German Railway “Deutsche Bahn:” Train-ing for the Future?

The industry-wide vision for the future of rail provides great potential for digitalization along the entire supply chain. Is Deutsche Bahn on the right track?

The first railway in Germany was built in 1835, going hand in hand with the first industrial revolution. It is quite remarkable that 182 years later—in the era of so-called “Industry 4.0”, characterized by increasing automation and the rise of artificial intelligence—taking the train still feels like a largely analog experience.

The long-term vision for the future of rail, however, is one of a fully digitized experience: trains will be “intelligent” and fully connected with the infrastructure, using sensor technology to monitor themselves and the track; they will be fully automated, maximizing the railroad’s capacity in real time, while maintaining highest security standards. Intelligent breaking systems and preventive maintenance will increase energy efficiency and asset lifetime. Information flow will be highly digitized: data will be shared with passengers in real time, and freight location and condition can be tracked at all times.[1]

Granted, this vision is still far from being realized, due to ongoing technological development, costly new infrastructure as well as regulatory challenges, especially in Europe where cross-national standardization has to be taken into consideration. Nevertheless, many railway companies have made digitalization one of their top strategic priorities—including Deutsche Bahn (DB), the largest railway and infrastructure operator in Europe. In 2015, as part of “DB 4.0”, the company launched six initiatives—Mobility 4.0, Logistics 4.0, Infrastructure 4.0, Production 4.0, IT 4.0, and Work 4.0[2]—to foster digitalization along its entire supply chain. It committed to pursuing more than 150 individual digitalization projects, investing €1 billion in digitalization by 2018.[3] In past years, DB has faced increasingly competitive pressure—due to liberalization of distance coach travel, low fuel prices and tolls benefiting the trucking industry, and various sharing models on the rise.[4] This has augmented the urgency of digitalization, promising to decrease cost and increase efficiency as well as capacity, at maximum safety.

Especially in the area of asset and infrastructure maintenance DB has been an industry innovator, introducing both the usage of 3D-printed spare parts as well as preventive maintenance. With over 40 partners, including Siemens, DB launched the initiative “Mobility goes Additive.” Between the end of 2015 and mid-2017, DB had already 3D-printed 1000 spare parts, aiming to double this number by the end of 2017 and to increase it up to 15,000 by the end of 2018.[5] 3D printing is faster and cheaper than traditional procurement, thus shortening the supply chain and rendering it more cost-effective. Furthermore, 3D-printing offers the opportunity of on-demand delivery, rendering large warehouses and spare parts inventory obsolete, while shortening lead times and thus decreasing downtimes of trains. Finally, 3D-printing allows to continuously innovate and adapt part designs,[6] decreasing material waste and product weight, which in turn reduces the attrition of rail infrastructure, leading to further cost savings.

Moreover, DB partnered in 2016 with Siemens (passenger transport) and GE (freight transport) to increasingly rely on preventive maintenance technology.[7]Using smart sensor technology and intelligent algorithms, potential problems can be recognized and fixed before they occur, reducing the fault rate of parts. This decreases the need of spare parts supplied as well as downtime, realizing further cost savings along the supply chain.

Looking ahead, I believe it is critical that the entire supply chain and procurement process be digitized. While technologically innovative initiatives like 3D-printing and preventive maintenance can improve the supply chain, full cost-saving potential will likely only be realized if they are embedded into a company-wide shift towards automatizing and digitizing procurement processes, including ordering, bill passing, and payments.

Finally, while DB has recognized the urgency and potential of digitalization, I worry that it has neglected investing in the necessary cultural shift within the organization. For months, DB has tried to fill the new position of a Chief Digital Officer. Although a highly qualified candidate has been identified, she still has not been officially tapped—due to politics and internal quarrels.[8] I believe the organization is currently lacking the necessary prioritization of those 150+ identified digitalization projects and alignment across its business, leading, for instance, to installing separate preventive maintenance systems from Siemens and GE instead of standardizing them across business units. I believe this will be critical in actually realizing the expected gains from digitalization.

While DB’s passenger transport service increased slightly, by 1.1%, in 2016, DB lost 3.8% in freight transport over the same period of time.[9] Will DB be able to reverse the industry trend, specifically in freight transport thanks to increased digitalization and cost reduction? Are 3D printing and preventative maintenance actually scalable across the entire business and will produce sufficient cost savings? How should DB prioritize further digitalization needs on the path to DB 4.0?

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[1] Joris d’Incà, Tom Reinhold, and Tobias Sitte, “Taking Rail Virtual through Digital Industry,” Transport & Logistics, Oliver Wyman (2016): 4-6.

[2] “Sechs Initiativen treiben Digitalisierung voran,” Deutsche Bahn, accessed November 15, 2017, http://ib2015.deutschebahn.com/ib2015-de/konzern-lagebericht/trends-und-strategie/strategie-db2020/sechs-initiativen-treiben-digitalisierung-voran.html.

[3] Manuel Gerres, “Seizing the opportunities of digitalization,” Global Railway Review, May 10, 2017, https://www.globalrailwayreview.com/article/34008/seizing-opportunities-digitalisation/.

[4] Nye Longman, “Deutsche Bahn AG,” Supply Chain Digital, Feb 23, 2016, http://www.supplychaindigital.com/company/deutsche-bahn-ag.

