This is a very common question. The answer is a difficult one because it depends on a number of variables. This article will introduce some key questions that will help you determine how much a system will cost. If you like to be an informed buyer or are thinking about building a system of your own, please read on…
The major component of a rail shipment tracking system is data. Data is the life blood of a tracking system. There is much to consider, so this article will focus on data. The two main types of data are:
- CLM (car location messages)
- Waybills (EDI 417)
How much this data will cost is determined by several questions:
How fast do you need to be up and running?
Quickly (i.e. a few days)? The cost of this data will be higher because it will need to come from a Value Added Network (VAN) that is already getting CLM and waybills from most railroads in North America. They charge a premium for their services. Railcar tracking solution providers must get their data from this source to get you set up this quickly. The cost is going to range from $0.02 to $06 per CLM and $0.10 to $0.25 per waybill. There is a range because some resellers may do higher volume and it enables them to buy at lower wholesale prices and pass along the savings to you. In short, shop around even if you are in a hurry. Buying directly from a VAN is not recommended unless shipping high volume (i.e. more than 1,500 per month) because they typically have high monthly minimum fees ($1,500 to $2,000) and will require at least a one year commitment.
If you can wait several weeks, you may be able to significantly lower the cost of the data component. This is because the vendor will have time to get most of the data from the Class I railroads on your behalf. Most Class I railroads will provide CLM and waybill data for no charge to their customers or their agents. However, it can take from 2 to 8 weeks to get this set up with all the Class I railroads. If you only ship on one or two Class I’s, then it may not take this long. The vendor will probably build in some sort of charge for this service since they have to do significant work for account set up and maintenance. Plus, at least one Class I railroad charges to provide the data through vendors and more may follow – see this article for more information. You could see a 50% or more reduction in data costs: $0.014 to $0.03 per CLM and $0.08 to $0.16 per waybill.
How many CLMs do your shipments generate and do you need all of them?
Based on the type of business (i.e. railcars used for storage) and geographic location, the number of CLM records generated per railcar per month can vary greatly. The typical range is 30 up to 250. If the vendor is wholesaling from a VAN, they are paying either per CLM record or per kilobyte fees. Typically they will be able to limit the number of CLM records delivered per day per railcar to 1, 2, or 3 records. This can be a great way to reduce and control the cost of a solution, while at the same time enjoying the fast setup provided by VAN-sourced data.
What railroads and how many do you ship on?
If you ship on Mexican railroads, short lines and/or regional smaller railroads, this will increase the cost of data since this data must usually be gotten from a VAN at a premium. Very few Mexican railroads, short lines and regionals provide CLM and waybill data directly to their customers.
How many rail shipments will you be tracking?
If you are a large shipper of more than several thousand shipments per month, you may be able to get a volume discount on the data component. Don’t expect much though. If you ship 5,000 per month you may be able to get 10%. Vendors can discount their software more easily than data and I’ll touch upon that in a follow up article. Data is difficult to volume discount because with more data comes more support issues related to the data. This leads naturally into the next question to consider.
Is data quality important to you? If so, will you be ensuring data quality yourself or do you want the vendor to do it?
Railroad data is not perfect. The more you ship, the more data issues you will encounter. For some shippers 90% accuracy is fine, so they didn’t require data quality services or time to do it themselves. For others, absolute data quality is important. For example, if you are going to be feeding data from your tracking system into an ERP system to accrue freight or demurrage charges, you may want to consider data quality services or at least factor in the cost of the time to do it yourself. If the vendor provides data quality services, they are going to charge a premium for that. Their software will have some algorithms to handle and highlight data issues, but human intervention is required too. A very rough guide would be to figure on one hour per 500 active railcars. If the service is off-shored, then figure $15/hour. If not, $30/hour.
Hopefully these questions and answers have given you a greater understanding about how much a solution will cost. If you can think of others please comment. I will continue the series soon to talk about other major components of a solution and their cost.
All the best,