The Trade-off Strategy between Railroads and Customers: A Case Study for Low-frequency Entire Trains

TL;DR

This paper explores a trade-off strategy for freight railroads and customers, balancing operational cost savings from direct entire train services against increased inventory costs for customers, through a case study analysis.

Contribution

It introduces a novel trade-off strategy to optimize the balance between railroad cost savings and customer inventory costs in low-frequency entire train services.

Findings

Direct train services reduce railroad operating costs.

Customer inventory costs increase with low-frequency direct trains.

A balanced trade-off improves overall efficiency.

Abstract

Some large freight railroads ship a number of shipments over the rail network annually. To reduce unnecessary reclassifications of shipments on their routes, each railroad is willing to operate the entire train for an individual shipment. In other words, the motivation for providing the entire train service lies in a simple realization that door to door transportation (directly from origin to destination) can reduce operating costs by decreasing classification. However, this mode will increase inventory costs for customers when commodities are transported by low frequency entire train services. Thus, this study proposes the trade-off strategy to keep a balance between saving operating costs of railroads and increasing inventory costs of customers. We analyze the revenue and losses after a shipment shifting from the transfer transportation which contains a series of train services to the direct transportation by entire train service.