Railroad wheat transportation markets in the central plains: modeling with error correction and directed graphs

Time series methods are used to study the dynamics of regional, export-wheat, railroad rates linking seven central US regions to Texas Gulf ports. Research focuses on the extent and nature of regional rate interactions to determine whether regional rail transportation rates are established independently, through interaction and/or dominated by several regional leaders. Analysis is carried out on 1988–1994 public waybill data for seven Business Economic Areas (BEA) located in Kansas, Oklahoma, Texas and Colorado: these regions originate virtually all of the eight million tons of hard red winter wheat annually shipped to Texas Gulf ports. Results show all rail transportation markets linked in varying degrees. Some regions are near-independent or highly exogenous regarding rate-setting, while others interact with and to rates established in other regions. Regions that are dominated by a single carrier tend to be more independent and insulated regarding rate-setting. Export rates in regions dominated by the Union Pacific (UP) generally account for a significant variation in the rates of other regions. Data show the UP to have been aggressive in providing incentives for country elevators to consolidate for purposes of making unit train shipments, thus their presumed influence on rates of other regions. As expected, export rates for regions with substantial storage and transhipment facilities are sensitive to export rates of regions which ship to the transhipment facilities. Finally, results suggest that rate-setting in a particular region is in part a function of the dominant railroad’s management and its aggressiveness, an expected outcome in an oligopolistic market.     

Design and planning for green global supply chains under periodic review replenishment policies

We quantify the impact of jointly optimizing strategic network design and tactical inventory planning on the cost and CO₂ emissions of multi-echelon logistics networks. The obtained insights indicate that longer optimized replenishment cycles reduce a node’s transportation cost and CO₂ emissions but increase its inventory costs. Moreover, under a fixed replenishment cycle, a node’s service level increases when supplied by a satellite warehouse. Finally: (i) the costs of implementing optimal green network design decisions could be misleading if inventory planning is neglected, (ii) greening of supply chains could become expensive, (iii) current legislative CO₂ ton prices hardly influence logistics networks.     

Investigating the impact of recession on transportation cost capitalization: a spatial analysis

The unprecedented economic crisis experienced by Greece is fertile ground for research at myriad levels. In this paper, the authors aim to investigate the effects of the crisis on real estate prices by measuring the impact of transportation infrastructure location. For the purposes of this research, on-line real estate data collected in 2011, when the consequences of the crisis were still uncertain, and in 2013, when a significant decline had been observed, are combined.The analysis is based on various spatial statistical methods. In order to identify potential common price patterns, G spatial clustering is first performed. Spatial error models (SEM) are then developed to parameterize the real estate prices. The results show that, overall, purchase prices have been reduced by 18.2% and rents by 15.2%. More specifically, the positive impact of metro station locations (<500 m) has declined 42.5% for purchase prices and 62.5% for rents. Moreover, dwellings located in the Inner Ring are still more expensive than others; however, the impact of the crisis has been reduced by 30.3% for purchases and 50.7% for rents. On the other hand, the negative impact of ISAP station locations (<500 m) has declined by 53.5% for purchase prices.The findings of this paper could be of great interest to the transportation policy research community and could be used to better predict the benefits and costs of public transport investment under extremely uncertain conditions, such as a long-lasting recession.     

Cost and revenue synergies in airline mergers – Examining geographical differences

Deregulation, privatization and shifting demand patterns in the airline industry, combined with the emergence of low-cost airlines and rising fuel prices have increased the competitive pressure on legacy airlines. Since alliances do not deliver sufficient benefits to counterbalance these trends, many airlines have engaged in mergers to seek for additional cost and revenue synergies. An extent body of literature investigates the synergy potential in mergers and alliances, but there is no study on how synergies differ among mergers and what potential influence factors cause these differences. This paper aims at explaining differences in synergy estimates and realized synergies in recent airline mergers and places a special focus on geographical influence factors.The research methodology uses a comparative case study comprising six large airline mergers between 2003 and 2012 from Europe, North America and Latin America. After analyzing the cases individually, the pre-merger situation of the merging airlines, the synergy estimates and the realized synergies of the cases were compared.The results show considerable geographical differences in pre-merger cost structures, synergy estimates, and synergy realization. The European mergers present lower synergy estimates but also lower integration costs than mergers in the Americas. Whereas European airlines estimate cost synergies higher than revenue synergies, both North and Latin American airlines expect more revenue synergies than cost synergies from airline mergers. Only one merger showed superior post-merger profitability which indicates that the achieved synergies in the broad majority of the cases are insignificant.     

