RAIL INFRASTRUCTURE MANAGERS

A paradigm shift inAsset Management

€30

+2.5%

+80%

+50%

€150annual rail industry market between 2011 and 2013

share of infrastructure in global spending

expected annual growth rate for global rail equipment by 2019

growth in European freight volumes by 2050

growth in European rail passengers by 2050

A BOOMING MARKET

billion

The rail transport market has been significantly growing in recent years driven by urban population growth, increase in demand for mobility, and a growing concern for transport’s environmental impact.

billion

A MORE INTENSE COMPETITIVE ENVIRONMENT AND INCREASING PRESSURE FOR INFRASTRUCTURE MANAGERS

Progressive liberalization of Europe’s passenger market with the opening of national commercial lines to competition

A growing number of private freight operators (for example, in France after the completion of liberalization in 2006)

Liberalization and a growth environment inflict increased pressures on rail Infrastructure Managers to provide high security and service quality levels together with a higher capacity, at competitive rates.

A MORE INTENSE COMPETITIVE ENVIRONMENT AND INCREASING PRESSURE FOR INFRASTRUCTURE MANAGERS

At the national level

INCREASINGLY STRINGENT REGULATIONS (1/2)

European Infrastructure Managers

respond to national regulators.

In France, the Authority for the

Regulation of Rail & Road Activities

(Arafer) delivers opinions on the

conditions for access to rail

infrastructures. These opinions are

lawfully binding on tariffs and

advisory for other conditions.

Infrastructure Managers now have to

engage in a ten-year contract with

their State, with that contract fixing

their objectives and an economic

and financial plan, including the

financial resources at their disposal

(pricing and public subsidies).

The evolving national and European regulations force InfrastructureManagers to work toward greater interoperability and compel themtowards greater transparency and economic control.

The EU has launched various initiatives aimed at improving the European rail sector’s interoperability and therefore its global competitiveness.

INCREASINGLY STRINGENT REGULATIONS (2/2)

The TEN-T program: a policy for transport infrastructure connecting the continent to reduce the gaps between different national networks.

The 4th railway package is a series of measures proposed by the European Commission. The technical axis is comprised of a set of measures on security and interoperability. The political axis (ongoing negotiations) addresses the organization of the European rail sector, and the terms of the opening to competition. The 4th package also introduces more obligations for Infrastructure Managers to report to the European Commission in order to improve the sector’s transparency.

Investments in ERTMS (European Railway Traffic Management System) to facilitate movement across borders while guaranteeing circulation security.

1 3

2

RISING PERFORMANCE EXPECTATIONS

Multiply industrymarket share for both passenger and freight

markets

Become more competitive and

environmental-friendly

Innovate to reduce avoidable costs and

attract new users

Remain the safest andgreenest transport

mode

Make European rail firms leaders in

transport and logisticsacross borders and

transport modes

Ambitious European objectivesfor the rail industry were fixedin the framework ofthe Challenge 2050 report,a proposition backedby different sector associations(including CER, EIM, UIC).

INVESTING IN INFRASTRUCTURE: A KEY STEP TOWARDS A HIGH PERFORMING NETWORK

Total investment in transport infrastructure in Europe by 2030 with the railway industry accounting for most of this total. This is in large result because of the investment wall that Infrastructure Managers face in the near future, itself a result of underinvestment in existing networks over the course of decades.

€1.5 trillion

Increase in the number of lines impacted by speed limits (8.8% of rail lines in Europe) in spite of an increase by 5% in maintenance spending. This reflects the delay in maintenance works accumulated in recent years.

+ 9.1 %

Increase in the number of cancelled trains between 2014 and 2015 (4.4%

of the whole traffic)

+ 14.4 %

Annual EU-wide spending on maintenance and renewals in rail

systems

€15-25billion

ASSET MANAGEMENT: A COMPLEX PROCESS…

We recognize that we currently have an incomplete understanding of how our assets change in condition and performance throughout their lifecycle, that is how assets degrade and fail with age and usage, how this degradation and failure impacts on service outputs and the optimum interventions to mitigate or prevent failures.

… THAT COMES WITH MANY CHALLENGES

A recent survey by the Institute of Asset Management shows that the priorities of asset owners are mainly focused on a better asset and risk management on their network

Improving data management and data quality

28.6%

26.6%

24.9%

15.0%

5.0%

Prioritizing and planning asset investment

Building a coordinated asset management strategy at corporate level

Improving risk assessment and management

Implementing new regulations and standards

A PARADIGM SHIFT IN ASSET MANAGEMENT IS NECESSARY

Past experiences show that there is a strong need for investment in infrastructure to be better coordinated with the requirements of logistics and other infrastructure operators.[…] The general squeeze on government expenditure makes it even more critical to choose investment projects wisely. That is why new approaches to assessing the costs and benefits of projects – in particular, to better capture the wider economic benefits as well as better understand the costs of delays, deferments or inaction – will have to be developed.

