Managing heterogeneous traffic on rail freight networks incorporating the logistics needs of market segments

Recent studies have shown that the freight market can be divided into a number of market segments that have different preferences on elements of service quality and willingness to pay for additional service improvement. These studies suggest that a railroad must target markets in which to compete and must properly position its services to be competitive and profitable in those markets. The ability of a railroad to differentiate its services can provide a strategic advantage in the competitive transportation environment. The research in this thesis aimed to develop both empirical and theoretical insights on how service differentiation strategy helps a railroad in gaining market share and in improving service quality and profitability. Three areas were studied. First, the research examined whether and how railroads are currently differentiating services among different groups of traffic. The empirical analysis on trip time and reliability for different groups of traffic showed that railroads are currently differentiating services for major classes of traffic. Second, the research developed insights into the effects of service differentiation on the service provided to segmented markets and the costs to railroad of providing such differentiated services. Two simulation analyses showed that service differentiation strategies enable a railroad to provide market-sensitive services, to utilize service capacity more efficiently, and to potentially enhance profit. Third, the research examined how to further improve the ability of a railroad to differentiate services by designing an operating plan that fully considers the heterogeneity of shippers and their traffic. A dynamic freight car routing and scheduling model was developed as a practical decision support tool for managing heterogeneous traffic on rail freight networks. The results of the case study showed that the dynamic car routing and scheduling model can effectively allows a railroad to plan clearly differentiated services for heterogeneous shippers and their traffic, and thereby improves the ability of a railroad to differentiate services. Thesis supervisor: Dr. Joseph M. Sussman Title: JR East Professor Professor of Civil and Environmental Engineering