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Simple Railcar Fleet Sizing

Sometimes something can be so complex, it never gets  used.

There are more complex and more accurate ways to size your railcar fleet, but here is a simple way that even the most modest thinker (me) can understand. Before you use this, be sure to test it in a small situation to be sure that it works for your particular situation.

  1. Determine the OD (origin/destination) Pairs (load and empty return) that are used by this fleet.
  2. Get the average Transit Days and average Layover Days (days to load or unload) for each OD Pair. Use a historical period that is long enough so that you have at least 30 shipments for each OD Pair. Of course, if you don’t have that much volume, work with what you have – it is better than nothing right?.  Be sure that the average transit days and layover days do not contain measurements of railcar cycles that had special, extreme delays (i.e. Bad Orders, Hold, derailment, etc.). If this is a new route, you will have to estimate. You can call a few railroads and ask them what kind of transit time they can offer for the route to help your estimation. Warning: shameless plug – getting these averages would be very easy if you were using a rail shipment tracking system like this one.
  3. Record the average Transit Days + Layover Days for each load and empty OD Pair used by the fleet.
  4. Determine your forecasted average daily loads required for the busiest three month period for each particular load OD Pair. This is calculated by dividing the number of loads forecasted out of an origin to a particular destination for the three month period and dividing it by 90.
  5. Then for each load OD Pair, take the forecasted loads and multiply it by the average Transit Days + Layover Days for that OD Pair, this will give you loaded railcar days.
  6. For each empty OD Pair, take the forecasted loads and multiply it by the average Transit Days + Layover Days, this will give you empty railcar days.
  7. Add the loaded railcar days to the empty railcar days and this will give you an estimate of the fleet size required for this pool.

For example, a pool called the Decatur pool is comprised of tank cars that are shipped out of Decatur, IL (the plant location) to Buffalo, NY (Customer A) and to Old Fort, OH (Customer B).

Decatur to Buffalo (load) transit days + layover days = 6

Decatur to Old Fort (load) transit days + layover days = 5

Buffalo to Decatur (empty return) transit days + layover days = 8

Old Fort to Decatur (empty return) transit days + layover days = 7

Forecasted daily loads out of Decatur to Buffalo = 15 and Decatur to Old Fort = 10

Railcar days for loads = 15*6 + 10*5 = 90 + 50 = 140

Railcar days for empties = 15*8 + 10*7 = 120 + 70 = 190

Total railcar days = 330

Fleet estimate = 330 railcars

 

TIP: You may wish to divide the forecasted loads for the prior year and compare that with the actual number of loads that were shipped and assign that factor to your fleet size calculation.

The formula in this post is from an article entitled “Determining Rail Fleet Sizes for Shipping Automobiles” by Hanif D. Sherali and Lawrence W. Maguire. Interfaces, Vol. 30, No. 6 (Nov. – Dec., 2000), pp. 80-90. http://www.jstor.org/pss/25062655 (you will need to purchase the article to read it in its entirety). In this article, it describes the Static Model of fleet sizing, which is what my post uses. Further in the article, a Dynamic Model is proposed that is supposed to handle real world scenarios and day to day variations better, but it is complex. If you are interested in researching the Dynamic Model further, and are good at math, I recommend that you purchase this article.

I hope that you have found this helpful. If you have some related suggestions or tips from your personal experience, please post them!

All the best,

Jim

Categories: Railcar Fleet Management Tips
Post by Jim Dalrymple on August 31, 2011

Simple Railcar Fleet Sizing

Sometimes something can be so complex, it never gets  used.

There are more complex and more accurate ways to size your railcar fleet, but here is a simple way that even the most modest thinker (me) can understand. Before you use this, be sure to test it in a small situation to be sure that it works for your particular situation.

