INTERMODAL PROFITABILITY ANALYSIS IN THE TRUCKLOAD AND LTL INDUSTRIES

MBTC FR-1081 W .M. Plunkett, G.D . Taylor, and J.R. English

The contents of this report reflect the views of the authors, who are responsible for the facts and accuracy of the information presented herein. This document is disseminated under the sponsorship of the Department of Transportation, University Transportation Centers Program, in the interest of information exchange. The U.S. Government assumes no liability for the contents or use thereof.

1 . Report No. 1081 4. Tfue and Subtitle

2. Government Accession No.

Technical R art Do 3. Recipient's Cat abg No .

Intermodal Profitability Analysis in the Truckload and LTL Industies

7. Author(s)
Plunkett W . M ., Taylor G . D ., English, J . R .

8 P rf rN

9. Performing Organization Name and Address

Mack-Blackwell Transportation Center 4190 Bell Engineering Center University of Arkansas, Fayetteville, AR 72701

10. Work Unit No. (TRAIS) 11 . Contract or Grant No .

DTRS92-G-0013

12. Sponsoring Agency Name and Address

Mack-Blackwell Transportation Center 4190 Bell Engineering Center University of Arkansas Fayetteville, AR 72701

13 . Type of Report and Period Covered

Final Report 8/97 - 12/98

14. Sponsoring Agency Code

15. Supplementary Notes

Supported by a Grant from the US Dept . of Transportation Centers' Program .

16 . Abstract

In this project, the authors examine intermodal transportation from a profitability standpoint . The project extends the state-of-the-art in transit mode selection by including profitability factors generally not considered in such studies . Herein, the authors consider factors such as origin and destination market types, service level required, freight volume between the origin and destination, the cost of drayage, profit margin requirements, equipment redistribution, and the price of purchased transportation . The study includes both truckload and less-than-truckload (LTL) carrier perspectives and considers two alternative models for subsequent equipment dispatches . A decision support system, written in Microsoft Excel '97, is a major deliverable for the project . The project has been practically motivated and supported by three major companies, J .B. Hunt Transport, Inc . (truckload trucking), ABF Freight System, Inc . (LTL) and BNSF Railways (intermodal rail) .

17. Key Words

Transportation, Intermodal Transportation Less Than Truckload Trucking, Profitability Analysis,

18. Distribution Statement

No Restrictions . This document is avaliab e from the National Technical Information Service . Springfield, VA .

19 . Security Classif . (of this report)

Unclassified 2

20. Security Classi. (of this page)

Unclassified

21 . No. of Pages 22 . Price

118 N/A

Reproduction of completed page authorized

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1 . AGENCY USE ONLY Leave blank)

2. REPORT DATE

3. REPORT TYPE AN DATES COVERED

October 29 . 1998
4. TITLE AND SUBTITLE

Final- Renott 8/97 - 12/98

5. FUNDING NUMBERS

Intermodal Profitability Analysis in the Truck load and LTL Industries

6. AUTHOR(S)

Plunkett, W . M . III, Taylor, G . D . and English, J . R .

7 . PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES)

Mack-Blackwell Transportation Center 4190 Bell Engineering Center University of . Arkansas Fayetteville, AR 72701
9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES)

8. PERFORMING ORGANIZATION REPORT NUMBER

Mack-Blackwell Transportation Center 4190 Bell Engineering Center University of Arkansas Fayetteville, AR 7 2701
11 . SUPPLEMENTARY NOTES

10 . SPONSORING/MONITORING AGENCY REPORT NUMBER

1081

Supported by a Grant from the US Dept of Transportation Centers' program .

12a . DISTRIBUTION /AVAILABILITY STATEMENT

12b. DISTRIBUTION CODE

National Technical Information Service 5285 Port Royal Road Springfield, .VA 22161

NA

mum

wo

In this project, the authors examine intermodal transportation from a profitability standpoint . The project extends the state-of-the-art in transit mode selection by including profitability factors generally not considered in such studies . Herein, the authors consider factors such as origin and destination market types, service level required, freight volume between the origin and destination, the cost of drayage, profit margin requirements, equipment redistribution, and the price of purchased transportation . The study includes both truckload and less-than-truckload (LTL) carrier perspectives and considers two alternative models for subsequent equipment dispatches . A decision support system, written in Microsoft Excel '97, is a major deliverable for the project . The project has been practically motivated and supported by three major companies, J .B . Hunt Transport, Inc . (truckload trucking), ABF Freight System, Inc. (LTL) and BNSF Railways (intermodal rail) .

14 . SUBJECT TERMS

IS. NUMBER OF PAGES

Transportation, Intermodal Transportation, Truckload Trucking, Less than Truckload trucking, Profitability Analysis,
17 . SECURITY CLASSIFICATION OF REPORT 1$ . SECURITY CLASSIFICATION OF THIS PAGE 19 . SECURITY CLASSIFICATION OP ABSTRACT

118
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none
NSN 7540-01 .260 SS00

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Standard Form 2 B Rev aowd v, ANIS1 Std =.e . 249

The contents of this report reflect the views of the authors, who are responsible for the facts and accuracy of the information presented herein . This document is disseminated under the sponsorship of the Department of Transportation, University Transportation Centers Program, in the interest of information exchange . The U . S . Government assumes no liability for the contents or the use thereof .

TABLE OF CONTENTS : Chapter 1 : Introduction 1 .1 Objective of the Research 4 4

Chapter 2 : Review of Literature 2.1 2.2 2.3 2.4 General Information Industry Trends Trends In Published Literature Truckload and Less Than Truckload 2.4 .1 Similarities/ Differences 2.4 .2 Network Design and Operation 2.4 .4 Facility Allocation/ Location 2.5 Intermodal Transit 2.5 .1 Definition of "Intermodal" 2.5 .2 Market Area 2.5 .3 Profitability 2.5 .4 Current Algorithms 2.5 .5 Drayage 2.6 Costs 2.6 .1 Highway Transportation 2.6 .2 Rail Transportation 2.6 .2 a. Domestic Rail Network 2.6 .2 .b . Traffic and Cost Structure 2.6 .3 Overhead 2.6 .4 Transfer Costs 2.6 .6 Market Type 2.7 Decision Support Systems 2.7 .1 Current Carrier Utilized Algorithms 2.7 .2 Current Customer Utilized Algorithms

6 6 6 8 9 9 10 14 15 15 16 17 18 18 19 19 20 20 22 23 24 25 26 27 28

Chapter 3 : Method of Analysis 3 .1 Factors to be Analyzed 3 .1 .1 Service Level 3 .1 .2 Freight Volume 3 .1 .3 Length of Haul 3.1 .4 Market Type 3 .1 .5 Redistribution of Equipment 3.1 .6 Drayage 3.1 .7 Price of Purchased Transportation 3.1 .8 Profit Margins 2

29 29 29 32 32 33 34 36 36 37

3 .2 Service Time Break-Even Analysis 3 .3 Profitability Break-Even Analysis

37 39

Chapter 4 : Development of the Model 4.1 Introduction 4.2 Inputs 4.2 .1 Rates 4.2 .2 Dray Costs 4.2 .3 Profit Margins 4.2 .4 Taxes 4.3 Parameters 4.3 .1 Lane Type 4 .3 .2 Volume 4 .3 .3 Loop Type 4.3 .4 Service Level 4.4 Calculations 4.4.1 LTL and TL Costs 4.4.2 Intermodal Costs

40 40 40 40 42 44 45 45 45 46 47 48 48 48 49

Chapter 5 : Analysis of the Results 5.1 Introduction 5.2 Organization of the Results 5 .2 .1 The Complete Data 5.2.2 Graphs 5.3 Results of the Analysis

52 52 52 52 55 56

Chapter 6 : Users Manual 6.1 Overview 6.2 Master Codes 6.3 Master Calculator Chapter 7: Conclusion References Appendix A Appendix B Appendix C Appendix D Appendix E

61 61 61 63 66 67 72 75 77 86 114

CHAPTER 1 : INTRODUCTION Intermodal transportation with truck and rail is a rapidly growing segment of the transportation industry . Projections show that intermodal transportation is expected to grow rapidly through the early part of the next century . Harps (1995) indicates that this growth could continue in the double digits through the year 2000 and beyond . As this growth continues in a very competitive industry, tools will be needed to help determine which mode (truck only or intermodal) is most cost effective for the service needs of customers .

1.1 Objective of the Research In this analysis, the primary focus is on the development of a tool set to support cost analysis and mode selection for motor carriers . The ultimate objective is to provide a tool for both less than truckload (LTL) and truckload (TL) industries to assist in mode selection as a function of several critical factors . These factors include the desired service level, lane freight volume, length of haul, market type, equipment redistribution needs, drayage needs, purchased transportation options, and profit margins . This analysis provides carriers with a profitability perspective on new or existing lanes to help determine loads that should be handled using intermodal equipment and methods or alternatively which should remain solely as over the road (OTR) loads . This analysis also provides carriers with a tool set that determines costs and thereby identifies opportunities for increased profitability . The research delivers a profitability determination model with eight possible defining characteristics [(2 delivery modes) x (2 industry types) x (2 equipment return

scenarios)] . The delivery mode options are intermodal and truck only . The industry types are truckload and LTL . The equipment return scenarios include a `loop' model and a `next load dispatch' model . Both equipment return scenarios are discussed in greater detail later .

CHAPTER 2 : REVIEW OF LITERATURE

2.1 General Information In the trucking industry it is increasingly difficult to maintain profitability on a national basis . This is due to several factors ; the difficulty of serving customers in "good" and "bad" markets, freight imbalances, unionization of drivers, the increasing costs of travel on the highway, and the erratic nature of demand in most markets . These factors are forcing a sharp increase in the competitiveness of the industry . Companies can no longer just take a load without thinking first of the possible consequences involved in shipping through certain modes and markets . Trucking companies must focus internally on their business and determine overall profitability for their networks and eliminate unnecessary costs therein . The data obtained in the area of profitability is normally focused on making a statement of either high or low profitability for an entire firm . This data is usually dated and provides no suggestion of specific problem areas, rather a general statement about the balance sheet (Christofi et al ., 1990) . Through the use of the tools developed herein, carriers should be able to better evaluate areas for improvement and growth, and determine areas of their business that should be forfeited to their competitors in order to improve profits .

2 .2 Industry Trends Growth in the trucking industry has been primarily in the area of intermodal freight. According to Burke (1995) growth in this area out paced the U.S. economy from 1992 to 1994, with growth rates of 7 .2%, 7.9%, and 14.1%, for that time period . Many

factors that have contributed to this growth in the intermodal industry as summarized by Broadstreet (1996) : 1 . Improved railroad scheduling 2. Improved rail transportation contracts 3 . Lower accident probabilities 4. Reduced capital investments 5. Shortage of OTR drivers 6. Recognized ability to handle imbalances 7. Growth in the North American economy 8 . The teamsters strike in 1994 As with any industry, there have been obstacles to impede the growth of this industry as it has moved forward . A significant obstacle for intermodal shipping has been the question of making deliveries on time, which becomes substantially more difficult with the increased transit times that are prevalent in the intermodal industry (Sparkman, 1995) . This problem has been dealt with by many companies by simply allowing the proper transit time in shipping, increasing efficiencies in the processes involved in shipping intermodally, and by recognizing which loads are in need of increased service. In relation to service time, carriers and shippers often make hasty judgements about which mode should be used in order to provide the necessary level of service on a load . Many of the carriers and shippers alike assume almost automatically that the higher service level is provided via truck . This is, however, an incorrect assumption as will be discussed later . There is a break-even length of haul that can be found to determine

which service level is better suited to make a more timely delivery to the shipper destination . Other problems include equipment shortages, and a limited rail infrastructure . These problems must be addressed as well . Ronald T . Sorrow, senior vice president of CSX Intermodal, states " . . .The intermodal industry is not going to be able to spend itself or expand itself to success, rather the industry has to manage itself to success ." (Harps, 1995) . Future growth in the industry is eminent . However, the industry is facing new problems and the solution to these problems will have to be addressed in order to ensure that a let down does not occur .

2.3 Trends In Published Literature During the last two decades there has been substantial research completed in the transportation industry devoted to the topic of intermodal freight . Although some of this research has been focused on costs, the area of operational improvements has been the primary focus of the vast majority of the work in this field . Much of this information is of little use to trucking companies attempting to determine profitability on current lanes or to establish new profitable lanes . The decision to ship intermodally is one that is seldom addressed in current literature . Many carriers simply ship intermodally whenever possible, and while it is in many cases a good decision to ship in this manner, it may in some cases be a bad decision and therefore a costly one . On the surface, the analysis of costs in the intermodal and trucking industries may seem straightforward. A closer look, however, reveals hidden costs of doing business that may not be evident to the casual observer. Some of the costs such as truck, driver,

and fuel costs are well documented ; others are abstract in nature and computationally difficult to quantify . Examples from this second group include equipment redistribution (deadhead), dwell time (time spent in an area waiting for the next load), ownership of equipment, and service costs . Since this project involves intermodal profitability analysis for both the Truckload and Less than Truckload (LTL) Industries, it requires the integration of several bodies of research in related areas . The project will make use of current research in the truckload, LTL, and the intermodal industries. Research in the areas of networks will also be utilized, although to a lesser degree .

