Estimation of Modal Diversion and Economic Benefits due to Rail Service Improvements in South Carolina by Omor Sharif 1 ECIV 790U INTERMODAL FREIGHT TRANSPORT Project Presentation

Introduction 2 Transportation policy/infrastructure changes in South Carolina How much ‘Modal Diversion’ will occur? How much ‘Economic Benefits’ of the changes? The ITIC Model -Intermodal Transportation and Inventory Cost Model

The ITIC Model 3 A spreadsheet based computer model Version 1.0 of the model was published in 2005 by US Department of Transportation and Federal Railroad Administration Highway to Rail Intermodal Version Follows a logistics managers perspective who choose a mode and shipment size Transportation alternatives is chosen based on minimum total logistics costs

Estimate the diversion of highway freight traffic to rail intermodal service Estimate the economic benefits of changes Understand the underlying methodology Application of TRANSEARCH Data 4 Objective

Contribution Selecting suitable data sources for the model Development of Inputs for the model such as Freight Rates, Rail Miles, Dray Miles, Junction Frequency Understanding the modal diversion impact of rail service improvement 5

Prior Research The model itself refers to many sources regarding previous research Case studies: using the model by various organizations at federal/state/local governments 6

Methodology - Cost 7

Methodology- Data 8 1.Serial Number 2.Commodity Description 3.Commodity Code—Standard Transportation Commodity Code* 4.Pounds per Year* 5.Pounds per Shipment* 6.Value of Commodity—Dollars per pound* 7.Origination State 8.Destination State 9.Origin FIPS 10.Destination FIPS 11.Observed Mode (Truck)* 12.Truck rate per mile for 3S2* 13.Truck highway miles* 14.Truckload per shipment* 15.Number of Trailer on Flat Car (TOFC)/Number of Container on Flat Car (COFC) (0)* 16.Rail Junction Frequency (0)* 17.Observed Rail revenue per hundred weight (cwt) (1)* 18.Rail variable cost per cwt* 19.Rail miles* 20.TOFC pickup miles* 21.TOFC delivery miles*

Transportation Cost Formulas in TSW worksheet: 1. Lb/day = (lb/year) / Days between orders = final lbs in the shipment / (lb/day) 3. Transit time (Rail) = Rail Miles / Rail Speed + Dray Miles / Dray Speed + Dwell time at origin and destination terminals (0.5 days at each) + Interchange delays (1.5 days – if there is an interchange) [Both rail and dray speed is based on 24 hours] 4. Transit time (Truck) = Truck Miles / Truck Speed [truck speed is based on 10 hours a day] 5. Expected L&D claim per shipment = L&D as percent of gross freight revenue X transport charges per shipment 6. Transport charges per shipment (Rail) = (Load/unload hours X Hourly wage) + final lb in shipment X rail rev per cwt / Transport charges per shipment (Truck) = Handling cost per shipment + Linehaul cost per shipment = (Load/unload hours X Hourly wage) + (Linehaul miles X Linehaul cost per mile + Linehaul miles X Additional fee per mile + One time additional fee) 8. Number of shipments/yr = final lbs in shipment X lb/year 9. transport charges/yr = transport charges per ship X Number of shipments/yr 9

Non Transportation Logistics Cost Formulas in TSW worksheet: 1. Order cost = (Order cost per shipment + Dunnage) X Number of shipments/yr [for ‘truck’ dunnage is 0] 2. In-transit stock carrying cost = Lb/day X Dollars/lb X Transit time X Interest 3. cycle stock carrying cost = Dollars/lb X inventory carrying cost factor X final lbs in shipment / 2 4. Loss & damage claims = Expected L&D claim per shipment X Number of shipments/yr 5. Capital cost on claims = claim payment days X loss & damage claims X Interest 6. Safety stock carrying cost = safety stock (lb) X Dollars/lb X inventory carrying cost factor 7. Total Non-Transportation Logistics Costs = Order cost + In-transit stock carrying cost + cycle stock carrying cost + Loss & damage claims + Capital cost on claims + safety stock carrying cost 10

A sample analysis Transearch 2008 as Preliminary Data Source Origin- South Carolina Destination- Florida and Virginia Total Records STCC Commodity codes are kept at 4 digit level 11

An Analysis of the Operational Costs of Trucking: 2012 Update By ATRI 12 ( )

Forecast of 2023 Freight Rate 13 Inadequate Historical data Longer forecast horizon makes forecasting difficult Extrapolation techniques have higher success in short time horizon Regression, Time Series Analysis?? A value of $2.10 was assumed in the sample analysis for now!

Rail Miles SC 2008 Transearch does not provide county outside SC, only BEA Possible Alternative: County-to-County Distance Matrix at CTA and use regression Matrix of distances and network impedances between each pair of county centroids via highway, railroad, water, and combined highway-rail paths Regression between Intermodal Rail and Highway Miles based on 125 samples 14

Dray Miles For combined highway-rail CTA provides Highway and Rail miles here for each pair of county Take Dray miles as a percentage of Rail Miles and use data fitting Best Fit Distribution is ‘Gamma’ out of seven tested using ‘fitdistrplus’ package in R (Anderson-Darling statistic: ) based on 125 samples Fitting of the distribution ' gamma ' by maximum likelihood Parameters : estimate Std. Error shape rate Use GAMMA.INV(RAND(),1.359,1/0.192) * Rail Miles / 100 in EXCEL. 15

Preparing Input File for analysis (truck itic input.xls) -Discard Transearch records when ‘shipment weight’ is zero -Discard Transearch records when ‘truck miles’ is zero -Format ‘STCC’ codes as ‘Text’ in Excel, not as ‘Numbers’ -Add zero before one digit STCC code (01, 08, 09 instead of 1, 8, 9) -Put ‘unknown’ in ‘rail VC per cwt’ column and ‘1’ in ‘obs rail rev per cwt’ -Junction Frequency = 1 if Truck Miles > 1000, otherwise 0. 16

A sample analysis By Year 2023 Rail is offering the following service improvements- Increase rail speed by 8 mph (30 mph to 38 mph, Truck = 50 mph) Improve reliability from 0.45 to 0.42 (Truck = 0.40) Reduce Loss & Damage Claims 20% to 10% (Truck = 7%) 17

Results 18 TRUCK-TO-RAIL INTERMODAL OUTPUT SUMMARY STATISTICS BasePolicy Case Results CaseTruckDiversion TruckMovesto Rail Number of Records17,733 0 Number of Shipments314,473 0 Tons Shipped6,004,312 0 Truck VMT148,171,808 0 Intermodal Dray VMT000 Rail Ton-Miles000 Logistics Costs($) About records were selected for policy analysis after base case run of about records. Not many Mis-assigned, mostly excluded because they failed cost < revenue criteria.

Exclude when ‘Variable Cost > Revenue’ $ / 100 lb comparison Not considered if ‘Variable Cost > Revenue’ Rail Revenue = 0.95 X Cost per mile of 3S2 X 3S2 Miles X 100 / Shipment weight in lb Rail Variable Cost = Dray Pickup charge / Shipment weight in lb X ((Variable Cost per mile X Rail Miles + Total Lift charges at Origin and Destination) / Shipment weight in lb X 100) / So, short transport distances have higher chances of being excluded. 19

20 Spartanburg, SC to Fort Myers, FL

21 Thank You!