The Optimization Edge

Note: Dr. Randall further explains the benefits of combining simulation and optimization in the cover article of the current issue of Analytics Magazine.

North American railroads have invested billions of dollars in recent years on terminals and infrastructure to improve rail intermodal, the transportation of containers and trailers on flat cars, which accounts for a quarter of major railroad revenue. In some cases, these investments have included the development of advanced technologies and analytics to assist speed and service and to ensure that intermodal remains an essential transportation strategy for shippers.

Truckers are dealing every day with tech innovators and disruptors like ELDs and Uberization—and related uncertainty. Following is another excerpt (Part 1 is here) from my appearance on Road Dog Trucking, the Sirius XM radio program, hosted by Mark Willis, with 1.2 million daily listeners.

Improving revenue management offers great potential value because it goes right to the bottom line without additional capital spending. Moreover, it is needed in a world where pricing is getting faster.

What exactly is revenue management? The application of disciplined analytics that predict customer behavior at the micro-market level and optimize product availability and price to maximize revenue growth. It is an example of “analytics in motion,” which uses real-time streaming data (that can be big, fast and noisy) and dynamic optimization to improve the quality of an organization’s continuous decisions such as: pricing, order acceptance, resource allocation, scheduling, routing, and forecasting supply/demand.

As a consultant, I spend time keeping up with the latest technologies that can assist us in the delivery of analytics-based projects. Many software vendors, both large and small, claim that using their software will automatically deliver great business value. I beg to differ. At Princeton Consultants, we always start with a business question whose answer brings value to the organization before building a model and analyzing data.

Blockchain is a hot topic, to put it mildly. Progressive Railroading recently interviewed me for an examination of blockchain as a game-changer. Read the article here.

It is important to recognize that blockchain is a generic technology, not a standard. Freight transportation will require standards for transmitting and adding to the blockchain, adjudicating ties and defining the messages, among other things. There is exciting potential in the Blockchain in Transportation Alliance (BiTA) and its ability to set those standards.

For the past 46 years, INFORMS has hosted a competition to determine the Franz Edelman Award, whose purpose is to “bring forward, recognize and reward outstanding examples of operations research, management science and advanced analytics in practice in the world.” Considered the “Super Bowl” of the field, the competition for the award has a rigorous process for selecting the six finalists who make their final presentations to the judges at the annual INFORMS Business Analytics Conference. This year, the Federal Communications Commission (FCC) was the winner, and I had the pleasure and honor to be one of their coaches for their entry.

MHI Solutions, which covers material handling and logistics, interviewed me for its current issue’s review of intermodal transportation trends. Many shippers used intermodal in the past, didn’t like it, and have been using truckload ever since. However, significant headwinds are now impacting truckload, such as the driver shortage. Truckload has not seen meaningful consolidation, so only a few companies are very large and profitable.

A revenue forecasting system we delivered for a publicly traded North American multimodal transportation company, summarized in a case study on this page, is noteworthy for many reasons. In this post, we focus on the collaboration throughout the project that helped the business team build confidence in changing forecasting processes from a manually intensive methodology to an automated system that provides insights into the underlying forecasting techniques. While many software vendors are promoting automated machine learning algorithms, we believe that the best predictive analytics blends business experience and insight with advanced analytics techniques.

An international airline sought to transform flight scheduling and crewing decisions through state-of-the-art optimization. The airline’s network is notably complex, with planning required for unscheduled pickup and delivery between 13,000 worldwide airports in more than 179 countries, with over 700 planes. There are variable transit times due to weather and potentials for grounding due to equipment failures.

The project sponsor recognizes the potential value of optimization and often initiates the contact with the optimization consultants to further define the right opportunity. While titles vary, this is generally a person near the top of the reporting chain of the people who will be using the software day in and out. The sponsor is usually a level or two above the SMEs: in most cases a vice president, director, or general manager.