1. Maintenance costs affect rail company competitiveness: European operators spend 16 billion euros a year
2. Digitization can accelerate the optimization of processes and reduce rolling stock downtime
3. 20 percent savings possible in maintenance costs

Munich, June 23, 2016

Maintenance represents a major portion of costs for all rail companies alike – be they public or private, passenger or cargo operators. European railways have undergone continuous improvements in this area since the rail reforms in the 1990s, with the result that 44 percent of rail companies now classify their performance as "good" and 9 percent as "best in class". 20 percent even consider themselves "best in class" on rolling stock availability.

However, these assessments are overly optimistic according to the findings of the latest analysis by Roland Berger entitled "On the digital track – Leveraging digitization in rolling stock maintenance". The ongoing liberalization of the railway industry on the one hand and the unstoppable march of digitization on the other means that the European railway market has no choice but to improve its performance to stay competitive. The need to bring costs down even further is especially pressing.

"Railways have continually lost market share to road traffic in the past 70 years," explained Andreas Schwilling, Partner at Roland Berger. "And with autonomous driving and increased intermodality, the next challenges to the railway sector will not be long in coming. That is why it is so crucial for operators to work on improving their products and services while also minimizing operating costs, including what they spend on maintenance."

The majority of rail managers in the Roland Berger survey also see things that way: 74 percent of respondents consider operational efficiency – including improving flexibility and quality – as their top priority. And almost half (46%) place digitization very high on the agenda.

Digitization shaves 20 percent off maintenance costs

The two topics are very closely linked according to rail expert François Guénard, Principal at Roland Berger: "Digitization is a good way to increase efficiency. By going the digitization route rail operators can cut maintenance costs alone by up to 20 percent. They can achieve longer, more flexible intervals and shorter periods of downtime. But they won't do that unless they really understand digitization and put it into practice the right way."

Mainline railways have made the most progress here so far. They are already employing digital solutions to optimize their maintenance planning and asset management activities. In doing so, they ensure higher availability of vehicles and raised productivity levels. As a result, they need to purchase fewer vehicles and have less rolling stock on their books, which means that the cost of digitization pays off very quickly. Still, François Guénard believes there is more work to be done: "Software, sensors and other digital tools are one thing. But companies often lack the expertise to analyze the new data they have at their disposal and to actually use innovative solutions to maximize the positive effects."

Cargo operators, for their part, are also showing a strong level of interest in digital solutions – especially for tracking their rolling stock, planning capacity and analyzing driving behavior. This contrasts with urban operators, who use hardly any digital data or solutions at all. They use software tools that are often outdated and just about sufficient to perform certain basic functions. But what they can hardly do is optimize maintenance cycles for components or reduce downtime.

New mindset needed

Nothing less than a mind shift is necessary to tap the full potential of integrating digitization in the rail industry. The Roland Berger experts have formulated six recommendations for train operators and OEMs alike to push their market further in the direction of digital rolling stock maintenance.

1. Share data: The bigger the data pool, the better the results from intelligent data analytics on technical failures, wear and tear and the like. Railways should adopt a model of "coopetition": competition in train operation and sales & marketing alongside cooperation in maintenance.
2. Invest in sensors: A lot of data is already available for rail vehicles. But if there are blind spots in the information, do not shy away from investing in additional sensors. Ideally, equip the vehicles with those sensors during a heavy maintenance project or refurbishment.
3. Review the big picture: Do not focus on rail maintenance alone. The whole value chain, from condition monitoring, defining the optimum maintenance regime to the manual labor in the depot, can be optimized. Only a holistic view of the total life cycle cost of the vehicle or asset will make it possible to optimize the process.
4. Trust external experts: Work with data analytics experts, including digital start-ups. They can share their innovation know-how with railway engineers to develop new asset management and maintenance regimes in line with safety requirements.
5. Employ innovative methods: Crowd platforms, hackathons and design thinking are examples of new methods that companies can turn to their advantage to get the most out of digitization.
6. Improve your excellence: Focusing on digitization does not mean neglecting the classic elements of optimization: purchasing, sourcing, manufacturing and continuous improvement in depots/workshops all need to be carried on during the process of integrating digitization in the sector.

"These measures will help rail operators and OEMs stay competitive," said Andreas Schwilling in summary. "And they will enable the transport commissioning authorities – most of them state-owned – to put the right policies in place to guide the digital transformation."