Using spatial equilibrium models to analyze transportation rates: an application to steam coal in the United States

This paper uses the implications of Samuelson's spatial equilibrium model to analyze transportation rates for steam coal delivered to electric utilities in the United States. The analysis indicates that transportation rates declined in every year but two since railroads were substantially deregulated in 1980. While some utilities may have experienced some rate increases, coal-fired electric utilities as a whole have clearly benefited from lower transportation rates, and economic welfare has increased. The methodology in this study may be used in other instances where reliable data on transportation rates are not available, but data on delivered prices are available.     

Future impacts of coal distribution constraints on coal costs

This study seeks to identify potential capacity constraints within the US rail network that could limit expanded use of coal for electricity generation and hydrogen fuel production. We estimate the costs of alleviating those constraints under various scenarios of future coal demand growth. By 2050, coal transportation is projected to increase 35–90% necessitating rail capital investments of $1.5–11.0 billion. These investments are within the range of historical expenditures in the railroad industry, so it is unlikely that delivered prices of coal will necessarily increase or that rail capacity will be a barrier to a future coal-based “Hydrogen Economy”.     

Organizational learning,operating costs and airline consolidation policy in the Chinese airline industry

This study investigated and reviewed organizational learning in the Chinese airline industry, which is dominated by state-owned or state-controlled airlines. This empirical research focused on the extensive scale of airline mergers and acquisitions among 12 Chinese airlines for the period of 1996–2014. This research aims to make a contribution towards addressing the general lack of academic reflection on the impact of organizational learning on airline performance during and after the completion of mergers and acquisitions. The empirical findings of this paper suggested that there was, in general, organizational learning experienced by Chinese airlines from their prior operating experience in improving operating costs. However, airline mergers in 2001/02 increased airlines' average operating costs, as most state-owned airlines are notorious for poor cost management. Significantly, the performance improvement among Chinese airlines was found during the post-merger periods in this study, and the increase in Chinese airlines’ operating costs during the post-acquisition periods due to the limited integration of 2010 acquisition compared with the 2001/02 mergers.     

The effect of high fuel costs on liner service configuration in container shipping

For shipping activities, not least container shipping, bunker fuel is a considerable expense. In the last 5 years, bunker prices have risen considerably. An increasing bunker price in container shipping, especially in the short term, is only partially compensated through surcharges and will therefore affect earnings negatively. This paper deals with the impact of increasing bunker costs on the design of liner services on the Europe–Far East trade. The paper assesses how shipping lines have adapted their liner service schedules (in terms of commercial speed, number of vessels deployed per loop, etc.) to deal with increased bunker costs. The paper also includes a cost model to simulate the impact of bunker cost changes on the operational costs of liner services. The cost model demonstrates for a typical North Europe–East Asia loop that the current bunker prices have a significant impact on the costs per TEU even when using large post-panamax vessels. The model also shows shipping lines are reacting quite late to higher bunker costs. The reasons that explain the late adaptation of liner services relate to inertia, transit time concerns, increasing costs associated with fixing schedule integrity problems and fleet management issues.     

The impact of low cost airline entry on competition, network expansion, and stock valuations

We conduct event studies and statistical analysis to explore the impact of low cost carriers’ entry on legacy airline stock prices. Oligopoly structures, entry barriers, and high fixed costs make the airline industry highly susceptible to competitive and network expansion impact of low cost airlines’ entry. Positive stock returns are observed, which we interpret as the spillover effects of network expansion. Thus, rising passenger traffic and improved connectivity increase the revenues of legacy airlines to sufficiently offset the low cost carriers’ competitive threats.     

Corporate social responsibility programs choice and costs assessment in the airline industry—A hybrid model

Corporate social responsibility (CSR) has taken an increasingly important role in business. Here we develop a technique for operationalizing CSR programs for air transportation within the context of limited physical resources. A hybrid model for selection and costs assessment is proposed to address inter-relationships among CSR criteria using trial and evaluation laboratory methods, analytical network processes and zero–one goal programming. The activity-based costing approach is applied to estimate costs of the chosen programs and an example looking at China Airlines is presented.     