During the planning of major capital programs, […] sophisticated planning tools will create a complete, hierarchical virtual model of assets. […] The virtual model can be used to accurately simulate how one asset affects the entire system and how to prevent failure. The use of asset information informs future upgrade and planning cycles, with the potential to dramatically reduce the operating costs of transport infrastructure. […]Capital programs should become smarter in the way that they use technology to understand how planning should go ahead.

THE SYSTEMIC APPROACH: THE BEST PRACTICE AT THE CORE OF ASSET MANAGEMENT…

To be more effective, technological research needs to be complemented with a systems’ approach, taking care of infrastructure and regulatory requirements, coordination of multiple actors and large demonstration projects to encourage market take-up.

… INTEGRATING ALL THE NETWORK‘S SUBSYSTEMS TOGETHER INTO A SINGLE DECISION MODEL

Optimal Decisions

NetworkLines / equipment

AgingConstraints

TrafficPeriodType (freight/passengers/high speed)

PerformanceRegularity

OPEX / CAPEXFinancial losses

Incidents / Security

Asset ManagementMaintenance works

Renewal worksBudget

Human ResourcesStock

MULTIPLE BENEFITS

Greater engagement of the workforce, including leadership,

communications and cross-disciplinary teamwork

Alignment of processes, resources and functional contributions

(instead of departmental silos and competing, short-term priorities)

Creating a transparent audit trail for what is done, when

and why

Consistent, prioritized and auditable risk management

Improved planning (especially capital

expenditure)

Adopting a systemic approach enables rail Infrastructure Managers to understand the impacts of short term decisions on long term performance, and thus to make optimal decisions. It enables Infrastructure Managers to balance costs, risk, and performance over the lifecycle of an asset in order to maximize its performance function and value.

Better understanding and usage of data and

information to provide informed and consistent

decisions

CONCLUSION

The rail network’s aging assetstock, budget constraints due to aflat economic context, and theambitious performance objectivesfor the sector all place growingpressure on rail InfrastructureManagers.

Investments in infrastructureare crucial to relieving thesepressures since there is remains apressing need for regenerationacross European rail networks.Infrastructure Managers must planthese investments so as to operatemore efficiently, ensure security andservice quality, meet the needs ofincreasingly demanding clients, allwhile better controlling costs andevaluating the impact of theirdecisions.

The multiple constraintscoupled with the complexity of railtransport systems make strategicmaintenance and asset renewalplanning difficult to grasp forInfrastructure Managers. Toolsenabling better understanding andanalysis of rail systems as a wholeare necessary. To fulfill this mission,these tools should adopt newapproaches, with a systemic vision(including the interconnectionsbetween the organization’s differentsilos) and integrating notions of risk.

THANK YOU FOR YOUR ATTENTION

Did you find this report interesting?Do not hesitate to contact us to learn more and discover our solutions dedicated to assets optimization and management:

contact@thecosmocompany.com

The CoSMo Company is a global technologycompany that helps the C-suite make optimaldecisions. Through our unique methodology, wemodel and then simulate complex scenarios toaccurately predict the outcome of events even ifthose events have never happened before.

CoSMo delivers interconnected insights that tellclients how each part of their organization wouldbe affected by potential choices so that userscan make the best decisions for their company.What CoSMo does goes way beyond big dataand data science to decision management. Wetransform companies by giving them reliableinsight into the future.

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Some of our references

www.thecosmocompany.com

SOURCES

• Xerfi Global, Railroad Equipment Groups –World (2015)

• arafer.fr

• SNCF Réseau

• European Council

• CER & UIC, Challenge 2050, The Rail Sector Vision (2013)

• CER, Rail Infrastructure Quality and Performance in 2012

• Pwc, Assessing the Global Transport Infrastructure Market: Outlook to 2025

• European Commission, Roadmap to a Single European Transport Area (2011)

• Network Rail, Asset Management Strategy (2014)

• Liden, Railway Infrastructure Maintenance – a survey of planning problems and conducted research(2015)

• The Institute of Asset Management, Infrastructure Asset Management Report (2015)

• Deloitte, Transport in the Digital Age – Disruptive Trends for Smart Mobility (2015)

• assetmanagementstandards.com