2 .4 Truckload and Less Than Truckload The trucking industry possesses many similarities between separate business sectors and it is important to apply current literature to both the truckload and LTL businesses . It is also important to point out potential similarities and differences in the two industries, so that a proper analysis of current models can be performed .

2.4 .1 Similarities and Differences The service requirements for both an LTL carrier and a truckload carrier represent an important difference in the two business sectors . Though these requirements, from a customer standpoint appear to be similar in nature, they are quite different . For LTL carriers a load is seldom "built" at a customer facility, whereas for most truckload carriers the load is sealed before the driver pulls away from the customer facility, and is subsequently opened by the customer at the destination . The exception to this is an ever-

increasing sector of the truckload business that is the multi-stop truckload, where drivers make several (as many as 5) pickups and deliveries . LTL companies handle loads during the travel time at cross docking facilities called "breakbulk facilities" where loads are "built" . If volume is enough to "build" a load then the shipments are grouped and moved together as a unit to their destination terminal . The destination terminal represents a distinct difference in the two industries as well, it is at this point that loads are broken down and shipped out to individual customers within the region . This process, simple as it seems, can be made complex as typically LTL carriers are asked to perform specialized deliveries for items such as software, or to record releases that require simultaneous delivery to all destinations on a given day . The travel from terminal to terminal can also be quite costly in the LTL industry due primarily to the fact that many of the LTL companies are unionized and therefore have union rules that guarantee drivers a certain number of miles on a given lane . The delivery of the load in the truckload industry often requires little more than a drop at a customer facility by the driver (Tilmon, 1997) (Taha and Denison, 1997) . Still another important difference in the two industries is the pricing of loads, or shipments to the customer . The price of a truckload shipment to a customer is usually quoted on a rate per mile basis with a minimum charge for low mileage shipments . The price of an LTL shipment is far more complex . The complexities come from the class system which is based on density of the commodity, which is in turn combined with the weight to price a shipment (Taha and Denison, 1997) . Clearly in industry the costs of driving a truck are very similar in both LTL and truckload trucking, however the price differences incurred by the customer are due to the freight handling that is necessary in

10

the LTL industry . Despite these differences the profit margins are remarkably close in both industries . The primary similarities are in the areas of service cost and market type . In both industies it is more profitable to move a truck from a freight "source" than from a freight "sink".

2.4.2 Network Design and Operational Issues One area that has seen much improvement and research in recent years is the area network design, and operation . With the advent of Just-In-Time production facilities, there has been a movement of many manufacturers toward decreasing inventories to help decrease costs . The result of this trend is increased service requirements from the transportation provider (Arcelus and Rowcroft, 1993) . This increased service requirement has added to the stress of the supply chain within the LTL and truckload industries . This new stress has forced the trucking industry to make drastic changes in the way that they approach their business . They have been forced to closely examine their cost structure to seek and eliminate unnecessary costs within the supply chain, and therefore improve the design of their network . This stressed supply chain has allowed companies to pursue opportunities for improvements in the overall design of the current network and the support for that network. One of the critical problems that has been addressed to some degree in past literature is the problem of empty equipment distribution or redistribution . Addressing the issue of vehicle allocation in most environments is computationally demanding and can be very difficult to quantify on a balance sheet. While there is a large amount of historical and current research in this area (Frank, and Wolf, 1956)(Jordan, and

11

Tumquist, 1983)(Frantzeskakis, and Powell, 1990), these algorithms concern themselves largely with the railroad and trucking industries and do not consider alternate modes of transport for the equipment that is being utilized . Furthermore, the loaded vehicle in these algorithms is considered as a tractor trailer rig, a rail car, or an ocean going container not the chassis and container problem specific to the intermodal industry . At best the algorithms put forth in these papers to help to monitor the costs necessary to operate a non-intermodal freight business . New network design is of primary importance in the intermodal and trucking industries . More efficient networks conceivably provide cost savings in areas previously thought to have little or no opportunity for savings . This has led to the development of several costing algorithms and network models . Powell (1986) presents such a model, which considers the perspective of LTL motor carriers . In that research, a load-planning problem is formulated as a fixed charge network and minimum frequencies for loads are assumed . Adding local improvement heuristics allows drop and pick operations to be performed in an intelligent sequence . This line of research points to a similar problem in the intermodal industry . The dilemma occurs when a container arrives at a hub and must still be drayed to final delivery points . In most cases, however, the majority of these loads will be end of line drops with the next load originating at a random point passed through the chain of command . Powell (1996) follows that line of research into a discussion of a dynamic assignment problem . This problem has been addressed through the use of a dynamic stochastic model developed by Powell that will help optimize the largely myopic models that are currently employed by most carriers . The simulation of this process will be of

12

some importance to help address the issue of dwell time in certain market types . Empty equipment redistribution or dwell time is a question that is often overlooked in the trucking industry, and can conceivably cause major losses through service in certain market areas . Yafeng and Hall (1997) addressed this problem by making use of inventory theory and decentralized stock control policies for empty equipment . The theory was first applied to terminal networks by using a Monte Carlo simulation of the stock control variables . The work represents a balancing of two competing parameters, the need to optimize globally, and the desire of terminal managers to control centralized fleets . This balancing is difficult to achieve and is seldom done efficiently in industry . Further exploration of this issue is essential to the profitability of motor carriers . The problem of dispatching vehicles in an optimal manner is one that is not easily solved, even with known demands . One study by Frantzeskakis and Powell (1990) focuses on the problem of dispatching drivers to loads in long haul trucking, and on forecasting random demands . This problem is experienced by most truckload and LTL carriers that deal with real time dispatching of trucks and drivers in markets for which demand is difficult to quantify . The equipment used, repositioning methods, and the numbers of assets needed to support the demand for the areas are very important issues in transportation . Addressing these issues, Desrochers and Verhog (1991) viewed the problems from the standpoint of cost . The minimum cost was sought for dealing with routing and fleet sizing from a central depot with a known demand . This is a problem that is common in the LTL business, and less common in the truckload business but still relevant in that there are regular known demand figures that companies service as needed .

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The algorithm presented in Desrochers and Verhog (1991) utilizes savings heuristics based on successive route fusion produced from a weighted matching problem . Another study conducted by Powell et al . (1988) shows that the most recent dispatch is the most important in determining the position of equipment, and that each previous dispatch has less of an effect on the current position of the equipment . This study goes on to state that it is nearly impossible to predict the future positions of equipment for five or more dispatches . This information is of great importance to our research because it helps address the problem of where to position equipment and how to handle imbalances in the network. The lane can carry a load either to the next dispatch, or through a loop scenario where the equipment is carried back to its original position, and obtain similar levels of effectiveness . More will be said about this later . Other researchers have addressed network design through the use of the Princeton Transportation Network Model . The model uses an elaborate network of roads, railroads, and rivers to help carriers and shippers alike make more highly informed decisions about their specific transportation and distribution needs . A graphic interface is used to provide solutions to networking problems that can be applied in a wide variety of industries (Kornhauser, 1984) .

2 .4 .3 Facility Allocation/ Location The United States has adjusted its manufacturing practices to locate facilities in more strategic locations throughout the country, which has compounded problems in networks and management of the supply chain (Dohse, and Morrison, 1996) (Schwind, P .J., 1974) . This has led most companies to find their largest customers and locate their

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facilities close to those customers while still maintaining a relatively inexpensive work force . Campbell (1990) develops an algorithm for approximating the location of new transportation facilities for freight carriers serving a fixed region with increasing demands . Facilities were added to the region as needed to decrease transportation costs in the region as demand increased . The optimal strategy was discussed as it related to future demand figures. It was determined that the myopic strategies employed currently may be nearly optimal, but with no knowledge of future demand . The optimal location of equipment and facilities has left many markets with surplus transportation equipment or equipment deficits, more commonly known as back haul and head haul markets, respectively .

2.5 Intermodal Transit 2.5 .1 Definition of "Intermodal" The term "intermodal" (IM) is one that has been in use for quite some time . The word simply means to ship via two dissimilar modes of transportation. Within the past two decades, the term has become more specifically recognized within the trucking industry as a truck-rail mix on a single shipment . While this is not the only meaning of the word, it is the one used in this document . As stated earlier, there has been very substantial growth within the last two decades, especially in the first half of the 1990's (Burke, 1995) . The growth in this industry is largely due to the benefits that carriers see from shipping intermodally . In short, they are able to move loads with lower cost penalties, with similar service time and the added benefit of greater utilization of equipment . In today's transportation market there are very few commodities that are not

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handled intermodally (Mahoney, 1985)(Fullam, 1985)(Annon, 1997) . In fact, Krake et al . (1995) predict that in Europe by the year 2010, intermodal traffic will triple .

2.5 .2 Market Area While the vast majority of intermodal market area research has been done in the area of possible improvements and simulation, there are some very important works focusing in of determination of profits on intermodal loads . In seeking profitability and therefore lower costs in the trucking business, it is important to understand the conditions under which shipping via intermodal means becomes the more attractive option . This requires an economic analysis as well as a spatial analysis of the origin and destination for line haul freight . Nierat (1997) further developed the market area theory first put forth in the late 1800's, to address the issue of location of terminals in the intermodal industry . In so doing he performed a micro-economic analysis which is of great importance to this analysis . The mathematical models used simply attached a value to fixed costs and built on a rate per mile basis the costs of dray, line haul and dray again . This produced several over lapping curves and allowed easy graphical access to the information on both truck and intermodal costs . While this analysis was seeking to identify operating costs, it was not the primary focus of the paper . The analysis also excludes items such as redistribution of equipment, unions, equipment utilization and overhead which are potentially large and very volatile pieces of the operation costs . A further breakdown of the micro-economic analysis faced by motor carriers was carried out by Jourquin and Beuthe (1996) . In this breakdown, each movement of a carrier was considered to be an individual movement and assigned a cost, each mode or

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operation was then connected to subsequent necessary operations in order for a shipment to reach its destination . A software package called NODUS generates a virtual network, which is used to minimize total transportation cost with respect to the constraints of routes and mode .

2.5 .3 Profitability Broadstreet (1996) has addressed the question of intermodal profitability on a lane by lane basis . In this research a decision support system is developed utilizing factors such as percentage of equipment returned to origin, drayage costs, overhead, market type, and net revenue . This information is utilized to determine profitability on a given lane . The system, however, falls short of considering alternate modes of transportation from a profit perspective from a motor carrier stand point on a given lane .

2.5 .4 Current Algorithms Mode selection is an important question in the shipping industry . As more companies move to an intermodal future, the increasingly complex issues surrounding the optimal mode of transport can be difficult to quantify . Srinivasan and Thompson (1977) have described an algorithm for finding the set of all efficient points to find optimal routes and modes . They accomplished these goals by considering the effects of both total cost and shipping time on the objective function . Another approach to the modal selection problem was developed through the consideration of the total logistics cost of each mode (Sheffi et al ., 1988) . Still another modal selection algorithm was developed

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by Guelat et al . (1990) in which a Gauss-Seidel-linear approximation algorithm was used to determine mode for a multi-mode, multi-product network. Benjamin (1990) analyzed several factors in his consideration of mode selection . The analysis considers the effects of setup, inventory, hauling costs, capacity and demand constraints, transshipment warehouse needs, and concave transport costs, and solved the model using a decomposition technique . Bausch et al . (1994) considers an optimization model that selects mode based on minimization of total costs for a given shipment . None of the current algorithms address profitability and mode choice that are included in the research presented herein . 2.5 .5 Drayage When a company chooses to ship via intermodal means it is necessary to handle the load form the point of origin to the rail yard where it can be transferred to the next mode of transport . The term used to describe such a move is "dray" . Drayage in most truckload environments is either handled by local driver, or by an outside source (Tilmon, 1997)(Taha and Denison, 1997)(Ebel, 1998) . There are also intermediate moves between rail yards in cities like Chicago, IL where it is necessary to have a dray from one yard to another . The vast majority of these moves are handled by an outside source . The problem of an intermittent dray has been compounded by the necessity of steel wheel railway drays in cities where space and rail yard inter connectivity is a problem, like Chicago, IL (Ebel, 1998) . Because many of the railroads are now made up of components from former competing rail companies, the railyards used to build outbound IM trains often are in very close proximity but cannot be connected by a single train without extreme difficulty . These moves are usually set up by the carrier and charged on

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a fixed charge per move basis, based on the length of the move . The expected number of moves in the area over time, and the time required to make the move . There are special charges for delays at the rail yard or otherwise, and special handling that may be required in terms of the equipment used or the type of load that is being moved (Broadstreet, 1996), (Shangyao et al ., 1995).

