CSX Railway Uses Analytics to Cash in on Optimized Equipment Distribution
The Problem
CSX Railway allocates thousands of empty railway cars to customers each day. The challenge of car allocation is quite difficult because of the volume of information involved and the number of car allocations to be made. In the past, CSX used a sequential, heuristic “single-car” expert system that helped to automate decisions, but led to car assignments with high empty miles and low service. Weekly optimization helped provide a “network view,” but static solutions quickly became outdated as situations changed and decisions surrounding previously allocated cars could not be revisited. As a result, opportunities for improved car distribution were lost.
The Analytics Solution
In 1997, CSX Railroad implemented the U.S. rail industry’s first real-time, deeply integrated dynamic car planner (DCP) equipment distribution system. The DCP is continuously updated with new customer orders and available cars, allowing automated revisions of previous decisions as the new information becomes available. Real-time information is necessary because the conditions on CSX are constantly changing. Deep systems integration is essential to automating the communication of updated decisions to the field. Real-time information and deep integration allow the global perspective of O.R. modeling to be seamlessly integrated into the decision-making sequence and field communication process for the disposition of each individual car and customer order.
The Value
CSX has benefited in many ways. First and foremost, customer satisfaction survey responses for the car order process have steadily increased and are now at all-time highs. Furthermore, CSX estimates that it saves over $50 million per year from the DCP system from reduced fuel, crew, and car depreciation costs as a result of lower empty repositioning miles. CSX has also reduced the manpower required to manage railway car distribution, saving an additional $1 million per year. Over the last 11 years, CSX has saved over $561 million and anticipates saving more in the future. Additionally, the car fleet required to support CSX’s business is smaller because it is allocated more efficiently, allowing CSX to avoid $1.4 billion in capital expenditure on additional railway cars over that time. The smaller asset base allows for improved return on assets and reduced congestion on the CSX rail network.
Considering both expense reduction and capital avoidance, CSX has saved approximately $2 billion with the DCP. The entire North American rail industry has benefited from CSX’s DCP. Canadian Pacific Railway purchased the DCP in 2002, and other railroads have built similar systems, benchmarking CSX’s success. Beyond corporate benefits, there are social benefits as well from rail growth and efficiency. The DCP allows for increased rail service, reducing the number of trucks on the road. Fewer trucks mean safer, less-congested highways and lower tax-supported highway investment. Rail is a greener mode of transportation than truck, requiring less fuel and producing less pollutants and greenhouse gases. The DCP keeps approximately 380,000 truckload shipments off the roads each year. The resulting benefit to the U.S. public is approximately $600 million since the DCP was implemented.
