Adding Value in Rail Freight: The Case of DB Schenker

The following is based on Step 1 and Step 2 of the Value Chain Analysis approach. The subject of this analysis is the DB Schenker Europe-wide rail freight business and operations system.

Step 1. Function and Asset analysis

Step 2. Value Chain Risk summary

Step 1 consists of, in this case, obtaining a comprehensive understanding of the rail freight industry: objectives and constraints.

Step 2 consists of, in this case, identification of the risks imposed by each DB SR rail freight operation, i.e. a detailed appreciation of the risks and, if possible, the costs – potential and actual, represented by each activity within the general operation.

  1. IP: e.g. fuel-saving stop-start locomotive power systems (see DB Railways magazine, 2015)
  2. Knowhow and technologies: public, shared, and proprietary; interoperability – and profit gains possible – with DB group operations and external entities.
  3. Third party relationships. This must be further divided: (I) suppliers of plant and products; (II) third party entities.

Point 3 (I and II) is likely to be of critical importance. The DB SR business format is transportation of customer freight by rail. The service is provision of locomotives and driving crew. Wagons are usually supplied by customers. Sidings and facilities will also belong to the customer.
Train path costs are incurred by DB SR. A collection of routes and a usage schedule will be purchased on an annual/monthly basis (unknown at this point). Non-usage fees, delays, and locomotive failures will be probably be subject to fines (need information on this).

Train formation of wagon loads is a DB SR function. Trainloads will (presumably) be collected from customer’s sidings.

It is the working assumption of the following analysis that areas of risk represent areas of value creation, if not actual, then potential: since transport and handling are physical, time-sensitive activities, all rail freight operations are risk-exposed. The efficacy of operations and their constituent activities can be interpreted as the ability of the rail freight provider to reduce risk and thereby provision service excellence. Train availability, locomotive driving, and locomotive mechanical performance are, from the customers’ perspective, the critical factors and likely determinative of business relationship continuance. From the operator’s perspective, train composition, locomotive management, and train path purchase represent key functions.[/read]