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Estimation of Modal Diversion and Economic Benefits due to Rail Service

Improvements in South Carolina

by

Omor Sharif

ECIV 790U INTERMODAL FREIGHT TRANSPORTProject Presentation

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Introduction

• Transportation policy/infrastructure changes in South Carolina

• How much ‘Modal Diversion’ will occur?• How much ‘Economic Benefits’ of the changes?• The ITIC Model -Intermodal Transportation and

Inventory Cost Model

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The ITIC Model

A spreadsheet based computer modelVersion 1.0 of the model was published in 2005

by US Department of Transportation and Federal Railroad Administration

Highway to Rail Intermodal VersionFollows a logistics managers perspective who

choose a mode and shipment sizeTransportation alternatives is chosen based on

minimum total logistics costs

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• Estimate the diversion of highway freight traffic to rail intermodal service

• Estimate the economic benefits of changes• Understand the underlying methodology• Application of TRANSEARCH Data

Objective

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Contribution

• Selecting suitable data sources for the model

• Development of Inputs for the model such as Freight Rates, Rail Miles, Dray Miles, Junction Frequency

• Understanding the modal diversion impact of rail service improvement

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Prior Research

• The model itself refers to many sources regarding previous research

• Case studies: using the model by various organizations at federal/state/local governments

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Methodology - Cost

Variables Affecting Choice of Supplier, Shipment Size and Mode in Freight Transportation

Receiver Minimizes Total Costs / Unitwhich consists of:

Logistics Cost per Unitorder cost

load/unload costcapital carry in transitcapital carry in storage

storage costshelfloss in transitfiling L&D claims

capital carry on L&Dsafety stock carrying costemergency shipment cost

Total Logistics Costs per UnitTransport Charges

Trans & Logistics Cost per UnitPurchase Cost

Total Costs per Unit

Type of Receiver: Producer Wholesaler Retailer Government

Individual consumer

Affects buying decisions: 1) Buy from original producer 2) Buy from wholesaler who performs consolidation, deconsolidation and inventory functions 3) Buy from retailer who buys from wholesaler

Type of product: Product annual use Value/lb. of product

Shelf life of product

Storage requirements

Affects size of shipment and ability of receiver to hold product in inventory

Commodity Attributes: Density of product Cube capacity of vehicle Weight capacity of vehicle

Affects loading of shipment by mode and possible need for consolidation of shipment with others

Transport level of service attributes: Transit time of mode Reliability of mode Waiting time for equipment

Affects cost of capital tied up in transit, safety stock holding cost and ability of mode to

serve as emergency

Choice of shipment size affects: Cost of ordering

Cost of loading and unloading Cost of pickup and delivery

Choice of Supplier

Choice of Mode

Choice of Shipment Size

Choice of mode affects: Cost of line haul transport

Choice of supplier affects: Length of haul Carriers available Purchase price of product

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Methodology- Data

1. Serial Number2. Commodity Description3. Commodity Code—Standard Transportation Commodity Code*4. Pounds per Year*5. Pounds per Shipment*6. Value of Commodity—Dollars per pound*7. Origination State8. Destination State9. Origin FIPS10. Destination FIPS11. Observed Mode (Truck)*12. Truck rate per mile for 3S2*13. Truck highway miles*14. Truckload per shipment*15. Number of Trailer on Flat Car (TOFC)/Number of Container on Flat Car (COFC) (0)*16. Rail Junction Frequency (0)*17. Observed Rail revenue per hundred weight (cwt) (1)*18. Rail variable cost per cwt*19. Rail miles*20. TOFC pickup miles*21. TOFC delivery miles*

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Transportation CostFormulas in TSW worksheet:

1.Lb/day = (lb/year) / 365

2.Days between orders = final lbs in the shipment / (lb/day)

3.Transit time (Rail) = Rail Miles / Rail Speed + Dray Miles / Dray Speed + Dwell time at origin and destination terminals (0.5 days at each) + Interchange delays (1.5 days – if there is an interchange) [Both rail and dray speed is based on 24 hours]

4.Transit time (Truck) = Truck Miles / Truck Speed [truck speed is based on 10 hours a day]

5.Expected L&D claim per shipment = L&D as percent of gross freight revenue X transport charges per shipment

6.Transport charges per shipment (Rail) = (Load/unload hours X Hourly wage) + final lb in shipment X rail rev per cwt / 100

7.Transport charges per shipment (Truck) = Handling cost per shipment + Linehaul cost per shipment = (Load/unload hours X Hourly wage) + (Linehaul miles X Linehaul cost per mile + Linehaul miles X Additional fee per mile + One time additional fee)

8.Number of shipments/yr = final lbs in shipment X lb/year

9.transport charges/yr = transport charges per ship X Number of shipments/yr

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Non Transportation Logistics Cost

Formulas in TSW worksheet:

1.Order cost = (Order cost per shipment + Dunnage) X Number of shipments/yr [for ‘truck’ dunnage is 0]

2.In-transit stock carrying cost = Lb/day X Dollars/lb X Transit time X Interest

3.cycle stock carrying cost = Dollars/lb X inventory carrying cost factor X final lbs in shipment / 2

4.Loss & damage claims = Expected L&D claim per shipment X Number of shipments/yr

5.Capital cost on claims = claim payment days X loss & damage claims X Interest

6.Safety stock carrying cost = safety stock (lb) X Dollars/lb X inventory carrying cost factor

7.Total Non-Transportation Logistics Costs = Order cost + In-transit stock carrying cost + cycle stock carrying cost + Loss & damage claims + Capital cost on claims + safety stock carrying cost

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A sample analysis

• Transearch 2008 as Preliminary Data Source• Origin- South Carolina• Destination- Florida and Virginia• Total Records- 27000+• STCC Commodity codes are kept at 4 digit level

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An Analysis of the Operational Costs of Trucking:2012 Update By ATRI

(http://www.glostone.com/wp-content/uploads/2012/09/ATRI-Operational-Costs-of-Trucking-2012.pdf)

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Forecast of 2023 Freight Rate

• Inadequate Historical data• Longer forecast horizon makes forecasting

difficult• Extrapolation techniques have higher success in

short time horizon• Regression, Time Series Analysis??• A value of $2.10 was assumed in the sample

analysis for now!

