was recognised in 2003 that the Frens system was no longer adequate for current developments. An internet portal was essential, as was some form of terminal management system to replace the manual tags used by lift operators when assembling or breaking up trains.
The interface issue was tackled by the development of IT-Frens, an internet-compatible server and front-end software allowing customers access to the tracking system. The latest phase of this programme allows customers to reserve their own slots on specific trains by completing and submitting a simple web-page booking form. After trials at the end of 2004, the computerised reservations system was formally launched in January 2005.
To improve terminal performance and provide real-time handling information, JR Freight started installing an automated tagging system in January 2004. Known as Trace, this involves fitting radio-frequency identification tags to 8000 wagons and 90000 containers, together with readers and processor units on 500 fork lifts and Top Lifters at 140 terminals. Iwasa says that installation went ahead so smoothly and rapidly that Trace was able to go live just 12 months after the start of work.
With Trace, all container movements are recorded automatically and the data forwarded to update the main Frens database. Instructions to terminal staff are then downloaded to local display screens. For example, when a fork lift removes a container from an incoming train, the system automatically instructs the driver where to take it, whether it is destined for a specific slot in a storage stack or for loading onto a waiting delivery lorry. When the next stage of the system goes live in August, collection and delivery drivers will get their instructions by inserting personal cards into a terminal at the yard reception office.
Access charge debate
An area of uncertainty facing JR Freight is the need to renegotiate its access rights and charges for use of the tracks owned by the six JR Group passenger companies. These were laid down in the 1987 legislation which broke up JNR, but are subject to review after 20 years.
Iwasa says that access charges account for around 10% of JR Freight's operating expenses. The rates per train-km are currently calculated on an incremental or marginal cost basis, and fixed by the Ministry of Land, Infrastructure & Transport. The unit costs are recalculated each year, in separate negotiations with each passenger company.
The future structure of access charges is the subject of considerable debate at present. Iwasa says JR Freight needs to ensure a financially stable position, and would ideally like to retain the current structure. The company is already in negotiation with the passenger railways, and Iwasa says it is 'making every effort to get a good solution'. As the final arrangements must be approved by the ministry, JR Freight is keen to ensure that the government has a good understanding of the critical issues.
The biggest challenge is coming from JR Central, which is keen to reduce the cost of infrastructure maintenance by introducing overnight blockades (RG 10.04 p680). However, its tracks lie astride the heart of the JR Freight network, including the Tokaido Main Line. With most freight trains running overnight, a blockade could devastate the business. JR Central Chairman Yoshiyuki Kasai believes JR Freight should pick up the extra maintenance costs incurred by keeping the routes open at night.
Iwasa believes that there will be considerable pressure for the two railways to reach a compromise. 'It is time for Japan to think about the whole nation; what is in the best interests of the country's transport system.'
He recalls that at the time of the 1987 reforms the government emphasised the importance of co-operation between the JR Group companies. This obligation was emphasised again when the government started selling off its shares in the Honshu companies. Citing environmental and economic arguments, Iwasa feels that 'today there is a widespread recognition that rail freight should be placed in a good position'.