[5] “DB in 3D: Bahn revolutioniert die Instandhaltung,“ Deutsche Bahn, May 15, 2017, http://www.deutschebahn.com/de/presse/pressestart_zentrales_uebersicht/14123352/h20170515.html.

[6] “A Print-on-demand Manufacturing Plant,” Siemens, August 19, 2016, https://www.siemens.com/innovation/en/home/pictures-of-the-future/industry-and-automation/additive-manufacturing-spare-parts-for-the-rail-industry.html.

[7]“Deutsche Bahn und Siemens starten Pilotprojekt zur vorausschauenden Instandhaltung,“ Siemens, October 25, 2016, www.siemens.com/press/PR2016100048MODE.

[8] Linda Gondorf, “Chaos bei der Deutschen Bahn: Warum es immer noch keinen Digital-Vorstand gibt,“ Absatzwirtschaft, November 1, 2017, http://www.absatzwirtschaft.de/warum-es-immer-noch-keinen-digital-vorstand-gibt-117061/.

[9] “Wettbewerbskennzahlen 2016,“ Deutsche Bahn, May 2017. https://www.deutschebahn.com/file/de/11877804/tKnxZUc-BRbHdgq6BgklSOhMoIA/14625258/data/Wettbewerbskennzahlen.pdf.

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5 thoughts on “German Railway “Deutsche Bahn:” Train-ing for the Future?

  1. Very interesting read on a $40B company that I knew nothing about! I’m wondering how this shift to more digitalization has been received in Germany. I did a bit of googling (I’m sure your links had the information I needed but my German skills are limited to counting to 10), and it looks like DB’s largest stockholder is the German government and it currently employs ~195K employees in Germany alone. Since a shift to digitalization is typically accompanied by a job loss, is the German government ok with one of its largest employers embarking on what will likely be large job cuts? You mentioned that some of even the most basic hiring has been limited through internal quarreling, and I’m guessing it will only get worse in the future.

    I’m also curious how the shift to 3D printing will be regulated. If the eventual goal will be to not only replace current parts but innovate them as well, will that be allowed to happen in what I assume is a highly regulated industry? These trains carry hundreds of thousands of people a day and a faulty part can be catastrophic, I’m not sure if continual product innovation at 3D printing labs will be possible in this industry.

  2. Great article Sophie! As you noted above, it feels as though rail freight transport will be challenged in the increasingly digital world, as other modes (trucking) can deliver on more highly customized routes at faster speeds. Also, new inventions such as 3D printing may decrease the need for transportation altogether, as parts can be printed on-site, rather than ordered and shipped as freight. Perhaps the rise of intermodal freight, with trucking handling more of the first and last mile transportation, will reverse some of these trends and increase demand for rail transportation going forward.

    One of the other interesting points here is how Deutsche Bahn is pursuing its digital new product development. The company has recently formed a venture capital arm, DB Digital Ventures, to fund data driven business models in the transportation sector. This seems to be a relatively cost effective way to source both new business ideas as well as high quality talent for the digitally focused business going forward.

  3. Really interesting article! So true that trains still feel like an antiquated experience.

    I love the idea that trains would be highly digitized in the future, greatly improving the customer experience. Applied to freight more broadly, this also represents an opportunity for the supply chain of other companies that rely on freight as a means for getting goods to and from locations. By digitizing all of this information, companies would have way more information about the delivery times of their goods. Additionally, it sounds like the cost of freight could go down eventually as trains become more efficient and effective.

    Agree with mattasperheim’s comment above that freight is challenged by modes like trucks but if trains can adjust to the digitized world and increase reliability, transparency of information, and reduce cost, it could continue to be a very attractive option for companies as part of their supply chain.

  4. Very interesting take! My main thoughts would be around dealing with the regulatory perspective of such large transportation projects. You mention that coordination among European nations will be key, but how that plays out will be interesting. Furthermore, the reduction of labor replaced by digitization may cause disruptions by unions, which may increase the overall cost of switching.

    Nonetheless, I think it’s great that this important infrastructure operator is coordinating with 40 companies to provide better service. However, because the company is owned mainly by the German government, I wonder if the politicians may be investing in the wrong priorities. For instance, perhaps with advances in technology ‘self driving buses’ could be significantly better than this train system. However, since the government is allocating the capital (as opposed to the private sector), Germany may miss out on the creation of alternative transportation technologies not related to trains.

  5. Hi Sophie, Great article! I’ve spent a great deal of the past five years on the subway and hated every minute of it, so I really enjoyed reading about the Deutsche Bahn and what they are thinking about to improve the experience. I am curious to know whether the reduction in freight being shipped by rail is the result of a switch to a competing mode of transport, which can be addressed by further digitalization of the railway or if it is the result of broader economic conditions, such as, a decrease in aggregate material shipped. YoY freight carried by rail in the U.S. has increased slightly and has been largely flat over the trailing four-year period while the country’s GNP has been increasing. [1] This leads me to believe we may be seeing a move away from rail to other modes in the U.S. Matt addressed a great point that rail has always faced a “last mile” problem, which might be able to be mitigated through technological advancement; however, rail still faces a flexibility problem that stems from the fixed nature of the rails themselves. In a world where technology continues to make more flexible modes more appealing, will rail lose out simply due to its fixed nature?
    1. https://www.aar.org/data-center/rail-traffic-data

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