Fleet management for rail car transport of ethanol

Abstract

Rail and truck transport modes are the most frequently used in the movement of ethanol. Rail transport, however, with its cost and capacity to carry large amounts of ethanol, has become the preferred choice for shippers. Although ethanol producers are often smaller, there is a need to acquire and manage enough rail cars to meet demand, through lease or purchase. We use a stochastic programming model to determine the optimal number of cars of each type needed over a finite number of time periods. Decision variables include the number of rail cars leased, sub-leased, outsourced, and owned. Additional parameters such as capital costs, use of unit trains or individual transport, running costs, and the opportunity to sublease unused cars for a fixed duration, in the face of stochastic demand are considered. The results indicate that the model with an Average Cost Per Period strategy, based on the Silver-Meal algorithm, for subleasing offered good performance with a single adjustment over the 15-month horizon, compared to a chase strategy that adjusted the number each quarter at considerable setup cost.