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Rail Miles• SC 2008 Transearch does not provide county outside SC, only BEA• Possible Alternative: County-to-County Distance Matrix at CTAhttp://cta.ornl.gov/transnet/SkimTree.htm and use regressionMatrix of distances and network impedances between each pair of county centroids via highway, railroad, water, and combined highway-rail pathsRegression between Intermodal Rail and Highway Miles based on 125 samples

0 500 1000 1500 2000 2500 3000 3500 40000

500

1000

1500

2000

2500

3000

3500

4000

f(x) = 1.04308599789475 x + 67.4614019211329R² = 0.976919633181141

Rail Miles Vs Highway Miles

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Dray Miles• For combined highway-rail CTA provides Highway and Rail miles here for

each pair of county http://cta.ornl.gov/transnet/SkimTree.htm• Take Dray miles as a percentage of Rail Miles and use data fitting• Best Fit Distribution is ‘Gamma’ out of seven tested using ‘fitdistrplus’

package in R (Anderson-Darling statistic: 0.3201 ) based on 125 samplesFitting of the distribution ' gamma ' by maximum likelihood Parameters : estimate Std. Errorshape 1.3586393 0.15588283rate 0.1922481 0.02656798

• Use GAMMA.INV(RAND(),1.359,1/0.192) * Rail Miles / 100 in EXCEL.

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Preparing Input File for analysis (truck itic input.xls)

- Discard Transearch records when ‘shipment weight’ is zero

- Discard Transearch records when ‘truck miles’ is zero- Format ‘STCC’ codes as ‘Text’ in Excel, not as

‘Numbers’- Add zero before one digit STCC code (01, 08, 09

instead of 1, 8, 9)- Put ‘unknown’ in ‘rail VC per cwt’ column and ‘1’ in ‘obs

rail rev per cwt’- Junction Frequency = 1 if Truck Miles > 1000,

otherwise 0.

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A sample analysis

By Year 2023 Rail is offering the following service improvements- • Increase rail speed by 8 mph (30 mph to 38 mph,

Truck = 50 mph)• Improve reliability from 0.45 to 0.42 (Truck = 0.40)• Reduce Loss & Damage Claims 20% to 10% (Truck =

7%)

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Results

TRUCK-TO-RAIL INTERMODAL OUTPUT SUMMARY STATISTICS

Base Policy Case Results

Case Truck Diversion

Truck Moves to Rail

Number of Records 17,733 17,733 0

Number of Shipments 314,473 314,473 0

Tons Shipped 6,004,312 6,004,312 0

Truck VMT 148,171,808 148,171,808 0

Intermodal Dray VMT 0 0 0

Rail Ton-Miles 0 0 0

Logistics Costs($) 451616829 451616829 0

About 17000 records were selected for policy analysis after base case run of about 22000 records. Not many Mis-assigned, mostly excluded because they failed cost < revenue criteria.

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Exclude when ‘Variable Cost > Revenue’

$ / 100 lb comparison

Not considered if ‘Variable Cost > Revenue’• Rail Revenue = 0.95 X Cost per mile of 3S2 X 3S2

Miles X 100 / Shipment weight in lb• Rail Variable Cost = Dray Pickup charge /

Shipment weight in lb X 100 + ((Variable Cost per mile X Rail Miles + Total Lift charges at Origin and Destination) / Shipment weight in lb X 100) / 0.909

• So, short transport distances have higher chances of being excluded.

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Serial number 20036Description In bulk in boxcarsSTCC 50lbs/yr 48689540lbs/shpmt 41116.49784$/lb 0.563500086Ostate 45Dstate 12Ofips 45083Dfips 31Obs mode truckCost/mile 3S2 2.13S2 miles 714.23S2 load 41116.49784num TOFC/COFC 1Junction Frequency 0obs rail rev per cwt 1rail VC per cwt unknownrail miles 749.91tofc pu 18.74775tofc dlvr 18.74775

Input

Serial Number 20036STCC 50Ostate 45Dstate 12pounds/yr 48689540rail miles 749.913-S2 miles 714.2chosen mode 2line haul miles per shipment final 714.2annual pickup cost 0annual delivery cost 0 rail ton-miles 0translog per cwt chosen mode final 3.830437transport cost per cwt chosen mode final 3.672054payload final 41116.5number of shipments 1185Intermodal Dray VMT 03S2 translog cost per cwt 3.8304373S2 transport cost per cwt 3.6720543S2 annual VMT 8463273S2 number of shipments 1185annual rail transport cost 1700272annual rail non transport cost 147410.1origin fips 45083destination fips 31Calculated Rail Rate/cwt 3.465346New Rail Revenue 0annual truck transport cost 1789137annual truck non transport cost 77115.82total annual rail logistics cost 1847682total annual 3S2 truck logistics cost 1866253flag for rail rate less than costs SAVINGS 18570.09

OUTPUT

Spartanburg, SC to Fort Myers, FL

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Thank You!