CN Rail is forging new alliances to reimagine provide chains

This interview is a part of the Inside the Mind of the CEO sequence, which explores a variety of vital choices confronted by chief executives all over the world.

When veteran railway government Tracy Robinson grew to become president and CEO of the Canadian National Railway Company (CN Rail) in 2022, after an eight-year stint within the power sector, she was returning to an trade present process a major transition.

Pressure to decarbonize international mobility infrastructure—which creates roughly one-fifth of global emissions—was creating alternatives for much less carbon-intensive transport to play an even bigger position in overland methods largely dominated by the trucking trade. Rail freight operators, which have traditionally been robust rivals, had begun to rework their enterprise fashions by shifting from having a single-operator perspective to embracing a job in a broader transportation ecosystem, in pursuit of each elevated market share and a extra sustainable methodology of transferring items globally.

Robinson’s priorities at CN, one in every of North America’s “huge six” rail operators, deal with remodeling the corporate’s core relationships and provide traces. CN is likely one of the corporations driving the expansion of intermodal networks, during which disparate gamers within the transportation system, equivalent to railroads, vehicles, ships, ports, terminals, and warehouses, collaborate extra intently to take items from the primary to the final mile.

Robinson spoke to technique+enterprise from her workplaces in Montreal about CN’s position within the transformation of the trade.

S+B: PwC’s Annual Global CEO Survey discovered chief executives have been considerably extra optimistic concerning the financial system this 12 months than they have been final 12 months, however the total degree of pessimism stays comparatively excessive. How do our findings evaluate to what you’re seeing?

ROBINSON: Without a doubt, this 12 months will likely be higher than final 12 months. But we’re nonetheless watching the influence of what’s happening all over the world extra from a geopolitical perspective. Coming out of covid, totally different commerce flows emerged, after which when latest geopolitical battle emerged, there was a dramatic change in sure commodities. And now, once we have a look at what’s happening within the Middle East and the Red Sea, these occasions have modified the way in which that vessels and containers transfer all over the world, which then impacts North American provide chains and infrastructure. There are additionally water quantity points within the Panama Canal, which have an effect on how international delivery is routed. So total, the setting we’re seeing is usually optimistic, with some cautionary notes [related to] geopolitics.

S+B: You touched on a key level, which is the rising significance of corporations and CEOs having the ability to sense and put together for rising threats and dangers on this risky setting. What are your methods for predicting and staying forward of key dangers on the horizon?

ROBINSON: We’ve been in enterprise for greater than 100 years, so we begin with what we all know primarily based on the probably patterns. But these days, that’s inadequate for predicting what’s going to occur.

Today, we think about extra forward-looking indicators that inform us what may occur throughout quite a lot of industries. There are a whole lot of improvements coming, and these generate new sources of knowledge, which all of us could be effectively suggested to make the most of as we take into consideration constructing resiliency into our enterprise. It is inherent upon all of us to ensure that we mitigate and reduce these impacts.

Two years in the past, we carried out a scheduled railroad working mannequin [in which freight trains operate on fixed schedules, similar to passenger trains]. The scheduled mannequin has pushed us to be sooner and much more constant. We’re sitting beside our buyer and we’re managing their base enterprise, however they wish to get into a distinct market or they want to consider options or totally different retailers, given the way in which international trades are transferring now. There is a degree of nimbleness that’s required in eager about our enterprise today. We perceive very effectively that we now have the capability and functionality to take shocks or to answer alternatives as issues shift, and we’re getting actually good at that.

S+B: The want to cut back greenhouse gasoline emissions [GHGs] bodes effectively for rail carriers seeking to develop their position in international provide chains. But lowering GHGs requires corporations all through the availability chain to work collectively to enhance the interconnectivity and the fluidity of their networks to create an end-to-end journey for transferring items. How are you approaching this at CN?

ROBINSON: I like our trade in terms of the crucial problem of local weather and emissions. If you have a look at North America, the numbers present that transportation, together with airways, vehicles, rail, ships, and vehicles, accounts for 25 to 27% of North American emissions. Rail would account for about 2 to three% of that, with vehicles at about 25%.