  1. Determine the OD (origin/destination) Pairs (load and empty return) that are used by this fleet.
  2. Get the average Transit Days and average Layover Days (days to load or unload) for each OD Pair. Use a historical period that is long enough so that you have at least 30 shipments for each OD Pair. Of course, if you don’t have that much volume, work with what you have – it is better than nothing right?.  Be sure that the average transit days and layover days do not contain measurements of railcar cycles that had special, extreme delays (i.e. Bad Orders, Hold, derailment, etc.). If this is a new route, you will have to estimate. You can call a few railroads and ask them what kind of transit time they can offer for the route to help your estimation. Warning: shameless plug – getting these averages would be very easy if you were using a rail shipment tracking system like this one.
  3. Record the average Transit Days + Layover Days for each load and empty OD Pair used by the fleet.
  4. Determine your forecasted average daily loads required for the busiest three month period for each particular load OD Pair. This is calculated by dividing the number of loads forecasted out of an origin to a particular destination for the three month period and dividing it by 90.
  5. Then for each load OD Pair, take the forecasted loads and multiply it by the average Transit Days + Layover Days for that OD Pair, this will give you loaded railcar days.
  6. For each empty OD Pair, take the forecasted loads and multiply it by the average Transit Days + Layover Days, this will give you empty railcar days.
  7. Add the loaded railcar days to the empty railcar days and this will give you an estimate of the fleet size required for this pool.

For example, a pool called the Decatur pool is comprised of tank cars that are shipped out of Decatur, IL (the plant location) to Buffalo, NY (Customer A) and to Old Fort, OH (Customer B).

Decatur to Buffalo (load) transit days + layover days = 6

Decatur to Old Fort (load) transit days + layover days = 5

Buffalo to Decatur (empty return) transit days + layover days = 8

Old Fort to Decatur (empty return) transit days + layover days = 7

Forecasted daily loads out of Decatur to Buffalo = 15 and Decatur to Old Fort = 10

Railcar days for loads = 15*6 + 10*5 = 90 + 50 = 140

Railcar days for empties = 15*8 + 10*7 = 120 + 70 = 190

Total railcar days = 330

Fleet estimate = 330 railcars

 

TIP: You may wish to divide the forecasted loads for the prior year and compare that with the actual number of loads that were shipped and assign that factor to your fleet size calculation.

The formula in this post is from an article entitled “Determining Rail Fleet Sizes for Shipping Automobiles” by Hanif D. Sherali and Lawrence W. Maguire. Interfaces, Vol. 30, No. 6 (Nov. – Dec., 2000), pp. 80-90. http://www.jstor.org/pss/25062655 (you will need to purchase the article to read it in its entirety). In this article, it describes the Static Model of fleet sizing, which is what my post uses. Further in the article, a Dynamic Model is proposed that is supposed to handle real world scenarios and day to day variations better, but it is complex. If you are interested in researching the Dynamic Model further, and are good at math, I recommend that you purchase this article.

I hope that you have found this helpful. If you have some related suggestions or tips from your personal experience, please post them!

All the best,

Jim

Categories: Railcar Fleet Management Tips

Post by Jim Dalrymple on August 31, 2011

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The formula in this post is from an article entitled “Determining Rail Fleet Sizes for Shipping Automobiles” by Hanif D. Sherali and Lawrence W. Maguire

6 Responses to Simple Railcar Fleet Sizing

  1. Nice article Jim,
    The way I determine fleet size is by the following:
    1) Look at the round trip transit time
    2) Determine demand used during the round trip cycle
    3) Add in safety stock (qty of railcars client would always want to have on hand at site)
    4) Assume 5% of cars will need to be sent to shop for repairs

    Example: Transit from City A to City B is 14 days. Clients uses 2 cars a day and want a 4 car safety stock on site.
    1) Round trip transit (14 days x 2) = 28 days.
    2) 2 cars x 28 cars = 56 cars
    3) 4 cars safety stock + 56 cars = 60 cars
    4) 60 cars x 1.05 = 63 cars need for fleet

  2. what if you don’t have a daily load. for example my company ships out 3 railcars per week to Georgia and 2 to Alabama. How does the formula change?

    • Hi Drew,

      Average Daily Loads as described in step 4 can be less than 1. What may have confused you is that I later use the term “Daily Loads”. Please think of “Daily Loads” as the same as “Average Daily Loads”. For example, if you have 3 shipments per week for a particular OD pair, then that would be 12 per month and 36 per quarter. Take 36 and divide it by 90 days, which will give you 0.40 average daily loads. You can then use that 0.40 in the formula that determines your fleet size.

      I hope that this will work for you. Please let me know if you have more questions.

      Jim

  3. Thanks for this article. It really helped me to understand different methods to implement. My client has provided me rail car volume as an input to consider in estimating the fleet size. Any idea how can i use it in the equations you have provided.

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