Time series forecasting of quarterly railroad grain carloadings

The participants in the grain logistics system need forecasts of railroad grain carloads. Although forecasting studies have been conducted for virtually every mode, no forecasting studies of quarterly railroad grain transportation have been published. The objectives of the paper are (1) specify a US quarterly railroad grain transportation forecasting model, and (2) empirically estimate the model. The selection of explanatory variables requires that they have a theoretical relationship to railroad grain transportation supply and/or demand, and that the data for the explanatory variables are published in quarterly frequency. However, there are relatively few potential explanatory variables that are published quarterly and those that are available appear to have weak correlation with quarterly railroad grain carloadings. The economic process generating quarterly railroad grain carloadings is quite complex and very difficult to model with regression techniques. Given this problem and the focus on short run forecasting, a time series model was employed to forecast quarterly railroad grain carloadings. An AR(4) model was estimated using the Maximum Likelihood estimation procedure for the 1987:4–1997:4 period. The actual railroad grain carloadings for this period were compared to the forecast carloadings generated by the time series model. For 92% of the 37 quarters the percentage difference between the actual and forecast values was 10% or less. Of the 9 annual observations, the per cent difference between the actual and forecast value was less than 2.6% for 8 of the 9 years. ©     

A service position model of package tour services based on the hybrid MCDM approach

ABSTRACT

Traditionally, package tour (PT) agencies assumed that tourists only pay attention to the PT’s price, so PT service providers often offer limited package tours based on options and prices. Nowadays, PT service providers face the difficult challenge of how to offer diverse PTs to satisfy tourists’ needs based on a reasonable price. This study proposes an evaluation model of package tours based on diverse resources and transportation means. This study proposes a two-dimensional evaluation framework to analyse tourists’ needs regarding package tour services and the proposed model could be applied to plan mass customized package tours based on the portfolio of value satisfaction index (VSI) and the price satisfaction index (PSI). The study also proposes that mass customized package tours can improve the traditional tour planning method through a portfolio of diverse tourism resources. Moreover, the study integrates the different choices of traffic and transportation tools, as well as tourism resources and providers in six portfolios of package tours in the Nantou county of Taiwan. These six package tours can be planned through three traffic and transportation tools (tourist coach, railroad, and minibus) and four tourism resources (natural experiences, cultural exploration, shopping and cuisine, and event participation).     

An empirical test of modal choice and allocative efficiency: Evidence from US coal transportation

A generalized shipper transportation cost function is estimated to test whether coal shippers achieve allocative efficiency with respect to market prices when facing limited access to the full range of transportation services. Findings indicate that allocative efficiency with respect to market prices is achieved when shippers have access to all major transportation modes. In contrast, the condition for allocative efficiency is not met with respect to market prices when shippers’ modal choices are limited to trucking and rail services. Findings for the sample of shippers who face limited shipping choices is interpreted as suggesting an over-use of trucks relative to the use of trains due to price distortions of transportation services.     

Design of international assembly systems and their supply chains under NAFTA

The purpose of this paper is to provide a decision support aid for the strategic design of an assembly system in the international business environment created by NAFTA. The strategic design problem is to prescribe a set of facilities, including their locations, technologies, and capacities, as well as strategic aspects of the supply chain, selecting suppliers; locating distribution centers; planning transportation modes; and allocating target levels (i.e., amounts) for production, assembly, and distribution. The objective is to maximize after-tax profits. This paper presents a mixed integer programming model that represents the complexities of the international design problem as well as relevant enterprise-wide decisions in the US–Mexico business environment under NAFTA. It deals with a broad set of design issues (e.g., bill-of-material restrictions, international financial considerations, and material flow through the entire supply chain) using effective modeling devices (e.g., linearizing non-linearities that arise in modeling transfer prices and allocating transportation charges). Examples demonstrate how managers might use the model as a decision support aid.     

A supply chain network design considering transportation cost discounts

This study addresses an integrated facility location and inventory allocation problem considering transportation cost discounts. Specifically, this article considers two types of transportation discounts simultaneously: quantity discounts for inbound transportation cost and distance discounts for outbound transportation cost. This study uses an approximation procedure to simplify DC distance calculation details, and develops an algorithm to solve the aforementioned supply chain management (SCM) problems using nonlinear optimization techniques. Numerical studies illustrate the solution procedures and the effects of the model parameters on the SCM decisions and total costs. Results of this study serve as a reference for business managers and administrators.     

Credit-based congestion pricing: A Dallas-Fort Worth application

Under a credit-based congestion pricing policy, net revenues are distributed uniformly among qualifying travelers, to partially offset toll payments. This work predicts the traffic impacts, air-quality changes, welfare effects, and system implementation costs of such a policy, as applied to the Dallas-Fort Worth (DFW) region of Texas. Joint destination-mode choice models were estimated and applied. The status quo and two marginal cost pricing (MCP) scenarios were simulated for the short and long terms, with full feedback of trip costs and times. Monetarized logsum differences suggest that marginal cost pricing of congested freeways in this urban region, followed by travel credit distribution to all workers, is welfare improving for the great majority of such travelers. Moreover, high levels of recurring congestion (V/C ratios exceeding 1.5) are predicted to practically disappear.     