Right now, [trucks] transfer most long-haul commodities [in North America]. You can scale back emissions by about 75% for those who shift from truck to rail. The alternative, but in addition the accountability, is to determine how we will transfer extra of that truck site visitors off the roads and onto this lower-emissions path. Doing that requires us to consider our enterprise very in a different way as a result of we all know that folks rent vehicles for a motive: they need quick, they usually need constant.

What [railroads] have to do is be extra like vehicles by getting collectively as a full provide chain. It can contain ports, terminals, warehouses, a number of railroads, and vehicles. But we have to give you one service package deal that not solely is straightforward to make use of and perceive but in addition operates quick and constantly. If we will do this, I believe you’ll see a really optimistic influence, not solely on the financial system but in addition on emissions.

S+B: You’ve pursued intermodal preparations at CN, together with by the Falcon Premium partnership, which connects factors over 3,000 kilometers, from Canada and Detroit, to terminals in Mexico. Can you discuss how a lot of these partnerships work in apply?

ROBINSON: Railroads have lengthy histories of being fierce rivals. But having confronted the entire shocks to the availability chains lately, I believe each single one in every of us understood how essential it was that railroads work successfully by working collectively.

The Falcon Premium service is our first and first instance of how we’re coming along with different railroads. We at the moment are operating trains from Monterrey, Mexico, throughout the Union Pacific system and on to our system within the United States and into Toronto. We’re doing that [route] in 5 days, which is nearly as good as or higher than a truck can do it. This is the outcome when [companies decide] to return collectively, and that is what we did with Union Pacific and Grupo México-Ferromex as one firm.

We problem ourselves round that partnership desk. We ask ourselves, “If we have been one firm, how would we take into consideration this problem?” That’s when the aggressive spirit comes down and the collaborative spirit comes up. It’s wonderful what you can also make occur when you may get to that degree of collaboration. Now that we’ve confirmed we will transfer items sooner and we will do it constantly, it’s a matter of demonstrating it to the extent that we begin to entice that truck site visitors onto the trains.

S+B: We’ve additionally seen examples of partnerships with trucking corporations as a part of the expansion of intermodal networks. What’s your view on how rail carriers can greatest collaborate with trucking corporations when these rail carriers are additionally competing with them to take site visitors off the roads?

ROBINSON: There are totally different approaches to an intermodal technique. In our case, we acquired an organization primarily based in Canada referred to as TransX, which we use as an extension of our community to ship on to our clients’ door, versus [them] contracting that last-mile supply themselves. We method it in a different way within the United States, the place we use intermodal advertising and marketing corporations that purchase capability from totally different gamers.

There’s no single answer. We assume that rail is the reply on the lengthy haul. Trucking would be the reply to a sure extent on the final mile in terms of transferring containers. The huge query is how we work collectively and [what’s] the trail in between, [aiming] to enhance the effectivity and effectiveness of the general provide chain.

There are additionally broader points once we discuss intermodal collaboration. Take knowledge sharing, for instance. When a container leaves, say, China, and it’s going to Chicago, any person already is aware of precisely the place it’s going. The extra we will take down the boundaries and share knowledge between our clients, oceangoing vessel corporations, ports, terminals, railroads, warehouses, and vehicles, the stronger our provide chains will likely be. It’s going to change into apparent the place we have to make investments to be able to develop our capability to handle the pinch factors within the provide chain.

This is essential as a result of proper now, we’re optimizing an excessive amount of for our personal operation versus the full throughput of the availability chain. Changing that, by actions like sharing extra knowledge, is a giant leap of religion. But if we will’t determine it out, there are going to be constraints on the expansion of the financial system. None of us needs that.

S+B: What are the subsequent huge challenges for CN and the way forward for the rail trade?

ROBINSON: Looking at our personal emissions, 85% come from locomotives, and we’re focusing very arduous on locomotives in two key areas. The first is thru the know-how that offers you knowledge and knowledge to enhance the way you deal with locomotives. The second is working to extend the quantity of biofuels or renewable fuels within the diesel used to run them.

It’s a query of what the subsequent era of propulsion goes to be. In Pennsylvania, we’re working with Wabtec on a totally electrical locomotive and will likely be testing to see the way it performs. In British Columbia, we’re working with Progress Rail on a hybrid diesel–electrical locomotive. But finally, the trade might want to come collectively to resolve on the perfect path ahead.

This is an excerpt of an interview for technique+enterprise and was first broadcast on PwC Canada’s CEO Viewpoints podcast.