© 2012 Veritec Solutions Incorporated. All Rights Reserved. Potential Synergies from Positive Train Control Bruce Patty Vice President – Transportation Analytics Veritec Solutions INFORMS Conference – Phoenix October 2012

© 2012 Veritec Solutions Incorporated. All Rights Reserved. © 2012 Veritec Solutions Inc. All Rights Reserved. 2 Outline  Opportunities to Leverage Information to Generate Benefits - Assessment of Potential Benefits from PTC from 6 Areas - Assumptions and Caveats - Linkages or Synergies between PTC and other systems for some areas  Integration Needs  Conclusions

© 2012 Veritec Solutions Incorporated. All Rights Reserved. © 2012 Veritec Solutions Inc. All Rights Reserved. 3 Thanks  My sincere appreciation to our Session Chair, Carl Van Dyke, for providing me with much of the background material used to develop this presentation

© 2012 Veritec Solutions Incorporated. All Rights Reserved. © 2012 Veritec Solutions Inc. All Rights Reserved. 4 Opportunities to Leverage Information  Line Capacity - Theory: PTC could increase capacity by allowing trains to operate on shorter headways - Assumes PTC would use moving blocks or dynamic headways - Current PTC implementation plans do not support this - Should see line capacity improvements on over-capacitated “dark territory” - Diversion of funds to PTC implementation could actually reduce amount of capital available for capacity expansion  Service Reliability - Theory: PTC could improve reliability by reducing delays and increasing average train speeds - Improved service quality and reliability would allow shippers to reduce supply chain costs and make rail service more attractive, especially for intermodal - However, independent implementations of Precision Dispatching do not rely on PTC to achieve this goal - Potential benefits here are not nearly as large as they were before railroads became so much more reliable

© 2012 Veritec Solutions Incorporated. All Rights Reserved. © 2012 Veritec Solutions Inc. All Rights Reserved. 5 Opportunities to Leverage Information  Efficient use of cars and locomotives - Theory: Real time location information provided by PTC will enable railroad managers to increase asset productivity through improved decisions - Dynamic car scheduling systems could use location information to re-trip cars as needed based on updated arrival times into terminals - Locomotive scheduling systems could use location information to update locomotive assignments based on real time information - However, GPS systems on locomotives can already provide this information without PTC, assuming that consists are linked to locomotive information  Fuel savings - Theory: Real time information will allow dispatchers to “pace” trains between scheduled meet points, permitting fuel savings - Trains would not always operate at top speeds in order to reduce delays - However, this can already be accomplished using Precision Dispatching approaches that are not reliant upon PTC

© 2012 Veritec Solutions Incorporated. All Rights Reserved. © 2012 Veritec Solutions Inc. All Rights Reserved. 6 Opportunities to Leverage Information  Reduction in locomotive failures - Theory: Digital communications provided via PTC can be used to report diagnostic data on locomotives in real time - This would allow pre-planning of maintenance activities and warnings of impending problems - However, “health” monitoring systems have already been installed in many modern, digital locomotives, so this is not PTC-dependent  Improved track maintenance windows - Theory: Real-time accurate information on train location should increase the productivity of track crews - This is needed because increased traffic density has made scheduling of maintenance more and more difficult - However, six of the seven Class I railroads have developed technology so that maintenance crews have visibility to train location information through a web application

© 2012 Veritec Solutions Incorporated. All Rights Reserved. © 2012 Veritec Solutions Inc. All Rights Reserved. 7 Integration of Approaches can Add More Value  Many of the benefits that were originally identified with PTC or other communication-based train control system have been realized through the deployment of other business systems Cellular networks GPS systems mounted on locomotives Precision dispatching AEI Web-based communication systems for track crews  It would appear that these approaches have been implemented in a “piecemeal” manner to address the needs of individual railroad departments Technologies need to be unified at the enterprise network so that more can be achieved for less

© 2012 Veritec Solutions Incorporated. All Rights Reserved. © 2012 Veritec Solutions Inc. All Rights Reserved. 8 Integration of Approaches can Add More Value  What could the integration of all these approaches allow? - One example -- Unifying the movement planner, PTC communications system, PTC onboard computer and display, and Train Energy Management System would allow for the development of “dynamic trip plans” For each train For each car For each terminal For each customer  Think about what this would mean for the demand for real-time OR tools and models to manage the railroad?

© 2012 Veritec Solutions Incorporated. All Rights Reserved. © 2012 Veritec Solutions Inc. All Rights Reserved. 9 Conclusion  Initial assumptions about the benefits of PTC used theories that did not take into account the proliferation of other technologies  These technologies, in general, however have not been well- integrated into a unified structure  Linking these together provides an environment that is “target rich” for opportunities for real-time OR tools and would take advantage of the synergies between these various technologies