2.6 Costs A brief analysis of intermodal costs shows that the largest cost in shipping mixed mode shipments is the cost of transportation . A more in-depth look reveals that the cost can be based on several factors that directly effect the cost of a shipment such as length of haul, weight, freight density, class, drayage, equipment rental, etc . The term transportation cost also encompasses the costs encountered by a carrier on single mode shipments as well . These costs include overhead, administration, crew costs, equipment costs, driver costs, fuel costs etc . Literature on highway transportation, and rail transportation costs are summarized by Chew (1995) . A summary of relevant sectors of this information follows below .

2.6.1 Highway Transportation In determining the actual cost associated with a single mode of transportation it is easier to work with aggregate costs . For example, one of the largest costs associated with trucking are the taxes that are paid by carriers nationwide . These costs vary from state to state and it would be difficult and time consuming to calculate actual costs . Even so, they

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can be summarized so that an approximation of the cost can be found through a simple economic analysis . Approximately 44 .6 million trucks were registered for private and commercial use in the United States 1987 . An estimated two thirds of these were utilized for private transportation. The average vehicle miles traveled on rural highways is 69 .4 billion and on interstates the number rose to 75 .2 billion (U.S. Department of Transportation, 1992) . The total number of miles traveled by all trucks on all roads was 629 billion as defined by the Federal Highway Administration .

2.6.2 Rail Transportation Since purchased transportation is the largest component of cost in an intermodal shipping environment it is important to determine, for the purposes of analysis, the costs associated with the line haul of freight from rail head to rail head . This cost should encompass the increased claim rate and maintenance that is necessary for carriers who choose to use this mode of transport as well . The quoted rate is usually a contracted rate for transport between two points, however it can also be calculated for a number of train miles as well (Broadstreet, 1996) . As the literature shows there are a number of factors that contribute to the overall cost of shipping over the rail . 2.6.2 a . Domestic Rail Network The railroad network of the U .S. consists of about 167,000 line miles . The operation of this industry is distributed by 18 Class I railroads (Sampson et al, 1990) . All U .S . railroad carriers are legally classified as common carriers, which means that the

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federal government regulates the interstate activities of all railroads . However the state governments regulate the intrastate activities of the railroads . The railways of the United States are owned and operated by many different corporations . The Eastern District is dominated by Conrail CSX Transportation, Florida East Coast, Grand Truck Western, Illinois Central and Norfolk Southern . The Western District is dominated by BNSF, Chicago & Northwestern, Denver & Rio, Grande Western, Kansas City Southern Lines, Soo Line, Southern Pacific and Union Pacific . All lines are interconnected at many points throughout the U .S . forming a large single system . With a small number of exceptions all cars are able to travel on all roads, as they all have standardized gauges on the rails . This standardized network makes it possible for any freight car to travel to any point within the network, although it should be pointed out that the structure of the network does not always make this an easily accomplished task . All railroads have been built to accommodate prevailing currents of domestic trade . These currents or flows have developed because of the nature of the resources and industries of the different parts of the country . Early trade within the U .S . had manufacturing industries in the East, cotton and agriculture in the South, and livestock and grain in the West . Railroad and motor carriers in the United States generally determine their rates, classifications, and other charges through group consideration . Several economic factors have helped shape the rate-making practices in the railroad industry . First, the Federal Government regulates common carriers as they have public utility status . Secondly internal economies of scale, external economies of scale, joint costs, unused capacity, or

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some combination of these is common . These sizable elements of cost, known as supplementary costs, cannot be specifically identified with any particular traffic movement and consequently must be allocated arbitrarily . Unused capacity on a round trip is usually the strongest cause of supplementary cost per unit of service . In the railroad industry, the ratio of supplementary or fixed costs to variable costs has a had a tendency to be high because of heavy investments in railbeds, rolling stock, terminals, and other fixed facilities . An important dimension of the invariability of these costs is that costs per unit of traffic tend to decline as traffic volume and plant utilization increases . So long as under utilization or excess capacity exists, increases in aggregate traffic volume will reduce unit costs, as much as constant costs are allocated over a larger volume of tonnage . 2.6.2. b. Traffic and Cost Structure The volume of freight traffic trends in the railroad industry may be examined through a number of indices including, car loading, tonnage originated, and ton-miles carried . Because ton-miles reflect both weight and distance, they are normally considered the better indicator of actual service performed by a transportation mode compared to the other two indices . Revenue of freight in ton-miles generated by the railroad industry for 1990 was recorded at $1,034B (Chew, 1995) . The cost structure of the railroad industry is such that railroads can be very competitive in their short-term pricing policies and in the pricing of a particular service . Because of the very large investment in long-lived facilities such as track right of way and terminals, a large portion of their costs are fixed or indirect in nature . During the life of these facilities, expenses of interest, depreciation, property taxation, maintenance, and

22

similar costs do not vary with the amount of traffic handled . In the past, the cost structure has encouraged rate wars among railroads, and between rails and other forms of carriage, it has also led to the development of various kinds of discriminatory pricing policies . Prior to the 1940's, many transportation experts believed railroad fixed costs were as much as two-thirds of the total cost structure . Today, it is generally believed that fixed costs are 40 to 50 percent of the total cost structure . The primary reason for this is that many railroads have greatly expanded their ton-mile production, using the same basic right-of-way and physical plant . When volume increases over time, the percentage of fixed costs compared to total cost decreases . A noted railroad scholar James C . Nelson (1959) stated : "Railroads, having a substantial investment in plant and equipment and relatively large fixed costs, cannot operate efficiently with low and irregular volumes of traffic . Either adequate traffic flows must be stimulated, or unprofitable operations and high rates will result ."

2.6.3 Overhead The term "overhead" is used to describe a variety of costs in transportation . Although the term overhead is often misused it is important to understand what costs are associated with it so that an accurate assessment of these can be made . Overhead is often used to describe a variety of cost centers within organizations, to include management and staff benefits, wages, expenses, facility and equipment depreciation, and sales expenses (Broadstreet, 1996), (Malstrom, 1981) .

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Overhead costs are often listed and charged as a separate dollar per load amount, or dollar per dispatch . It is also common to charge based on percentage of the total cost of a shipment (Seeyle et al., 1962). Overhead costs are not as easily quantifiable as drayage or transfer costs, and because they are spread over a number of shipments they are not nearly as precise .

2.6.4 Transfer Costs Another cost that must be accounted for in intermodal shipping is the cost of transfer from one mode of transport to the other . This is the place where costs may vary based on the type of equipment used and the cost of the railroad equipment necessary to handle a certain load (Ebel, 1998) . If a container is not fitted so that a certain crane, or other piece of high capacity equipment can be used to place it on a flatcar, this cost would increase . For smaller LTL shipments the transfer costs occur at the dock where a shipment is handled, sorted, and sent on to its next destination . This type of cost varies greatly depending on several factors including the number of sortations, the cost of labor, required the labor for sortation and transport, the cost of equipment, the type of equipment necessary, the region itself or unionization . It is also sometimes necessary to have special charges for specialized attention to the handling of a shipment . This charge is usually a fixed charge paid by the customer for the service (Boardman, 1997)(Taha, 1998) . There are some algorithms that consider transfer costs as a constraint on the system . One such algorithm was put forth by Beeram and Kasilingam (1995) where cost

24

is the primary constraint on the system, and optimal mode and route were given as the result. The constraint of capacity was ignored between modes, as were as equipment redistribution and market type . The algorithm used a backward dynamic programming methodology to achieve its solutions . Similar Decision Support Systems (DSS's) will be covered in greater detail in section 2 .7.

2.6.5 Market Type Market type is a term used to describe the type of market that either the origin or destination represents to the carrier . A market where there is a surplus of equipment relative to what is being utilized by a market is commonly referred to as a "back haul" market . A market in which there is a deficit in equipment relative to demand in the market is referred to as a "head haul" market. The market that is nearly balanced in equipment and the amount used is referred to in a number of ways, but commonly as an "intermediate" market. The perceived market type plays a large role in the pricing of freight into or out of an area . For most carriers the rate structure is set up to encourage shipments arriving at a head haul market . For example, in the truckload industry, the most attractive rates would be when shipping from a back haul market to a head haul market . The cost of this type of shipment could be half or less of the cost if the origin and destination were reversed . The reason for this is simple . Carriers, in order to bring in revenues, must haul freight . In order for them to do this, they must have equipment where the loads originate . Consequently, when they are asked to go into a back haul market, they price the load so that the cost associated with leaving the market are paid by

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the shipper on the front end of the load . By pricing in this manner the carrier insures that they will not lose money on the load .

2.7 Decision Support Systems Decision support systems have been in use for many years . According to some, automated decision support systems have been helping managers make and evaluate decisions in industry, as far back as the mid 1970's (Olsen, and Courtney, 1992) . These systems are very valuable tools, and have become common within most industries . The transportation industry has adopted many different types of these systems to help managers make more effective decisions and to improve overall efficiencies . A formal definition describing a decision support system is offered by Mittra (1986) : "A DSS is a computer based information system that helps a manager in making key decisions and thereby improves the effectiveness of the manager's problem solving process . "

The broad scope of this definition fits nicely into a motor carrier environment because the manager can be managing people, freight, equipment, or any number of possible combinations thereof . In the transportation industry there are two types of users of DSS 's and their capabilities, the carriers themselves, and customers that handle their own transportation . The second group is shrinking as more firms turn to third party logistics to handle their freight . The third party logistics industry, however, still utilizes a myriad of DSS 's in

26

order to efficiently handle their customer's freight . This is to the advantage of the industry because most are paid on a gain share basis (Tilmon, 1997) .

2.7 .1 Current Carrier Utilized Algorithms Carriers are forced by the competitive nature of their business to consider a single shipment from several viewpoints before they determine the optimal mode and route of the shipment . The factors affecting the decision are customer driven ; service requirements and cost are chief among the shipper's concerns (McGinnis, 1990) . The fact that service, and cost are given such a high priority makes these factors standout to the carriers as well when making their decision on mode and route. For the customer, service in general has five dimensions ; reliability, transit time, over, short, or damaged shipments, shipper market considerations, and carrier considerations (McGinnis, 1990) . This leads carriers to consider these variables when making modal decisions as well . For carriers, service is a priority, but it is usually a function of factors that are difficult to quantify . While service is certainly of importance when considering mode, it is more common for carriers to handle their mode selection making a cost decision first . Carriers tend to ship via the least expensive mode subject to service requirements, but not necessarily the least expensive to the network . This elusive cost is difficult to quantify and therefore difficult to use in practice . This has led to development of the K-shortest path algorithms that allow carriers to consider a single factor at a time . These algorithms are useful in helping carriers to make decisions after considering one or more paths across the factors (MacGregor and Grover, 1994)(Sheir, 1976)(Eppstein, 1994) .

27

Dreyfus (1969) made an appraisal of some of the algorithms utilized for the shortest path calculations, and provides some necessary history on the subject as well .

2.7.2 Current Customer Utilized Algorithms McGinnis (1990) states that for the customer, as previously mentioned, service in general has five dimensions ; reliability, transit time, over, short, or damaged shipments, shipper market considerations, and carrier considerations . When the McGinnis (1990) discussed the making decisions between particular modes of transport, the list included these five factors ranked in order of precedence with cost being included, but not holding precedence over the others . Cost was usually second or third on the precedence list . From a carrier standpoint, this is important information to help them gain an understanding of what the customer base is seeking when the decision is made to ship . It can have a great effect on the decision to ship intermodally, or to handle the load via truck . It is also important to point out that many of the customers (shippers) view intermodal as the lowest level of service that is available to them, and will commonly request that a load not be handled via intermodal means, even at a lower cost. This is, however, changing as the railroad industry is improving its own efficiencies by making gains on service times, system reliability and damage rates . Customers also often make the false assumption that truck is always a faster mode of transport . While this assumption is indeed true for shorter lengths of haul, the longer lengths of haul can in fact be handled more quickly via intermodal means . The service time break-even analysis that appears in section 3 .2 demonstrates this fact .

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CHAPTER 3 : METHOD OF ANALYSIS 3 .1 Factors to be Analyzed To build meaningful profitability models, several factors should be considered . These factors include the service level of the freight, the volume of the freight through a specified lane over time, the length of haul, the market type, redistribution of equipment, drayage needs, purchased transportation price, price breaks per equipment type, and profit margins . This analysis determines the effects of these factors on profit for motor carriers .

3 .1 .1 Service Level Customer service must drive corporate strategy . For this reason, there are several types and levels of service available to the customer in the trucking industry . Since the customer can request anything from team service to a nationwide, simultaneous delivery time nation wide and expect compliance from the carrier, flexibility is critical to trucking industry. Studies show many ways of measuring the service performance of the supply chain within the logistics arena . Watson et al . (1998) for example, study the "best practices" in the logistics industry . English et al .(1998) introduced four primary performance measures related to service and an accompanying matrix for each . Figure 31 shows the framework for these matrices .

