An Optimization Approach to the Low-Frequency Entire Train Formation with Price Discount

Abstract

Historically, railroads and shippers have reached a consensus that the introduction of entire train service for bulk commodities can significantly save the costs of operating railcars and improve operating efficiency. This article provides a new idea for flexible pricing and increasing the proportion of entire trains while improving the long-standing problem of insufficient consideration of customer satisfaction for Chinese railway freight transportation, which may contribute to the increase in railway freight market share. In this paper, we suggest a way of providing lower prices (compared to single cars) for entire trains to induce customers to choose the entire train service to improve rail operating efficiency and save cost, which is not been implemented in China. In this case, the cost structure in the rail freight transportation process and the inventory cost of shippers are analyzed. Then, a mixed-integer programming model that maximize the profit of the logistic system composed of the railway company, the suppliers and the customers is developed to find out the optimal discount and entire train operating scheme. Finally, a small computational experiment is used to test the model. The results show that the application of entire train discounts and reasonable arrangements for entire train operation schemes can effectively improve the entire train proportion and system profit.