Airline cost changes: To what extent are they passed through to the passenger?

Since the start of the Millennium airline costs have been highly volatile, mainly due to large fluctuations in jet fuel prices. An important question for airlines and regulators is whether airlines are able to pass through cost changes to their prices. Little empirical evidence on the pass-through of costs exists. In this paper, we investigate which pass-through rates are most likely. According to economic theory, the pass-through of costs depends strongly on the type of cost increase (firm-specific or sector-wide) and market conditions (monopoly, oligopoly, perfect competition). In monopolistic markets, the shape of the demand curve also matters (linear, constant elasticity, log, power function). A pass-through rate of 100% is often assumed based on the reasoning that the aviation sector is highly competitive. We analyse market concentration in all airline markets in the world, and generally find a high level of concentration. Additionally, different airlines offer different products based on a variety of factors, including service, flight frequency, legroom, bags allowed on board, flight time and transfer time. Therefore, most aviation markets can be characterised as differentiated oligopolies. As airlines choose their quantities first (flight schedules) and adapt their prices to demand (yield management), we consider the Cournot model the best choice. In such markets, firmspecific cost changes will be passed through by a rate of less than half while sector-wide cost changes are passed through by a rate of more than half. In specific situations, the pass-through rate may be different. Examples are limited airport capacity (congestion), cross-subsidization, and the extent to which there is a level playing field.     

Making urban road pricing acceptable and effective: searching for quality and equity in urban mobility

Urban Road Pricing has been proposed many times as a powerful instrument to fight congestion in urban traffic, but has systematically faced a hostile political envirionment, due to lack of confidence on its promised (traffic) results and fear of its political consequences. Lack of action in this front is contributing to stable or even growing congestion problems in most large cities.This paper tries to address the problem with a fresh look at the objectives of road pricing and at the reasons for that political hostility. For managing and developing the urban mobility system, efficiency and equity are normally taken as the basic economic objectives. Sustainability objectives may be integrated in the efficiency objective if we are able to represent adequately the costs of the resources consumed in the process. Political hostility is normally based on having to pay for what was freely available, and on the risk of exclusion for those with little revenue available for the extra cost of driving into the city.Pursuit of efficency leads to suggestion of marginal social cost pricing but this is hard to explain to the public and application of this principle is fraught with pitfalls since some components of that cost get smaller as traffic grows (noise related costs for example). Pricing is still a good option but the objective has to be something easier to understand and to serve as a target for mobility managers. That “new” objective is quality of the mobility system, with a meaning similar to that of “level of service” in traffic engineering, and prices should be managed to across space, time and transport modes in such a way that provision of service is made with good quality in all components.Pursuit of equity leads to some form of rationing, which has often been associated with high transaction costs and abuse by the administrators. But the use of electronic road pricing should allow easy ways to address the rationing process without such high costs. The basic proposition is that all local taxpayers receive as a direct restitution of their tax contribution a certain amount of “mobility rights”, which can be used both for private car driving in the tolled areas and for riding public transport.These principles are easily applicable with a variety of technical solutions for road pricing, from the simplest cordon pricing to the more sophisticated “pay-as-you-go” schemes. The paper addresses this question of implementation and argues for increasingly sophisticated schemes, as people get accustomed to the principles and finer targeting of demand segments may be needed.     

An exact solution approach for vehicle routing and scheduling problems with soft time windows

A new column generation based exact optimization approach for the vehicle routing and scheduling problem with semi soft time windows (VRPSSTW) is presented. Elementary shortest path problem with resource constraints and late arrival penalties is solved as a subproblem, which rises from the Dantzig–Wolfe decomposition method. Exact solutions of VRPSSTW and hard time windows variant are compared on Solomon’s benchmark instances as well as on an instance based on Tokyo road network. It was found that the VRPSSTW solution results in fewer routes thus overall costs are reduced and late arrival penalties contribute only a small fraction to total cost.     

How large is the gap between present and efficient transport prices in Europe?

In this paper, we analyse the gap between present transport prices and efficient transport prices. Efficient transport prices are those prices that maximise economic welfare, including external costs (congestion, air pollution, accidents). The methodology is applied to six urban and interregional case studies using one common optimal pricing model. The case studies cover passenger as well as freight transport and cover all modes. We find that prices need to be raised most for peak urban passenger car transport and to a lesser extent for interregional road transport. Optimal pricing results for public transport are more mixed. We show that current external costs on congested roads are a bad guide for optimal taxes and tolls: the optimal toll that takes into account the reaction of demand is often less than one third of the present marginal external cost.