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Financial Quality

Cycle Time

Figure 3-1 (English, et al ., 1998) The four performance categories in English et al . areas are financial, quality, cycle time, and resource . The focus of the English et al . (1998) study is similar to this work in that the quality of service is of importance to the customer, and therefore to the carrier . However, these costs can be computationally complex and therefore difficult to quantify . In this report, service is defined as the level of service requested by the customer, which differs slightly in English et al . (1998). 30

Through interviews with carriers and shippers, McGinnis (1990) variables that most commonly effect the choice of a shipper. The study indicates that the most critical factor of concern is service . McGinnis (1990) also defined the dimensions of service after some analysis of his shippers . He found that there are five "dimensions" that are considered, (1) reliability, (2) transit time, (3) over/ short, or damaged shipments, (4) shipper market considerations, and (5) carrier considerations . Within these five, the priority that is placed on each varies from shipper to shipper, and, in fact, it is common for one of these factors to rank first on the list of considerations, ahead of freight rate . The obvious implication of the service level from a carrier standpoint is that a high service level incurs a higher cost to the carrier, therefore, this cost is passed to the shipper . Lower service level results in a lower cost to be incurred by the carrier, which can is also reflected in the shipper costs . The most common types of service are usually noted by mode : truck, and intermodal. This is an inaccurate list in today's trucking industry, as the carriers commonly have two alternate levels of service : : team service, and if volume on the lane warrants it, dedicated . Furthermore, intermodal shipping implies that there can be as many as four types of service or priority on the rail . The selection of a priority level is generally a function of the type of commodity being shipped and the shipper's service niche and relationship with the railroad . Albrecht (1994) provides a four level service framework that is useful in identifying goals for carriers . The first level is "basic service" . The second level is the "expected" service that is required to meet customer needs . The third level is the "desired" service level that customers want but do not expect . Finally, a forth level of "unanticipated" service is suggested as the ultimate carrier goal .

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3 .1 .2 Freight Volume The volume of freight is a common factor in determining the cost of shipping over a lane, since there is a direct relationship of volume to overhead cost . As volume increases the overhead costs can be spread over a larger number of loads ; therefore, lower costs on a per load basis are realized . This is especially true in LTL shipping where the price of overhead per load can be spread over many shipments and shippers . High freight volume in a lane also permits regularization of scheduling, adds more certainty to dispatching, and can contribute to the development of shorter driver tours and reduced driver turnover rates .

3 .1 .3 Length of Haul Length of haul has a great effect on the cost of a shipment, and most carriers utilize a length of haul measurement in pricing shipments for a shipper . Some use a "dollar per mile" ratio, which is most common in the TL industry . LTL carriers commonly utilize a mile measurement in their pricing algorithms to provide an accurate assessment of the cost of shipping can be measured . Railroad companies also utilize a "dollar per mile" quoting system to make quotes to their customers . Most carriers have an automated system for measuring the miles from point to point, that pulls the information from databases, such as PC Miler, or Rand McNally Miles . Length of haul is the basis for the break-even assessment for shipping intermodally versus by truck with in this project . Break even results based on fifty-mile intervals are presented subsequently . These intervals make the profitability break-even

32

point clear for the different shipping scenarios . For shorter shipments, it is almost always better to ship via truck, because the handling cost and time associated with shipping intermodal is not justified through line-haul savings on the rail portion of the move .

3 .1 .4 Market Type The type of market a shipper is shipping from or shipping to is a factor that has a tremendous effect on the price of shipping . There are three basic market types : head haul, back haul, and intermediate . The head haul market type is the type of market that has a running equipment deficit . Rates into or out of these types of markets tend to be very low, and dwell time in the market (time spent waiting for the next load) is minimal . The back haul market is a market where a carrier commonly incurs empty miles and /or excessive dwell time to pick up the next load, because of a lack of local outbound loads . The rates for these markets vary based on the direction of flow . If a load is going into this type of market, it is common for a carrier to charge very high rates in order to cover the cost of the empty repositioning miles . Leaving a market of this type is, however, very inexpensive, as carriers are load starved in the area. This is not the case if a load is traveling from a back haul market to another back haul market . Typically carriers charge a higher rate in this circumstance due to the empty miles and the anticipated dwell time incurred by the carrier at the destination . Head haul markets are markets where there is more freight than equipment to handle the loads . These are "good" markets for carriers, because dwell time is low and empty miles are small . Most carrier networks are set up so equipment gets into these

33

markets as frequently as possible so equipment utilization can be maximized . Typically, there are price breaks for shippers entering these markets . Intermediate markets are markets that are well balanced with regard to equipment and freight flows . Shipments traveling out of these markets frequently experience price breaks when traveling to head haul markets . Shippers seeking service between two intermediate markets, however, do not see a price break, and there is almost always a price increase for travel into a back haul market . When traveling to a market of this type, the price of shipping depends on the origin market type . If the origin market is a back haul market, then there is commonly a lower rate for entering an intermediate market . If the origin is a head haul market there is often a higher rate per mile associated with the shipment.

3.1 .5 Redistribution of Equipment The distribution of equipment within a network is an important issue addressed by carriers on a day to day basis . This issue is very closely related to market type, in that it is the goal of most carriers to place equipment into head haul markets . For the purposes of this study, there are two scenarios considered : a loop scenario and a next dispatch scenario . The loop scenario assumes that the equipment is relocated to the original shipment origin following each dispatch . This forces the system to operate as a balanced steady state network . The objective of this scenario is to force the equipment into immediate balance following each dispatch . Although operationally impossible, the

34

network must ultimately be balanced at each node . This is true in practice as well as in theory, and the loop scenario provides an artificial means of achieving balance quickly . The second model considered is the next dispatch scenario . Under the constraints of this scenario, the cost of equipment relocation is considered for its next dispatch within the network . This design acknowledges the futility of predicting the future location of equipment though several dispatches(i .e. Powell et al. (1988)) . The next dispatch model includes an expected dwell time within the market and expected empty miles to the next dispatch . This network design assumes the carrier can maintain a dynamic equipment balance and distribution. Another factor to consider in both of these models is the ownership of equipment . Many carriers utilize rail owned equipment including containers, chassis, and trailers . These can be rented from the railroad for a specific load and are commonly used to maintain balance within delivery networks . Rented equipment affects system costs in different ways . The loop model requires payment for the relocation to the railroad drop point, or requires a penalty associated with the imbalance of freight in certain markets according to the railroad needs . For the next dispatch scenario, the carrier is again be responsible for returning the equipment to the railroad drop point, which will be in the destination city. As a result, the redistribution is the responsibility of the railroad . This is a significant issue, because in certain situations, the railroad has the use of ISO containers in exchange and relocation . This drastically effects the cost modeling, since redistribution is included in the price of equipment rental .

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3.1 .6 Drayage When a company chooses to ship via intermodal with rail, it is necessary to handle the load from the point of origin to the rail yard and from the rail yard to the destination . The term used to describe such a move is "dray" . Drayage in most truckload environments is either handled by local company driver or by an outside source . There are also intermediate moves between rail yards in cities like Chicago where it is necessary to have a dray from one yard to another . The majority of these moves are also handled by an outside source . These moves are usually set up by the carrier and charged on a fixed charge per move basis based on the length of the move . This rate is related to the expected number of moves in the area over a given time, and the time required making a specific move . Most dray carriers do charge extra for delays at the rail yard, and any required special handling .

3.1 .7 Price of Purchased Transportation Since purchased transportation is the largest component of cost in an intermodal shipping environment, it is important to determine, for the purposes of analysis, the costs associated with the line haul of freight between rail heads . This cost encompasses the increased claim rate and maintenance necessary for carriers who choose to use this mode of transport . The rate is usually a contracted rate for transport between two points . However, it can also be calculated for the number of train miles . This cost varies according to length of haul, equipment used, ownership of equipment and the type of intermodal service required by the load .

36

Several equipment options exist for motor carriers electing to ship intermodally . A shipper can ship almost any container, but there are price breaks for containers that have double stack ability . Trailers can be shipped as well, including 28 ft . pups, 48 foot trailers and 53 foot trailers . These usually have extra charges associated with shipping intermodally, because extra space is required when compared with the double stack containers .

3.1 .8 Profit Margins Profit margins in the trucking industry are very small . Many of the carriers in the industry struggle each year to make a profit, which makes this research very necessary and very applicable to industry . This research assumes a small margin for both the rail carriers and the trucking carriers . The margins for the LTL and truckload companies are similar but can vary based on load type and freight mix . Sensitivity analysis can be realized by varying the profit margins .

3.2 Service Time Breakeven Analysis The primary focus of this research is to determine the cost breakeven points for OTR (over the road) versus intermodal transportation . It is also interesting, as a secondary consideration, to examine service time breakeven points . The maximum number of miles that a truck can travel in a single day per Department of Transportation (DOT) regulations for OTR drivers is established as follows :

37

(50 mph)*(10 driveable hrs/ 18 hrs(8 hrs of sleep required))*(24 hrs/day) = 666 .67 miles/day (70 drivable hrs/week)/((10 driveable hours /18 hours)*24 hours/day) = 5 .25 days/week (5.25days/week)*(666 .67 miles/ day) = 3500 miles / week (3500 miles/ week) / 7days = 500 miles /driver /day (x)miles /500 = Number of days transit for a truck (2) (3) (4) (5) (1)

The number of necessary dray miles is estimated and yard time is predicted in order to calculate the miles per day via rail . 120 dray miles + (2 railyard stops /shipment)*(12 hrs yard time) = 1 .1 days 1 .1 days + (x)miles / 45 mph = Number of days in transit for a train (6) (7)

Equations (5) and (7) were set equal and solved for the number of miles transit . The break-even point from a service time viewpoint is 1024 miles under these conditions. Under these conditions, when the length of haul is smaller than 1024 miles, the most timely method of shipment is truck, but as the length of haul increases past the 1024 mile mark, it is faster to ship via intermodal means . A sensitivity analysis has been performed on dray length and time spent in the railyard . An excerpt from this analysis can be seen in Table 3-1 . A more complete set of results appears in Appendix A .

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Dray (miles)

Yard time Number of days on Train speed Break even (hrs) For both yard + dray (days) (mph) point (miles) origin and destination 20 12 1 .03 45 962 .06 40 12 1 .07 45 993 .10 60 12 1 .10 45 1024 .13 80 12 1 .13 45 1055 .17 100 12 1 .16 45 1086 .20 120 12 1 .20 45 1117 .24 1 .23 140 12 45 1148 .27 Table 3-1 . Sensitivity for dray length in service Time Analysis * This analysis follows the DOT regulations for truck travel and assumes a 50-mph for all dray miles .

3 .3 Profitability Break-Even Analysis The decision support system (DSS) developed in this document introduces the user to eight possible scenarios and computes the best alternative within the user-defined parameters. The scenarios include two modes (truck or intermodal), with two return scenarios (loop or next dispatch), and two different industries (TL and LTL) . The DSS has an interface built in so that the user can easily adjust input factors to fit the desired parameters for operation . Sensitivity analysis is performed on each of the aforementioned factors . Appendices are included which contain tables of the sensitivity analysis, so that the importance of the individual factors can be determined . The DSS is also used to consider several "real world" tests using the data supplied by research partners, (J . B . Hunt Transport, Arkansas Best Freight Systems (ABF), and Burlington Northern Santa Fe (BNSF)) . All values are disguised to protect the proprietary nature of the data .

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Chapter 4 : Development of the Model 4.1 Introduction This chapter provides a detailed description of the methodology used to determine the preferred mode of transport for a given lane . This chapter details the types of lanes used in the calculations, the estimation of the required parameters, and their effect on the resulting costs from the developed model.

4.2 Inputs Inputs for model are static . These values can be changed as needed . The input values used are estimated using actual carrier data but are disguised to protect the proprietary nature of the carrier.

4 .2 .1 Rates The rates for carriers of motor freight differ as the lane, customer volume, and types of freight vary . The type of lane is the single most important factor used by a carrier when appraising the approximate value of new freight or when evaluating existing lanes . For this reason, cost inputs vary according to the origin and destination lane types . Input cost rates are considered as the "base rate," meaning that the augmented or effective rate is calculated within the model . Table 4-1 shows 18 different lane types and the corresponding "base" rate used in the primary lane analysis. Table 4-1 is taken form the "Master Codes .xls" spreadsheet and therefore contains many codes that are utilized by the calculator in determining costs . The lane type is abbreviated using both the origin and destination lane types (i.e. BB is a Back haul to

40

Back haul lane, and an IH would be an Intermediate market to Head haul market lane) . In the cases where the lane designator is preceded by an "L", the "L" represents an LTL lane, (i .e. an LBH represents an LTL lane that originates in a Back haul market and has a destination in a Head haul market) . Each lane has a corresponding Rate Per Mile (RPM) that is shown in Table 4-1 .

