1. Rail Transport
In the wake of a recent merger, the CEO of Rumo
was faced with a decade’s worth of low capex
investment that had weakened the company’s
railroad’s infrastructure. Reporting consecutive
years of negative earnings was enough to
convince him that a partnership with Alexander
Proudfoot was exactly what the organization
needed to return to profitability.
Maintenance challenges
After a thorough analysis of end-to-end operations, it was evident the
maintenance staff was struggling to meet certain goals. Research showed
that approximately one-third of their time was finalizing the daily schedule
instead of actively maintaining the railroad system. This contributed to
spare parts not being readily available which caused significant delays and
downtime. Making matters even more challenging was the fact that there
were very few work standards in place that would allow the company to
benchmark current efficiency levels against an actual plan.
Operations challenges
Without positive reinforcement of safe practices, there were frequent
accidents (an average of three per day) and rising indemnity costs due
to damaged goods. There was very little interaction between the train
control center and workers in the field, which made the transfer of work-
related tasks especially difficult. There was also little management of
daily activities to track performance. A culture focused on individual
achievement was in need of a new direction.
Objective and context
The CEO of Rumo, one of Latin America’s
largest railway companies, became frustrated
after reporting two consecutive years of
negative earnings. After almost a decade of low
capex investment had weakened its railroad
infrastructure, the company sought a partnership
with an operations expert that could help them
quickly restore profitability through the execution of
productivity, cost-saving and safety initiatives.
Approach
An end-to-end analysis of the client’s operations
revealed root causes for problems in productivity
and maintenance. Better planning, scheduling and
maintenance were extremely effective in reducing
transit times, as well as diesel fuel and accident
indemnification costs. A new organizational structure
helped evenly distribute employees to meet
projected demands. All levels of leadership learned
valuable team management skills and how to sustain
the improvements once the project was over.
Sustainable results
Working closely with the client’s workforce
transformed a culture focused on quick fixes
into one that was committed to doing things
right the first time. Optimum staffing levels were
achieved by strategically reallocating employees
to identified areas of need. Applying best practices
in maintenance strengthened the railroad’s
infrastructure which increased the speed and
reliability of the trains.
Returning
to profitability
Project impact:
• Railroad maintenance improvement (accident reduction) — $11 million in annualized benefits
• Third-party contractor costs — $6.5 million in annualized benefits
• Maintenance productivity — $3 million in annualized benefits
2. Workstream approach for quick results and
sustainable change
The Proudfoot team worked in conjunction with Rumo to initiate
six concurrent operational workstreams that would generate
results in six short months.
Rapid profitability activities
The team put daily schedule control measures in place that
made it easier to plan as well as quickly adapt to unforeseen
circumstances. Daily safety meetings became an outstanding
forum to drive awareness and information sharing among the
staff. As the level of communication began to improve, so did
the transfer of work from one shift to the next. Consistent work
standards were established so actual performance could be
measured against a specific plan.
Maintenance (rail and fleet)
Revised planning/scheduling processes and a daily activity model
wouldcontributetotheincreasedavailabilityofequipment,spare
partsandthereductionofbackloggedworkrequests.Adjustments
to freight car sealing and closure processes would require a series
ofqualitycontrolchecksbeforethetrainscoulddepart.Proudfoot
spent significant time in the trenches, showing supervisors in
the field how to actively manage their crews during railroad
construction.
Execution (yards)
Rumo was experiencing significant delays, sometimes 30 minutes
or more, due to inefficient charging and discharging of trains in
the various yards along its railroad. Proudfoot was able to install
a series of standards that would allow the management team to
measure daily performance. The standards would also prevent
lost time on maneuvers for incoming/outgoing freight cars. In
order to minimize transit times, port employees learned how to
optimize the amount of freight cars per trip. The installation of
new procedure would help aging trains safely navigate around
railroad construction.
Organizational design
Proudfoot worked closely with Rumo to analyze job descriptions,
consolidate roles and responsibilities, and eliminate unnecessary
layers within the corporate structure. Then, they adjusted the span
of control to give supervisors direct access to the coordinators and
vice versa. Both parties also worked together to develop a work
activity to eliminate non-value added tasks from the workflow.
Training and development
Implemented a training and development program on three
different levels of the organization: solution-based coaching for
managers, a coordinator development program and supervisor
development program.
Sustainability
Proudfoot worked closely with Rumo’s internal resource team
to design a continuous process improvement model that would
sustain the new framework of operations.
“ The transformation project is the first
step toward a standard of excellence
in our operations. Proudfoot’s
methodology combined with the
complete change of behavior
by our leaders and grass roots
practitioners were the main
catalysts for the rapid results
achieved during the project. I was
particularly surprised that our team
faced fewer obstacles than I initially
expected. Certainly the disciplined
execution of the changes managed
to quickly engage a large number
of people. This was instrumental in
the process. I now realize that the
team clearly sees the improvement
as ‘the point of no return.’ One of the
legacies we created over the course
of the last 30 weeks is a culture
that revolves around efficiency and
productivity gains. This is critical to
the sustainability of initiatives already
implemented, which are a solid
foundation for our next steps. ”
– Darlan Fabio de David
VP Operations South
The joint Proudfoot-Rumo team collaborated on site to facilitate change and secure buy in from all employees.
3. Benefits achieved
Within six months, the collaboration between Rumo and
Proudfoot achieved substantial results that spread throughout
the entire organization.
Tangible results
Maintenance productivity
$3 million in annualized benefits
Execution productivity
$1.5 million in annualized benefits
Railroad maintenance improvement
$11 million in annualized benefits through accident reduction
Railcar maintenance improvement
$3 million in annualized benefits through less indemnification
costs
Overtime reduction
$1 million in annualized benefits
Third-party contractor costs
$6.5 million in annualized benefits
Diesel fuel consumption
$3 million in annualized benefits
Culture
Working side-by-side with three different levels of the
organization helped mold the corporate culture into one that
was committed to doing things right the first time. Employees
became much more safety conscious as a result of the daily
meetings and bought in to the idea of doing what was best
for the company instead of focusing on personal gain. Better
communication throughout the maintenance department was
attributed to the seamless transition of work between shifts.
Business capabilities
Both Rumo and Proudfoot were able to define a set of consistent
work standards that would allow management to measure actual
performance against a specific plan. Revising the scheduling
and planning process improved the availability of equipment
and parts, transit times and the quality of work being performed
on the railroad and freight cars. The end results were a 55%
reduction of indemnification costs and 30% fewer accidents.
Organizational alignment
After several organizational design sessions, Rumo was able to
make informed decisions regarding headcount reduction. Once
this was done, productivity increased as existing coordinators
and supervisors were evenly balanced in strategic areas along
the railroad. This played a major role in reducing the amount of
overtime needed to meet daily requirements.
Detailed on-the-ground findings helped structure a comprehensive approach
Off-site execution and follow up Close team collaboration Engaging all employees
