Intermodal pricing model creates a network pricing perspective at BNSF

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.