Lane
BB

ype AVg KF'M 1 PUCK

$u .9b

BH BI HB HH HI IB IH 11 LBB LBH LBI LHB LHH LHI LIB LIH LI I

$0 .75 $0 .85 $1 .60 $1 .20 $1 .40 $1 .40 $1 .00 $1 .20 $1 .94 $1 .46 $1 .70 $3 .52 $2 .55 $3 .04 $3 .04 $2 .07 $2 .55

Table 4-1 . Base Rates . These rates are based on the marketing philosophies of TL and LTL carriers, where the price of shipping varies according to the quantity shipped into and out of a given market. Note, in Table 4-1, that the price of a shipment in the LTL industry is substantially higher in most cases . LTL rates assume that each load is handled at least once. As a load goes past the 500 mile mark, the number of assumed freight handles is moved to two and when a shipment passes the 1500 mile mark, the number of freight handles is three. These values are representative of industry averages in the LTL

41

business and can be adjusted by raising or lowering the rate within "Master Codes .xls" spreadsheet. The intermodal rate is calculated based on the base rate for an individual lane . The adjustment used for each lane type is dependent on the type of carrier handling the freight . For TL carriers the intermodal lane cost is 0 .9 times the "base" TL rate, and for the LTL carriers the multiplier is moved up slightly to 0 .925 . It is important to point out that the multiplier can be adjusted manually by the end user meet specific network costs . The TL adjustment is a very conservative estimate of the actual rate incurred by most TL carriers . The numbers were chosen somewhat arbitrarily, however, because of the flexibility offered within the model, this number may be used to estimate any actual intermodal rate . The rates incurred by most carriers vary significantly based on the intermodal market type, and the leverage the carrier has with the railroad . The carrier in analysis of a specific lane should vary the rates according to their own costs . The LTL adjustment figure is not as conservative of an estimate . The increased cost is the result of handling costs incurred by the carrier at each cross dock or terminal facility, the cost of shipping pups rather than containers, and the added cost of unionization .

4.2.2 Dray Costs The allocations for dray costs are included as an input as well. There are two methodologies for pricing drayage : per move charges, and rate per mile . It is more common for the dray to be handled as a per move charge than a rate per mile . However, the price and methods vary from city to city and company to company . For this reason,

42

the drayage included in this model can be priced either as a per move charge, or a rate per mile, both of which are user controlled. For the purpose of analysis we have considered the dray as a flat rate . The dray in this case is defined as a move from a customer facility to the rail yard, or end of line to a customer facility. There are no dray charges for shipments that do not move by rail . The other type of drayage that can be utilized by the carrier is an intermittent dray . This is a move from a rail yard to another rail yard . This type can be handled either by steel wheel (by the railroad) or by rubber wheel (standard truck move) . Intermittent drays are common in cross-country intermodal shipments traveling through densely populated areas, like Chicago, IL . The cost of intermittent drays is not included in the analysis . Even so, it can be an important aspect of cost, and can be included as the carrier wishes . The price for handling these types of shipments varies depending on the location of the necessary dray and the amount of carrier traffic in a city. For example, this type of move is common in Chicago, IL . As a result, the drayage companies have divided the city into zones . The major rail yards in the Chicago area are depicted in Appendix B . The price for moving from a zone to another zone, or for moves within the same zone are presented in Table 4-2 .

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Inter- City Chicago Drayage Rates :

Drayage Company Origin Zone Destination Zone
Hammer Express 1 1 1 2 1 1 1 2 1 1 1 2 1 1 1 2 1 1 1 2 1 2 3 3 1 2 3 3 1 2 3 3 1 2 3 3 1 2 3 3 Average Price :

Price
$110 .00 $130.00 $130 .00 $140.00 $ 55.00 $ 80 .00 $ 85 .00 $ 95.00 $ 50 .00 $ 75.00 $ 75 .00 $115 .00 $ 60 .00 $ 90 .00 $ 90 .00 $139 .00 $ 70 .00 $ 85 .00 $100 .00 $125 .00 $ 94 .95

Central States Trucking

Cushing Transportation

Triton

Capitol Intermodal

Table 4-2 (Bingham, 1998) These drayage figures in Table 4-2 have adjustments for volume, carrier familiarity, and seasonal traffic flows . It is expected that these numbers would move down as much as 60% depending on carrier volume . The input for the cost analysis model is set so that a minimum charge, or a rate per mile can be entered . The user can control the length of dray as well, therefore the input is completely flexible for carrier use .

4.2 .3 Profit Margins The profit margin reflects internal requirements of the carrier . The profit margin chosen for the analysis of the results presented is a three- percent . This is representative of the industry average . It is a conservative estimate, as there are many lanes where the

44

margin can be very high . For example, a head haul to back haul lane might create a substantially higher margin . The margin can be low or negative as well, lanes that originate in a back haul market usually fall into this category . The adjustment of this

margin is covered in the user's manual Chapter 6 of this document.

4.2.4 Taxes As discussed in Chapter 2, taxes play an important role in the overall cost of a shipment. These taxes vary from state to state, and each truck has a separate tax that it must pay for the use of the highway within individual states . There are taxes associated with the licensing of a tractor within a state . This matter is further complicated by an entirely different set of taxes imposed on the railroad carriers . Therefore, for the purposes of analysis, in this model, the tax margin is set at a three- percent rate on total dollars per move . This input can be changed as needed by the end user .

4.3 Parameters Unlike the inputs discussed in section 4 .2, the parameters for the model are figures that vary from run to run and may vary within an individual run . The end user may adjust these parameters as discussed in the users manual in chapter 6 of this document.

4.3.1 Lane Type The single most important factor in a carrier's pricing matrix is the type of lane being considered . Although pricing philosophies vary, larger carriers employ a matrix

45

that accounts for the origin market type and the destination market type . The cost model embedded with in the system handles this variable lane type by recognizing nine separate lane types, and two types of carriers for a total of eighteen lane types . Table 4-1 shows the abbreviations for the type of lane used, and the price of shipping (rate per mile) . Section 4.2 .1 reviews the interpretation of the abbreviations, and the calculation of the rates are figured . For the purpose of analysis, all individual lane types are used .

4.3 .2 Volume The volume parameter reflects a very important piece of pricing information that is used by carriers to price freight . Carriers typically consider the volume of freight on an individual lane, and the volume that the customer is offering on that lane . To handle this pricing variable, the model employs a three level system, providing flexibility in handling both large and small shippers . A level one shipper is representative of a large or long-time customer that receives a break or discount in pricing . The number chosen for the discount in the analysis is a 5% price break . This number is recognizably conservative, but it is easily adjusted. Level two shippers are average size customers receiving no price adjustments because their volume does not warrant it . When this level is used, there is no adjustment for volume made by the model . Level three is reserved for smaller shippers of freight . These customers pay a premium for the services rendered by the carrier because they have small volumes of

46

freight . The adjustment for a level three shipment within the network is a 5% price increase . This number can be adjusted as needed by the carrier.

4.3 .3 Loop Type As discussed earlier, there are three basic types of models ; closed loop, next dispatch, and a next dispatch rental . These three model types account for the cost of balance to the freight network . The rental, closed loop is not considered in this analysis, since the carrier must pay for the rail owned equipment to travel back to the origin after shipment . In practice, repositioning cost is built into the rental fees . The basic loop types are further augmented by the effect that the lane type parameter has on loop type . Loop type within this model is a function of lane type . This feature is added to consider the impact of the end market type on the next dispatch loop type . Table 4-3 reflects the number of different types of loops and the cost adjustments used for each type of loop .

Loop Cost Adjustment Table

End Cost Market Equipment? Type Adjustment Closed Loop No n/a 2 Next Dispatch Back Haul No BH 1 .15 Next Dispatch Back Haul Rental Yes BH 1 .075 Next Dispatch Head Haul No HH 1 .01 Next Dispatch Head Haul Rental Yes HH 1 .005 Next Dispatch Intermediate No I 1 .08 Next Dispatch Intermediate Rental Yes I 1 .04 Loop Type Rental

Table 4-3 . Loop Cost Adjustment Parameter.

47

The cost adjustment is used in the model to adjust the cost of the shipment according to expected dwell time within a given market, and the cost of rental equipment . These numbers can be adjusted as necessary .

4.3.4 Service Level The service level parameter includes the costs associated for increased levels of service . The parameter reflects the price increase for loads considered "hot" or "standard" . The "hot" loads are defined as loads where the window for delivery is within 24 to 48 hours of the load call . The cost increase for "hot" loads is two percent of the total cost of the shipment . This number can be readily adjusted .

4.4 Calculations This section presents the formulas used in the model and provides some explanation regarding their origin . To avoid confusion, the formulas are written in terms of the parameters and inputs in sections 4 .2 and 4.3 .

4.4.1 LTL and TL Costs The cost of shipping for both the LTL and TL carriers is differentiated by the rate . The rate is dependent upon the type of shipping lane . The initial cost is obtained from the following formula:

Initial Truckload costs = [Rate per mile] x [Length of Haul] x [Loop Added Cost] x [Volume Cost Adjustment] x [Service Level Cost Adjustment] (8)

48

The initial truckload cost is used to calculate the final cost of a shipment by adding the costs of tax and profit margins, using the following formula :

Total Truckload cost = [Initial Truckload costs] x [Tax] x [Profit Margin]

(9)

This number is evaluated against the price of shipping intermodally . The model incorperatesthe price of shipping LTL in the exact same manner as TL shipping with one exception, the rate. The cost of shipping via LTL for both truck and rail is substantially higher due to the added cost of handling the shipments at break-bulk facilities and the standard use of "pups" in place of containers or 48 and 53 ft . trailers. This is incorporated into the model by the adjustment on the LTL rate per mile for both truck and rail shipments (see Table 4 .1 for base rates) .

4.4.2 Intermodal Cost The calculation of intermodal costs is more involved . The cost associated with shipping intermodally is dependent on dray costs and can therefore vary depending on the distance from the rail yard to the customer facility . This presents a unique problem in that the variance of the dray distance is nearly impossible to calculate for all shipments . For this reason, an initial dray distance of 50 miles is used for the analysis . This dray length results in a minimum charge for a drayage shipment . The length of dray, the dray rate per mile and the minimum charge for drayage can all be changed . The actual cost for the intermodal shipment is divided into three stages similar to the two-stage process for calculation of the costs associated with TL and LTL shipments . The first stage is the drayage costs, which can be obtained from the following equation . 49

Dray Rate Per Mile Cost = [Dray Length of Haul] x [Dray Rate Per Mile]

(10)

This number is compared to the minimum charge for drayage, and the maximum of the two is used as the cost of drayage for a shipment . This insures that a minimum charge is not falsely undercut. The second stage is to calculate the initial intermodal cost, which can be obtained from the following formula :

Initial Intermodal Costs = {[Intermodal Rate per Mile] x [Train Length of Haul] x [Service Level Cost Adjustment] x [Volume Cost Adjustment] x [Loop Added Cost]} + [Dray Cost] (11)

This number is then used to determine the total cost of intermodal shipping by adding the final two factors for consideration .

Intermodal Total Cost = [Initial Intermodal Costs] x [Tax rate] x [Profit Margin]

(12)

This number is used as the total cost for an intermodal shipment under the specified conditions . This number is evaluated against the price of shipping entirely by truck . The lessor of the two numbers is considered the more profitable mode . The breakeven length of haul is marked to help determine the most profitable choice under the circumstances described by the model parameters and inputs . If the length of haul is less than the break-even value, the truck only option is the most profitable mode . If the length

50

of haul is larger than the break-even value, the intermodal option is the most profitable choice .

51

Chapter 5 : Analysis of the Results 5 .1 Introduction : The purpose of this chapter is to present results and to discuss the implications of the findings . Due to the number of graphs and tables used in the analysis, a comprehensive listing of data is excessive . A comprehensive listing of the data, graphs and tables appears in Appendix C, D, and E respectively.

5 .2 Organization of the Results The results obtained through analysis are contained in the Appendices C, D, and E. What follows are excerpts from these appendices . Brief explanations of the performance finding s for the scenarios considered are presented .

5 .2.1 The Complete Data The complete data set is organized so that the user can quickly determine when a load should or should not be shipped intermodally . For the purpose of analysis the model is run for 324 different scenarios, including 18 lane types, three volume levels with three loop types each, and two service levels . For each scenario a single number for length of haul is determined . If a length of haul is higher than this number this load should be shipped intermodally, and if it falls below that number the truck only option is more profitable . An excerpt from the scenarios considered appears in Table 5-1, a comprehensive table appears in Appendix C .

