BY OUR CONTRIBUTING PARTNER ZARAGOZA LOGISTICS CENTER (ZLC)
Freight transportation networks are increasing in complexity at a time when companies are under immense pressure to improve service levels. Investing in more efficient infrastructure is one response to this challenge, especially in countries such as the United States where deteriorating transportation systems are struggling to keep up with rising traffic volumes. But there is another response to the problem: a new generation of powerful transportation planning solutions that optimize cargo flows across regional, national, and local networks.
The improved planning tools enable companies to cut transportation costs and drive up service standards. In addition, by increasing the utilization of existing road, rail, and water systems, these solutions can lessen the need for expensive investments in new infrastructure.
Maximizing the rate of on-time deliveries while keeping operating costs to a minimum has always been critical to the efficiency of freight transportation networks. However, meeting these targets has become even more important as markets demand lower prices and tighter delivery windows.
Global trends such as the rapid growth in e-commerce are driving these demands. The evolution of freight networks also is adding complexity to the movement of goods. For example, following the expansion of free trade zones and other open border initiatives, many distribution networks have been reconfigured to cut the number of distribution centers. These networks have become more reliant on long distance road transportation.
Distribution networks also have to cope with rising traffic volumes. For example, trade volume projections released earlier this year by the U.S. Department of Transportation show that freight tons moving on the country’s transportation network will grow 40% in the next three decades, and the value of the freight will almost double. Freight traffic in Europe is expected to follow a similar growth path.
More sophisticated transportation planning will not overcome these network challenges. But it is possible to increase the efficiency of freight networks by using more advanced planning tools to optimize goods flows.
It’s a complex task, that requires planners to manage units of transportation – whether they be rail cars, freight containers, or trucks – moving between multiple nodes. They must meet the needs of diverse shippers in a commercial environment that is subject to wide fluctuations in demand.
In general, freight transportation planning has lagged behind its passenger equivalent. Also, much freight planning work is done manually, making it difficult for planners to keep pace with the changes described above.
Consider, for example, a typical process for the distribution of empty rail cars. A rail operator receives orders from customers to transport specific volumes of commodities. Quotas of empty rail cars are often allocated on a daily basis. Next, a trip plan is generated that allows for the origin-destination pairs involved, as well as train timetables – usually drawn up annually – and capacities. Cars are loaded in a station or a customer’s track facility, and finally moved to the required destinations for unloading.
Completing such a process – which can change any time in response to shifting customer demands – manually is unwieldly and costly. In fact, an analysis of such a process in the rail mode carried out by ZLC shows that these inefficient planning practices generate a significant volume of empty, and therefore non-productive, freight car space.
More advanced planning tools that automate much of the planning process can eliminate such inefficiencies.
An example is the dynamic car-planning system (DCP) implemented by the U.S. Class 1 rail operator CSX in 1997(1) . The DCP is the industry’s first real-time, fully integrated equipment distribution optimization system that CSX uses to optimize the use of its rolling stock. The company estimates that DCP saves it $51 million annually compared to the previous system, and has enabled it to avoid some $1.4 billion in capital expenditures owing to the network efficiencies it has unlocked.
Over the last decade CSX has invested in enhancing the DCP system. For example, it has improved the system’s real-time reporting information on train operations and the status of cars, and introduced a web-based order management system and visibility tools.
Even more advanced freight traffic planning tools are now being introduced and developed. Companies such as decision automation and optimization solutions provider Optym have compiled case studies of these applications that show the benefits. Optym experts developed a number of optimization solutions for some of the most important transportation service providers in the U.S. Examples include a blocking optimizer for generating an optimal blocking plan for railway freight traffic for Norfolk Southern railway, and a planning model for optimal repositioning of empty containers for Pacer Stacktrain.
Solutions like these are integrated into everyday operation planning, and contribute to significant savings in time, money and distance.
Research at ZLC is focused on enabling railways to increase their share of the overall market for freight transportation. Even though the rail mode delivers cost-effective transportation on long-haul routes, it commands only a relatively small portion of the market for moving freight – one of the most important economic activities in the world. The reasons for the shortfall lie in service inefficiencies, particularly in relation to transit times and on-time delivery performance. The ZLC research is looking at possibilities for improving the utilization of capital assets on railways by incorporating real-life constraints as much as possible. Also, since containerized cargo represents a significant share of railway transportation in the U.S. as well as in Europe, expanding the use of modern optimization tools in the intermodal rail market is another potential option for increasing the mode’s market share.
Ease the burden
Optimizing the flow of goods at the strategic, tactical, and operational levels, will enable companies and governments to increase the productivity of transportation systems, and relieve some of the pressure on overburdened freight networks. We now have the tools to achieve these improvements – and build even more powerful decision support systems for freight transportation planners and their shipper customers.
(1) CSX Railway Uses OR to Cash In on Optimized Equipment Distribution, Michael F. Gorman Department of Management Information Systems, Operations Management, and Decision Sciences, School of Business, University of Dayton, Dayton, Ohio, Dharma Acharya, David Sellers CSX Transportation