Shipper sensitivity to unreliable service in carload markets

The debate over the value of dynamic car scheduling is critical to the future of the industry. The value to shippers of shortened transit times and increased reliability is central to any discussion on improving railroad service. A recent study has found that improving railroad service provides little value to railroad shippers. That study is repeated here with more realistic assumptions. The results obtained here yield a different conclusion. While some railroad shippers are economically unaffected by poor railroad service, other shippers can experience dramatic increases in total logistics costs as a result of poor railroad service. This is especially true for shipments moved in private freight cars and for shipments having a modest value per ton. It is also important to note that shipments most affected by poor railroad service are also the shipments commanding the highest rates. Assuming that the highest rated shipments also contribute the most profit, poor service may result in loss of the traffic that railroads can least afford to lose.