52

Excerpt From Comprehensive data table :

Customer Volume Rating Service Level Cost Adjustment Adjustment Loop cost CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB H H H S S S H H H S S S H H H S S Lane Type bH BFI BFI B1-1 BFI B1-1 BI BI BI BI BI BI 11B 1-1B 11B 1-1B 1-1B BreakEven pt . 1325 1275 1275 1275 1225 1225 1175 1175 1125 1125 1125 1125 1075 1075 1075 1075 1025

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Table 5-1 . Excerpt from Comprehensive data Table A list of the abbreviations used in Table 5-1 and Appendix C . appears below : Customer Volume Rating: 1 - High volume 2 - Medium Volume 3 - Low Volume Loop Cost Adjustment : CL - Closed Loop NDH - Next Dispatch with end market type of Head Haul NDHR - Next Dispatch with end market type of Head Haul using Rental Equipment NDI - Next Dispatch with end market type of Intermediate NDIR - Next Dispatch with end market type of Intermediate using Rental Equipment 53

NDB - Next Dispatch with end market type of Back Haul NDBR - Next Dispatch with end market type of Rental Equipment Service Level Cost Adjustment : H - Hot, a load with a premium paid for a priority service level . S - Standard Load. Lane Type : BH - Back Haul to Head Haul BI - Back Haul to Intermediate BB - Back Haul to Back Haul IH - Intermediate to Head Haul II - Intermediate to Intermediate IB - Intermediate to Back Haul HH - Head Haul to Head Haul HI - Head Haul to Intermediate HB - Head Haul to Back Haul LBH - LTL Back Haul to Head Haul LBI - LTL Back Haul to Intermediate LBB - LTL Back Haul to Back Haul LIH - LTL Intermediate to Head Haul LII - LTL Intermediate to Intermediate LIB - LTL Intermediate to Back Haul LHH - LTL Head Haul to Head Haul Back Haul using

54

LHI - LTL Head Haul to Intermediate LHB - LTL Head Haul to Back Haul Break Even pt. : Listed in Miles .

5 .2 .2 Graphs While table 5-1 and Appendix C provide a useful arrangement of the comprehensive data, graphical interpretations of the results aid in interpretation and are presented in Appendix D . The graphs divide shipments according to the type of lane, and customer volume level. This helps to visualize results for each model type . An example of a Graph of this type appears in Figure 5-1 .

Head Haul to Back Haul Volume Rating High (1) 1500 1300 1100 a m 900 700 500 300 _Break Even Point x m z x w m m 0 0 z Z Scenario x J 0 J 0

Figure 5-1 .Head Haul to Back Haul volume level 1 . In this graph, the acronyms are the same as in Table 5-1 and Appendix C, except that in the graphs, the service level is attached to the loop type .

55

In Figure 5-1, we see a high customer volume level on a lane from a head haul to back haul market . This type of freight is usually shipped at a high price to the customer, and is not freight that is desired by carriers . It is important to note from the graph that the numbers for the break-even point are low . This indicates that in most cases on this lane, the carrier should ship intermodally to ensure profitability . This is an expected result from the model because of the lane type and the carrier's apprehension to send trucks into a back haul market .

5.3 Results of the Analysis As stated earlier, the calculation of breakeven points produces 324 separate data points . Due to the volume of these numbers, the results obtained from the software have been analyzed using a Microsoft Excel 97 spreadsheet . The purposes of this section are to present graphical results, from the Excel Spreadsheet, and to validate of the model using graphical information . A complete listing of all graphs is included in Appendix D . In Figure 5-2, a back haul to head haul lane with a high customer volume level is depicted . This is, in most cases, an extremely desirable freight type, because it brings equipment into a market where the demand is high and the resulting expected dwell time and next dispatch empty miles are very low . The rate per mile for this or any other lane varies from carrier to carrier, but in all cases, it is relatively low . The graph shows that unless the shipment has an extraordinary length of haul, it should be shipped via truck .

56

Back Haul to Head Haul Volume Rating High (1)

1500

1300

1100 m 2
H

900

700

500

300

Break Even Point

x z z

x
2

u~

x
J U J U

o x z o Scenario Z

Figure 5-2 . Back Haul to Head Haul with volume rating 1 . This is the expected result because most carriers seek to relocate their assets to larger, more profitable markets . In most cases, the carrier would send the load via truck . The graph also points out the importance of length of haul . In this example, we see an extreme case where the conditions for the load to be carried intermodally are rare . In fact, the average break even point across all truck load lanes is 464 .2 miles is very large as expected .

57

To demonstrate the importance of customer volume on these lanes it is interesting to look at the same lane type with a low customer volume level . In Figure 5-3, it is evident that the amount of freight shipped over a given lane is important, because it lowers the breakeven point by as many as 150 miles on a given load . The break-even values are otherwise effected in the exact same manner as seen in Figure 5-2 .

Back Haul to Head Haul Volume Rating Low (3)

1500

1300

1100
H d

900

2 700

500

300
Z

'?

x _ z

=
W o x

_ J
v

6?

Break Even Point

c z

Scenario

Figure 5-3 . Back Haul to Head Haul Volume Rating Low (3) In Figure 5-4, an example from the LTL industry, is shown . The Figure shows a head haul to back haul lane with a high customer volume level . The graph shows that the length of haul for the breakeven point is, at its highest, 375 miles . It is important to note that the model, at the breakeven point of 375 miles, also recommends renting equipment while shipping intermodally . This is an expected result, since this option partially frees

58

the carrier from relocating the equipment to a more profitable market (the railroad can reposition empty equipment at less cost) . Figure 5-4 shows a very short length of haul for the breakeven point, in all scenarios. This is due in part to the type of carrier involved and the additional costs incurred in the LTL industry, but it can also be attributed to the type of lane . The combination of these two factors has in this case produced a very short length of haul for the intermodal breakeven.

LTL Head Haul to Back Haul Volume Rating High (1)

1500

1300

1100

In 1

900

700

500

300 x _Break Even Point x m G z

G
z

x
J 0

z
S ce n a rio

Figure 5-4 . Head Haul to Back Haul volume rating 1 for LTL carriers . The results from the graphs in this section and from the graphs and tables in the appendices point to the consistent accuracy, and validity of the model embedded within the DSS . The general trends are consistent with the goals and practices in industry . It should be pointed out, however, that the parameters used are only vaguely connected to real world environments and should not be used without augmentation for carrier modal 59

decisions .

60

Chapter 6 : Users Manual

6 .1 Overview This chapter provides a brief explanation of how to use the DSS which integrates the previously described cost models . It assumes that the user is familiar with personal computers, and Microsoft Excel '97 . This environment is the one used for the development and testing of the model, but it could very easily be transferred to almost any spreadsheet package with minimal difficulty .

6 .2 Master Codes The "Master Codes .xls" workbook is composed of a single worksheet named "Master TL 1" . This worksheet contains all of the "Parameters" discussed in Section 4 .3 and all of the related inputs discussed in Section 4 .2 . Inputs that are not in this table appear on the "Master Calculator .xls" spreadsheet . These inputs include : "Total Dray Length of Haul", "Dray RPM" (Rate per mile), "Minimum Dray Cost", "Profit Margins" and "TAX" . The spreadsheet "Master Codes .xls" appears in Figure 6-1 . The values in this table are the ones presented in Chapter 5 . From this table the user can see the parameters that were discussed earlier . To make changes, a user would follow these simple instructions : 1 . Determine which value should be changed . 2 . Find that parameter in the "Master Codes .xls" work sheet . 3 . Change only the numbers in the following columns : -For Customer Volume Rating Table - "Rate Break / Penalty" column -For Lane type -Rates Table - "Avg . RPM Truck" or "IM Rate Adjustment" -For Service Level Cost Table - "Service Cost Factor" -For Loop Cost Adjustment Table - "Cost Adjustment" (NOTE : Change numbers in these columns only, to avoid catastrophic failure of the model .) 61

Customer Volume Rating Table

Customer Rating High Volume Average Volume Low Volume Rate Break / Penalty 0 .95 1 1 .05 Code 1 2 3

Lane Type -Rates Table

Lane Type BB BH BI HB HH HI 113 IH II LBB LBH LBI LHB LHH LHI LIB LIH LII $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Avg RPM Truck IM Rate Adjustment 0 .95 0 .9 0 .75 0 .9 0 .85 0 .9 1 .60 0 .9 1 .20 0 .9 1 .40 0 .9 1 .40 0 .9 1 .00 0 .9 1 .20 0 .9 1 .94 0 .925 1 .46 0 .925 1 .70 0 .925 3 .52 0 .925 2 .55 0 .925 3 .04 0 .925 3 .04 0 .925 2 .07 0 .925 2 .55 0 .925 Avg IM Rate $ 0 .86 $ 0 .68 $ 0 .77 $ 1 .44 $ 1 .08 $ 1 .26 $ 1 .26 $ 0 .90 $ 1 .08 $ 1 .80 $ 1 .35 $ 1 .57 $ 3 .26 $ 2 .36 $ 2 .81 $ 2 .81 $ 1 .91 $ 2 .36

Service Level Cost

Service Level Hot Standard

able
Delivery time (Firs) 24 - 48 48+ Lode H S

vice Lost Factor (IM o 1 .02 1

Loop Cost Adjustment Table

Loop
I

ype

Rental equipment? N N Y N Y N Y

end Market n/a BH BH HH HH I I

ype

CL NDB NDBR NDH NDHR NDI NDIR

cost Adjustment 2 1 .15 1 .075 1 .01 1 .005 1 .08 1 .04

Figure 6-1 Master Codes .xls 62

After adjustments are made, updates to the calculator occur automatically .

6.3 Master Calculator The second portion of the model is contained in the workbook "Master Calculator .xls" . This workbook contains two worksheets "TL" and "TL Graph" . The first is the sheet where the calculations occur, and the second is the graph corresponding to the results. These sheets also appear in Appendix E . The "TL" sheet has several important codes that correspond to values in the "Master Codes .xls" that are used to input values automatically . These columns are shown below with the corresponding available codes . Column: Customer Rating Loop Type Service Level Lane Type Codes Available : 1, 2, 3 CL, NDB, NDBR, NDH, NDHR, NDI, NDIR H, S BH, BI, BB, IH, 11, 113, HH, HI, HB, LBH, LBI, LBB, LIH, LII, LIB, LHH, LHI,LHB

Table 6-1 . TL Sheet Inputs NOTE: These codes are the only values that can be used any other code will result in a catastrophic failure of the model . These codes correspond to a code on the " Master Codes .xls" which can be seen in Figure 6-1 with the corresponding value . Values from "Master Codes .xls" are inserted into the calculator automatically. The "Total Dray Length of Haul", "Dray RPM" (Rate per mile), "Minimum Dray Cost", "Profit Margins" and "TAX" inputs are columns within the "Master Calculator .xls" worksheet . These inputs require no codes and can be updated by simply changing the appropriate first row value and pressing "enter" . For example, to change the Dray RPM values, the user should change the value in row one

63

only of the "Master Calculator.xls". Upon pressing enter, all values in the Dray RPM column are updated automatically. The "TL" worksheet also contains three more important columns : "Total Shipment Cost", "Mode Choice" and "Length of Haul" . The values from these calculations are used to evaluate the mode choice by the system . They cannot be changed directly but should be used to measure performance . The "TL Graph" worksheet is a graph that shows the results of the model graphically . An example appears as Figure 6-2 .

Total Thick Cast Tdai IM Cast

$3,300.00

Break

Even Analysis

$2800.00 U, rn L $2,300.00

R
p

$1,800.00

o o O o O o O 0 0 O 0 0 0 0 0 0 0 0 C) 0 0 0 0 0 0 0 0 0

o o M

O U)

o (O

00 CO Q)

O 0 0 0 O N M

0 0 (f)

0 (0

0 0 F- CO r

0 O)

0 O N

O N N

0 M N

0 0 V U) N N

0 (0

N N N N

0 0 1-- CO

0 Q)

0 O M

Lmi

h of Had (mles)

Figure 6-2 (Back Haul to Head Haul, Next Dispatch Model, High Customer Volume, with a Standard Service level.) See Also Appendix E . The graph shows a point where the lines intersect (approximately 1375 miles) . This is the break-even point . All lengths of haul to the right of the break-even point should be shipped intermodally, and all lengths of haul to the left of this point should be 64

shipped via truck.

65

Chapter 7 : Conclusion
This study introduces new and more comprehensive profitability analyses than those previously published. Both TL and LTL environments are explicitly considered, and profitability analyses for both truck and intermodal options are provided . Furthermore, the research develops models for two very different equipment relocation scenarios based on sound judgement from the literature . It is anticipated that the models developed support profitable decisions by motor carriers for a wide array of potential load demand situations . Cost is explicitly calculated based on the length of haul, the desired service level, the lane freight volume, the market type and equipment redistribution needs, the drayage requirements, the availability and cost of purchased transportation and equipment rental, and the possible profit margins in a particular lane. The models described herein provide a significant contribution to both the published literature and to the intermodal transportation industry in both TL and LTL settings.

