Optimal network configuration and capacity expansion of railroads

Railroads ship individual cars according to blocking plans that route the cars in groups (blocks) that share common intermediate stops. An individual shipment is regrouped (reclassified) two to three times along the way from its origin to destination. Yards are crucial facilities of the rail network where cars are reclassified according to such blocking plans. Therefore, yard locations and the blocking plan impose the detour and classification of cars over the physical network. Yards are capacitated with respect to number of blocks made and number of cars classified; rail lines between major stations are capacitated with respect to number of cars that pass through. These restrictions are accounted for in designing the blocking plans. Changing the yard locations and expanding associated capacities may result in dramatic changes in blocking plans saving tens of millions of dollars in railroad transportation costs. We develop a mathematical programming formulation and propose solution methods for the yard location problem and the capacity expansion problems. We demonstrate that the railroads can save significantly by reconfiguring their networks.