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Intermodal Pricing Model Creates a Network Pricing Perspective at BNSF

Author

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  • Michael F. Gorman

    (Burlington Northern and Santa Fe Railway, 2650 Lou Menk Drive, PO Box 961065, Fort Worth, Texas 76161)

Abstract

Burlington Northern and Santa Fe Railway (BNSF) is exploring methods of pricing its network of intermodal services effectively. The problem is challenging because cost interactions between the markets arise from equipment imbalances at end-points in the network. The intermodal pricing model takes a global perspective when establishing market prices to improve network profitability. Accounting for the vagaries of market-place demand proved to be critical to gaining management's confidence in the plausibility of model results. BNSF has applied the model to many pricing scenarios. In the application I describe, I identified a potential for 3.5 percent improvement in net profitability through a 61 percent reduction in empty repositioning. Since 1998, BNSF has increased loaded miles by five percent and simultaneously reduced repositioning by three percent per year.

Suggested Citation

  • Michael F. Gorman, 2001. "Intermodal Pricing Model Creates a Network Pricing Perspective at BNSF," Interfaces, INFORMS, vol. 31(4), pages 37-49, August.
    • Handle: RePEc:inm:orinte:v:31:y:2001:i:4:p:37-49
    DOI: 10.1287/inte.31.4.37.9661
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    Citations

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    Cited by:

    1. Goh, Shao Hung & Chan, Yuxian, 2016. "Operational shadow pricing in back haul container shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 92(C), pages 3-15.
    2. Michael F. Gorman, 2021. "Contextual Complications in Analytical Modeling: When the Problem is Not the Problem," Interfaces, INFORMS, vol. 51(4), pages 245-261, July.
    3. Long Gao & Jim (Junmin) Shi & Michael F. Gorman & Ting Luo, 2020. "Business Analytics for Intermodal Capacity Management," Manufacturing & Service Operations Management, INFORMS, vol. 22(2), pages 310-329, March.
    4. Mingzhu Yu & Ruina Yang & Zelong Yi & Xuwen Cong, 2020. "Contracting in Ocean Shipping Market Under Asymmetric Information," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(02), pages 1-24, March.
    5. Zhou, Wei-Hua & Lee, Chung-Yee, 2009. "Pricing and competition in a transportation market with empty equipment repositioning," Transportation Research Part B: Methodological, Elsevier, vol. 43(6), pages 677-691, July.
    6. Li, Dongjun & Islam, Dewan Md Zahurul & Robinson, Mark & Song, Dong-Ping & Dong, Jing-Xin & Reimann, Marc, 2024. "Network revenue management game in the railway industry: Stackelberg equilibrium, global optimality, and mechanism design," European Journal of Operational Research, Elsevier, vol. 312(1), pages 240-254.
    7. Huseyin Topaloglu & Warren Powell, 2007. "Incorporating Pricing Decisions into the Stochastic Dynamic Fleet Management Problem," Transportation Science, INFORMS, vol. 41(3), pages 281-301, August.
    8. Yang, Ruina & Yu, Mingzhu & Lee, Chung-Yee & Du, Yuquan, 2021. "Contracting in ocean transportation with empty container repositioning under asymmetric information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    9. Najafi, Mehdi & Zolfagharinia, Hossein, 2021. "Pricing and quality setting strategy in maritime transportation: Considering empty repositioning and demand uncertainty," International Journal of Production Economics, Elsevier, vol. 240(C).
    10. Michael Gorman, 2005. "Estimation of an implied price elasticity of demand through current pricing practices," Applied Economics, Taylor & Francis Journals, vol. 37(9), pages 1027-1035.
    11. Jin, Jie & He, Junliang & Wang, Xudong & Han, Chuanfeng & Meng, Lingpeng, 2024. "Contract design in ocean shipping market: A performance credit leveraged mechanism," International Journal of Production Economics, Elsevier, vol. 272(C).
    12. Michael F. Gorman, 2023. "Case Article—Louisiana Branch Lines," INFORMS Transactions on Education, INFORMS, vol. 23(3), pages 139-143, May.
    13. Ruina Yang & Chung-Yee Lee & Qian Liu & Song Zheng, 2019. "A carrier–shipper contract under asymmetric information in the ocean transport industry," Annals of Operations Research, Springer, vol. 273(1), pages 377-408, February.

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