66

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Albrecht, K., (1994), "Northbound Train," New York, NY, Amacon . Annon, (1997), "Intermodal Spearheads the Freightways," Railway Gazette International, v .153, n .6, 393-396 . Arcelus, F . J., and Rowcroft, J. E ., (1993), "Freight Rates for Small Shipments", International Journal of Production Economics, v .30-3 1, pp . 571-577 . Bausch, D . 0., Brown, G. G., and Ronen, D ., (1994), "Dispatching Shipments at Minimal Cost With Multiple Mode Alternatives," Journal of Business Logistics, v. 15, no. 1, pp .287-303 . Beeram, V . R ., (1992), "Mathematical Modeling of Intermodal Transportation Routing Decisions," Master's Thesis, University of Arkansas, Fayetteville, AR . Beeram, V . R ., and Kasilingam, R . G., (1995), " Intermodal Transportation Considering Transfer Costs," Presentation, Global Trends Conference, Academy of Business Administration, Aruba . Benjamin, J., (1990), "An Analysis of Mode Choice For Shippers in a Constrained Network with Applications to a Just in Time Inventory," Transportation Research Part B, v. 24, pp . 229-245 . Berg, J . T ., (1990), " Taxation and Revenues Policies for Future Federal Highway Programs," Federal Highway Administration, Washington D. C . Bingham, T ., (1998), "The effects of Intermittent Drays on Intermodal Profitability," Unpublished Research Experience for Undergraduates Report, University of Arkansas . Boardman, B ., (1997), "Real Time Routing of Shipments Considering Transfer Costs and Shipment Characteristics," Doctoral Dissertation, University of Arkansas Broadstreet, F .V., (1996), "Intermodal Lane Profitability : A Decision Support System," Master's Thesis, University of Arkansas, Fayetteville, AR . Burke, J., (1995), "New Wave in Intermodal : Fighting for Traffic," Traffic World, v . 242, no . 6, pp . 21-22 . Campbell, J . F ., (1990), "Locating Transportation Terminals to Serve an Expanding Demand," Transportation Research, v . 24B, no. 3, pp . 173-192. Chew, S . H ., (1995), "A Methodology for comparative True Cost Assessment of Transportation Modes," Master's Thesis University of Arkansas, Fayetteville, AR .

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Jourquin, B ., and Beuthe, M . A ., (1996), "Transportation Policy Analysis with a Geographic Information System : The Virtual Network of Freight Transportation in Europe," Transportation Research Part C : Emerging Technologies, v. 4, no . 6, pp . 359371 . Jordan, W.C ., and Turnquist, M.A., (1983), "A Stochastic Dynamic Model for Railroad Car Distribution," Transportation Science, v.17, pp . 123-145. Kornhauser, A . L ., (1984), "Examples of Corporate Distribution and Transportation Planning Using the Princeton Transportation Network Model and Graphic Information System," Computer Environment and Urban Systems, v. 9, no . 1, pp . 53-71 . Krake, R ., Siegmann, J ., and Voges, W., (1995), "Automation and the Private Sector Hold the Keys to Efficiency," Railway Gazette International, v.151, n .2, pp . 86-88 . Lee, D . B ., (1981), Recent advances in Highway Cost Allocation Analysis, Transportation Research Board, Washington D . C . Locklin, P . D ., (1996), Economics of Transportation, Richard D . Irwin Inc ., Homewood, IL. MacGregor, M . H ., and Grover, W . D ., (1994), "Optimized k - shortest Paths Algorithm for Facility Restoration," Software Practice and Experience, v. 24, no. 9, pp . 823-824 . Mahoney, J . M ., (1985), "Intermodal Freight Transportation," Transportation Quarterly, v.40, n.1, pp. 85-88 . Malstrom, E . M ., (1981), What Every Engineer Should Know About Manufacturing Cost Estimating, Marcel Dekker Inc ., New York, NY . McGinnis, M . A., (1990), "The Relative Importance of Service in the Freight Transportation Choice : Before and After Deregulation," Transportation Journal, v. 30, no . 1, pp . 12- 19. Mittra, S . S ., (1986), Decision Support Systems Tools and Techniques, John Wiley and Sons, New York, NY . Musgrave, R . A ., and Musgrave, P . B ., (1976), Public Finance in Theory and Practice, 2"d ed ., McGraw- Hill, New York, NY . Nelson, J . C ., (1959), Railroad Transportation and Public Policy, The Brookings Institution, Washington D . C . Nierat, P ., (1997), "Market Area of Rail-Truck Terminals : Pertinence of the Spatial Theory," Transportation Research, Part A ., v .31, n.2, pp . 109-127 . 69

Tilmon, C ., (1997), Personal Interview, J. B . Hunt Logistics Inc . Lowell, AR . Transportation in America, (1992), Eno Transportation Foundation, 10 th edition . US Congress, Senate Committee on Environment and Public Works, (1982), Federal Highway Program Needs : Revenues and Cost Allocation Issues, US Government Printing Office, Washington D . C . US Department of Transportation, (1982), Final Report of the Federal Highway cost Allocation Study, Government Printing Office, Washington D . C . US Department of Transportation, (1990), Federal State and Local Transportation Financial Statistics, 1988 / 1989, Office of Aviation Information Management, Washington D .C . US Department of Transportation, (1992), Highway Statistics 1991, Federal Highway Administration, Washington D . C . Warshall, S ., (1962), "A Theorem on Boolean Matrices," Journal ofACM, no. 9, pp . 1112 . Watson, J., Malstrom, E . M., Landers, T . L ., and Smith, V ., (1998), "Best Practices Logistics Performance Evaluation," University of Arkansas, Fayetteville . Wood, D ., and Johnson, J . C ., (1980), Contemporary Transportation, The Petroleum Publishing Company, Tulsa, OK. Yafeng, D ., and Hall, R., (1997), "Fleet Sizing and Empty Equipment Redistribution for Center-Terminal Transportation Networks," Management Science, v . 43, no . 2, pp . 145157 .

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Appendix A
Service Time Analysis Break-Even

72

Dray (miles) 20 40 60 80 100 120 140 20 40 60 80 100 120 140 20 40 60 80 100 120 140 20 40 60 80 100 120 140 20 40 60 80 100 120 140 20 40 60 80 100 120

Yard time (hrs) 8 8 8 8 8 8 8 10 10 10 10 10 10 10 12 12 12 12 12 12 12 14 14 14 14 14 14 14 16 16 16 16 16 16 16 18 18 18 18 18 18

Number of days on yard + dray (days) 0.7 0.733333333 0.766666667 0.8 0.833333333 0.866666667 0.9 0.866666667 0.9 0.933333333 0.966666667 1 1 .033333333 1 .066666667 1 .033333333 1 .066666667 1 .1 1 .133333333 1 .166666667 1 .2 1 .233333333 1 .2 1 .233333333 1 .266666667 1 .3 1 .333333333 1 .366666667 1 .4 1 .366666667 1 .4 1 .433333333 1 .466666667 1 .5 1 .533333333 1 .566666667 1 .533333333 1 .566666667 1 .6 1 .633333333 1 .666666667 1 .7 73

Train speed (mph) 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45

Break even point (miles) 651 .7241379 682.7586207 713.7931034 744.8275862 775 .862069 806.8965517 837.9310345 806.8965517 837.9310345 868.9655172 900 931 .0344828 962.0689655 993.1034483 962.0689655 993.1034483 1024 .137931 1055 .172414 1086 .206897 1117 .241379 1148 .275862 1117 .241379 1148 .275862 1179 .310345 1210 .344828 1241 .37931 1272 .413793 1303 .448276 1272 .413793 1303 .448276 1334 .482759 1365 .517241 1396 .551724 1427 .586207 1458 .62069 1427 .586207 1458 .62069 1489 .655172 1520 .689655 1551 .724138 1582 .758621

Dray (miles) 140 20 40 60 80 100 120 140 20 40 60 80 100 120 140 20 40 60 80 100 120 140

Yard time (hrs) 18 20 20 20 20 20 20 20 22 22 22 22 22 22 22 24 24 24 24 24 24 24

Number of days on yard + dray (days) 1 .733333333 1 .7 1 .733333333 1 .766666667 1 .8 1 .833333333 1 .866666667 1 .9 1 .866666667 1 .9 1 .933333333 1 .966666667 2 2 .033333333 2 .066666667 2 .033333333 2.066666667 2.1 2 .133333333 2.166666667 2 .2 2.233333333

Train speed (mph) 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45

Break even point (miles) 1613 .793103 1582 .758621 1613 .793103 1644 .827586 1675 .862069 1706 .896552 1737 .931034 1768 .965517 1737 .931034 1768 .965517 1800 1831 .034483 1862 .068966 1893 .103448 1924 .137931 1893 .103448 1924 .137931 1955 .172414 1986 .206897 2017 .241379 2048 .275862 2079 .310345

74

Appendix B
Railyard Locations in the Greater Chicago Area

75

INTERMODAL

FACILITIES

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76

Customer Volume Rating

Loop Cost Adjustment CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR

Service Level Cost Adjustment H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S 78

Lane Type BB BB BB BB BB BB BH BH BH BH BH BH BI BI BI BI BI BI HB HB HB HB HB HB HH HH HH HH HH H H HI HI HI HI HI HI 113 IB 113 IB 113 IB

Break Even Point 525 925 1025 575 975 1025 675 1375 1375 725 1375 1375 625 1125 1175 625 1125 1175 325 575 575 325 575 625 425 875 875 425 875 875 325 675 725 375 675 725 375 625 675 375 675 675

Appendix C
Comprehensive Results

77

Customer Volume Rating 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Loop Cost Adjustment CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR

Service Level Cost Adjustment H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S 79

Lane Type IH IH 11-1 IH IH IH II II II II II II LBB LBB LBB LBB LBB LBB LBH LBH LBH LBH LBH LBH LBI LBI LBI LBI LBI LBI LHB LHB LHB LHB LHB LHB LHH LHH LHH LHH LHH LHH

Break Even Point 525 1025 1025 525 1025 1025 425 775 825 425 825 825 NA 475 475 0 475 525 375 725 725 375 725 725 375 575 575 325 575 575 0 0 0 0 0 0 0 425 425 0 425 425

Customer Volume Rating 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

Loop Cost Adjustment CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR

Service Level Cost Adjustment H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S 80

Lane Type LHI LHI LHI LHI LHI LHI LIB LIB LIB LIB LIB LIB LIH LIH LIH LIH LIH LIH LII LII LII LII LII LII BB BB BB BB BB BB BH BH BH BH BH BH BI BI BI BI BI BI

Break Even Point 0 325 325 0 325 325 0 0 325 0 325 325 0 475 475 0 525 525 0 375 375 0 375 375 525 875 975 525 925 975 675 1275 1325 675 1325 1325 575 1075 1125 575 1075 1125

Customer Volume Rating 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

Loop Cost Adjustment CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR

Service Level Cost Adjustment H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S 81

Lane Type HB HB HB HB HB HB HH HH HH HH HH HH HI HI HI HI HI HI IB IB IB IB IB IB IH IH IH IH IH IH II II II II II II LBB LBB LBB LBB LBB LBB

Break Even Point 325 525 575 325 525 575 425 825 825 425 825 825 375 625 675 375 675 675 375 625 675 375 625 675 475 975 975 475 975 975 425 775 775 425 775 825 0 425 475 0 425 475

Customer Volume Rating 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

Loop Cost Adjustment CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR

Service Level Cost Adjustment H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S 82

Lane Type LBH LBH LBH LBH LBH LBH LBI LBI LBI LBI LBI LBI LHB LHB LHB LHB LHB LHB LHH LHH LHH LHH LHH LHH LHI LHI LHI LHI LHI LHI LIB LIB LIB LIB LIB LIB LIH LIH LIH LIH LIH LIH

Break Even Point 325 675 675 325 675 675 0 525 575 0 525 575 0 0 0 0 0 0 0 375 375 0 375 375 0 0 325 0 325 325 0 0 325 0 0 325 0 475 475 0 475 475

Customer Volume Rating 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

Loop Cost Adjustment CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR

Service Level Cost Adjustment H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S 83

Lane Type LII LII LII LII LII LII BB BB BB BB BB BB BH BH BH BH BH BH BI BI BI BI BI BI HB HB HB HB HB HB HH HH HH HH HH HH HI HI HI HI HI HI

Break Even Point 0 375 375 0 375 375 475 875 925 525 875 925 625 1225 1225 625 1275 1275 525 1025 1075 575 1025 1075 0 525 525 0 525 575 375 775 775 375 775 775 325 625 625 325 625 675

Customer Volume Rating 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

Loop Cost Adjustment CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR

Service Level Cost Adjustment H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S 84

Lane Type IB IB IB IB IB IB IH IH IH IH IH IH II II II II II II LBB LBB LBB LBB LBB LBB LBH LBH LBH LBH LBH LBH LBI LBI LBI LBI LBI LBI LHB LHB LHB LHB LHB LHB

Break Even Point 325 575 625 325 575 625 475 925 925 475 925 925 375 725 725 375 725 775 0 425 425 0 425 475 325 625 625 325 625 625 0 525 525 0 525 525 0 0 0 0 0 0

