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CSX Corp. Message Board

  • unclelarry66 unclelarry66 Jun 9, 2013 12:37 PM Flag

    The purpose of a railroad (contd)

    Each railroad is a small monopoly because it directly connects a supply source (wood chips) to a user of the material (paper mill). But because there are so many paper mills, the railroad has an obligation to help keep the mill profitable to allow it to stay open.

    Goods in transit have a cost. Assume that a head of lettuce costs $1 a piece at the field and has a life of 16 days before it must be thrown out (its shelf life). Assume a super market chain sells 100,000 a day. If it takes 8 days for lettuce to get to the super market, how much money is tied up inventory in refrigerator cars and how many days is the lettuce available on the store shelf? $800,000 and 7 days
    If transit time is 4 days -$400,000 and 12 days, cutting the inventory cost, in transit and on the shelf, in about half. This why you see fresh vegetables frequently moving by truck; even though the freight charges may be higher, the amount of money tied up is significantly less.

    To compensate, the railroads will upgrade lines which carry more valuable products to allow for faster train speeds.

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