THE EFFECT OF YIELD MANAGEMENT ON RAILROADS

Although on-time delivery is critical in todays competitive marketplac e, railroads are not usually able to provide consistently reliable fre ight service. Railroads attempt to offer a low-price product by minimi zing their costs and maximizing their asset utilitzation; strategies w hich do not support on-time performance. This paper explores the use o f yield management to segment the railroad market into high-priority, premium priced freight or low-priority, low priced freight. Through ma rket segmentation, railroads can move from pure cost-minimization to a more service focused strategy. Using yield management to smooth deman d will decrease the need for excess capacity (reduce costs) and at the same time improve service.