Customer Volume Rating 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

Loop Cost Adjustment CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR CL NDB NDBR CL NDB NDBR CL NDH NDHR CL NDH NDHR CL NDI NDIR CL NDI NDIR

Service Level Cost Adjustment H H H S S S H H H S S S H H H S S S H H H S S S H H H S S S

Lane Type LHH LHH LHH LHH LHH LHH LHI LHI LHI LHI LHI LHI LIB LIB LIB LIB LIB LIB LIH LIH LIH LIH LIH LIH LII LII LII LII LII LII

Break Even Point 0 375 375 0 375 375 0 0 0 0 0 325 0 0 0 0 0 0 0 425 425 0 475 475 0 325 375 0 325 375

85

Appendix D
Graphs of the Results

86

Origin type : Back Haul

Back Haul to Back Haul Volume Rating High (1)

1500 1300 1100 900 700 500 300
U) U) U) Cn

t-Break Even Point

th

m 0 z

m 0 Z

m m 0 0 Z Z Scenario

J 0

J 0

Back Haul to Back Haul Volume Rating Medium (2)

1500 1300 1100
a ~' 2 900

700 500 300

Z

v)
m
Z

--.-Break Even m Point Z

v) m 0

2
m 0

2 U

v)
-~ U

Scenario

87

Back Haul to Back Haul Volume Rating Low (3)

1500 1300 1100
N

'

900 700 500 300

N
_Break Even Point p z p Z z

v)

J
z U

J
V

Scenario

Back Haul to Head Haul Volume Rating High (1)

1500

1300

1100
H d

900

2 700

500

300 Break Even Point

x
L

x
G

at

vt

x
v

z x 13 ScenarioZ

88

Back Haul to Head Haul Volume Rating Medium (2)

1500

1300 -

1100
U)

' 2

900

700

500

300

x
_Break Even Point Y ;
z

0?

vj

x
x z Scenario

z
J

vt
J

x z

p
Z

Back Haul to Head Haul Volume Rating Low (3)

1500

1300

1100
to m 2

900

700

500

300 T _Break Even Point x

x
t)

vt v

o Z

o
Scenar-fo

89

Back Haul to Intermediate Volume Rating High (1)

1500

1300

1100
H

i 2

900

700

500

300

x
_Break Even Point Y z 0 z

x
D z

ut O z

J V

J V

Scenario

Back Haul to Intermediate Volume Rating Medium (2)

1500

1300

1100 m 2
U)

900

700

500

300 Break Even Point

3
z

c z

z
Scenario

J v

90

Back Haul to Intermediate Volume Rating Low (3)

1500

1300

1100
OA

' 2

900

700

500

300

x
Break Even Point Y z

s
G z

v?
O z

v?
J

s 1

Scenario

LTL Back Haul to Back Haul Volume Rating High (1)

1500

1300

1100
N d

900

2
700 -

500

300
v?
d'

x
d'

v?

Break Even Point

m
z

c z

p z

m z Scenario

v?
J

J v

c,,

91

LTL Back Haul to Back Haul Volume Rating Medium (2)

1500 -

1300

1100

U) d

900

700

500

300 x m _Break Even P oint

0 z

c z

z Scenario

LTL Back Haul to Back Haul Volume Rating Low (3)

1500

1300

1100
U)

v i

900

700

500

300 _Break Even Point

m
0

c
z

m
0

o
z

'? V

Scenario

92

LTL Back Haul to Head Haul Volume Rating High (1)

1500

1300

1100 a d 9 700

900

500

300 x Break Even Point

2 O z 2 0 z z

x
O

x
J V

J V

Scenario z

LTL Back Haul to Head Haul Volume Rating Medium (2)

1500

1300

1100

2 700 -

500

300
vj of

Break Even Point

i 0
z

z Scenario

x o

ut

z c
z

93

LTL Back Haul to Head Haul Volume Rating Low (3)

1500

1300

1100
h d

900

9 700

500

300 _Break Even z Point x

0 z

x
x

z
S

x Q' c
ce n a2io

x
J J

LTL Back Haul to Intermediate Volume Rating High (1)

1500

1300

1100 U) ar 2

900

700

500

300
3F 9

_Break Even Point

c
z

G
23cenario

3F J v

94

LTL Back Haul to Intermediate Volume Rating Medium (2)

1500

1300

1100 m 0

900 -

700

500

300 x _Break Even Point

D z z

=
G

67
z

x J
V

vt
J v

S c9n a rio

LTL Back Haul to Intermediate Volume Rating Low (3)

1500

1300

1100

N

900

700 -

500

300 x __Break Even c Point z

of

c z

x z

'2

z
Scenario

95

Origin Market Type : Head Haul

Head Haul to Back Haul Volume Rating High (1)

1500

1300

1100

900

2 700

500

300

x
_Break Even P oint
m 0 z

x
m

0 0 z z Scenario

vj m

s
J V J
V

Head Haul to Back Haul Volume Rating Medium (2)

1500

1300

1100
a

900

700

500

300
x '2 x 0

of
0

x 0

v2

_Break Even Point

m
(3

z Scenario z

96

Head Haul to Back Haul Volume Rating Low (3)

1500 -

1300

1100
H d

900

9 700

500

300 s

Y
Break Even Point z

U? z

3F D Z

C z

s J
U

J C)

Scenario

Head Haul to Head Haul Volume Rating High (1)

1500

1300

1100
U)

m 9

900

700

500

300 s Break Even z Point

s
p z

v?

vt

x
t)

v2

z Scenarioz

t)

97

Head Haul to Head Haul Volume Rating Medium (2)

1500

1300

1100
U)

900

9
700

500

300

x
Break Even Point 7 z

x
0 z x 0 z Scenario Z

Head Haul to Head Haul Volume Rating Low (3)

1500 -

1300

1100 w m 2

900

700

500

300

3F t Break Even _ z Point

= 0
z

0 z

x 0

Scenario z

98

Head Haul to Intermediate Volume Rating High (1)

1500

1300

1100
W

m 2

900

700

500

300

x
Break Even Point Y z
0 z

x a
z

t9

v1
J

x
J t)

a
z

Scenario

Head Haul to Intermediate Volume Rating Medium (2)

1500

1300

1100 U) m

900

700

500

300

x
_Break Even Point

'9

of

o z

p
z

x z
Scenario

x v

uj

99

Head Haul to Intermediate Volume Rating Low (3)

1500

1300

1100
U) d

900

i 700

500

300

x
Break Even Point
0 z D z

x
o z

ut z Scenario

v? J V

LTL Head Haul to Back Haul Volume Rating High (1)

1500

1300

1100
N d

900

5 700

500

300 _Break Even Point

'2

'2

67

c z

o z

z
Scenario

1 00

LTL Head Haul to Back Haul Volume Rating Medium (2)

1500

1300

1100
N

' i

900

700

500

300 m
O z

x m
D z

x m O z Scenario m D z

x
J V J U

_Break Even Point

LTL Head Haul to Back Haul Volume Rating Low (3)

1500

1300

1100
U)

900

700

500

300 x _Break Even Point

x
m D z

vj

1,

x J

0
Scena=rio

J V

1 01

LTL Head Haul to Head Haul Volume Rating High (1)

1500 1300 1100

700 500 300

x
2 z 2 0 z 2 G z

J C)

_Break Even P oint

LTL Head Haul to Head Haul Volume Rating Medium (2)

1500 1300 1100
H as

900 700 500 300 x x

G z S G z

x
c z Scenario
2 2 G z J C)

_Break Even Point

1 02

LTL Head Haul to Head Haul Volume Rating Low (3)

1500

1300 1100 U) m 900 700

500 300

x
S 0 z 2 0 z

2 2 0 z 2 0 z

x
J V

J 0

_Break Even Point

Scenario

LT L Head Haul to Intermediate Volume Rating High (1)

1500 1300 1100 N m i 900 700 500 300 ~_B re ak Even P o in t 2 0 z

x
2 0 z 0 z Scenario 0 z

2 J 0

J 0

1 03

LT L Head Haul to Intermediate Volume Rating Medium (2)

1500

1300

1100
W d

900

2 700

500 .0 300 0 .0 x G z x J V

x
D z D z O z Scenario

B re ak Even Point

LT L Head Haul to Intermediate Volume Rating Low (3)

1500

1300

1100
H d

900

i 700

500

300 G z _Break Even P oin t

x
0 z

x O z

4k 67 0 z

x J V

S ce n a rio

1 04

Origin Market Type : Intermediate

Intermediate to Back Haul Volume Rating High (1)

1500 -

1300

1100 in m 2

900

700

500

300 Break Even Point

x
Y n z O z M c z

G z Scenario

J C)

J V

Intermediate to Back Haul Volume Rating M edium (2)

1500

1300

1100

d 2

900

700

500

300
x r?

ut

v2

-Break Even P oint

m
z

m o
z

z Scenario

C)

1 05

Intermediate to Back Haul Volume Rating Low (3)

1500

1300

1100
h d

900

700

500

300 x t Break Even Point m z

tY

x
m m
0 z

of m

x
J

zz Scenario

J C)

Interm ediate to Head Haul Volume Rating High (1)

1500

1300

1100

m s

900

700

500

300 x ~_B reak Even Point

x

vj
0 z

vt

of

xx C3 z

o S ce n~rio

) C

1 06

Intermediate to Head Haul Volume Rating Medium (2)

1500 1300 1100 m 9

H

900 700 500 300

x x

x
2 G z

_Break Even P oint

G Z

x z G Scenario z

J V

J V

Intermediate to Head H a u l Volume Rating Low (3)

1 07

Intermediate to Intermediate Volume Rating High (1)

1500

1300

1100

on d 2

900

700

500

300 x _} Break Even Point z

'2

'2

'2

o
z

z
Scenario

Intermediate to Intermediate Volume Rating Medium (2)

1500

1300

1100

900

2 700

500

300 vj _} Break Even Point o z

x
zz

'2

vj

0
Scenario

zz

1 08

Intermediate to Intermediate Volume Rating Low (3)

1500 -

1300

1100
U) d

900

700

500

300 x Break Even Point

0 z 0 z
a o

o
z

J
v

J
v

Scenario

LTL Intermediate to Back Haul Volume Rating High (1)

1500

1300

1100
H d

900

2 700

500

300 __Break Even Point

T m x

0 z

a m

x
m m

x
J V J V

O z

D z

Scenario

1 09

LTL Intermediate to Back Haul Volume Rating Medium (2)

1500

1300

1100
tN N

900 700

500 300 x
m m Vj

x
z Scenario
o

t~

uT

Break Even Point

0 z

o z

LTL Intermediate to Back Haul Volume Rating Low (3)

1500 1300

1100 m 2
H

900

700 500

300

x
Break Even Point
M m D z

x
m

x
m O

J U

J U

Scenaxio

1 10

LTL Intermediate to Head Haul Volume Rating High (1)

1500

1300

1100 w 2

900

700

500

300

x
Break Even Point
2 D z

x
S z 2 D z

o!

S D

S ce n Frio

LTL Intermediate to Head Haul Volume Rating Medium (2)

1500

1300

1100

900

5
700

500

300

%\O

x
2

x
S 2 G z

_Break Even Point

c z

w x
C

J C)

Scenario z

111

LTL Intermediate to Head Haul Volume Rating Low (3)

1500 -

1300

1100

H d

900

E 700

500

300 _Break Even z Point fY x

0 z

x
z

x
J t)

x o
S ce n azrio

LTL Intermediate to Intermediate Volume Rating High (1)

1500

1300

1100

900

700

500

300

x
_Break Even Point fY z
0 z 0 z

x
0 z J t)

Scenario

1 12

L T L Intermediate to Intermediate Volume Rating Medium (2)

1500

1300

1100

900

700

500

300
x

__Break Even Point

O z

C z

x Le

c S can a rio

G z

x J V

J V

L T L Intermediate to Intermediate Volume Rating Low (3)

1500

1300 1100
U)

'

900 700

500 300

.0

40

x _Break Even z Point

0? z

'9 G z Scenario

J 0

J V

1 13

Appendix E
The Model

1 14

Sit

F I
A

Q Q Q Q 0 Q o Q Q Q o Q Q Q 0 Q Q Q o Q 0 Q Q Q Q Q o 0 Q Q Q Q Q O Q 0 0 o p Q 0 0 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
00000000000000(00(00(0000000000000(000000000

M M M M M M Q Q O Q Q O O Q 0 0 0 0 0N 0 ,O O Q O O O O O O O O Q O O O Q O OM O O OM OMQ M OM Q M O O Q

4 3 3 4 4 4 3 4 3 3 4 3 4 fill

N N M

N N N N N N

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1 16

Break Even Analysis

-Total Truck Cost -Total IM Cost $3,800 .00

$3,300 .00

$2,800.00

$2,300.00

$1,800 .00

$1,300.00

$800.00

$300 .00
,~c4 a cp ~A

Alp 0 cp
Length of Haul (miles)