Cbn Railway Co.

Case Study: No. 6-1: CBN Railway Co.

Colorado Technical University

SCM220 - Transportation and Distribution Management

Winter 2013

Date: 30 of January 2013

THE CASE STUDY OF: CBN Railway Co.

NOTE: The case synopsis is extracted from our book John J. Coyle, Robert A. Novak, Brian Gibson, Edward J. Bardi, A supply chain perspective, (Mason, OH: Southwestern Cengage learning, 2009)

Methodology and Analysis

After doing some on-line research and the scope of this paper is to find what advantages or disadvantages are involved with "power by the mile" arrangements within a rail company. And, this paper will also try to explain whether or not it is a good idea to continue leasing agreements if problems persist.

On page 224 the questions are asked; What are the potential advantages and disadvantages of entering into the "power by the mile" arrangements. What should be done if the problem with the locomotives continues even with the agreements and what is the best decision to lease the locomotives is the best decision for CBN Railway Co.?

I think that this is a very wise decision that CBN is making because the readings state that " The manufacturers will be responsible for the repair work and to charge only for the maintenance on the actual number of miles that any one unit has ensued" (Coyle,2009.p.224). Doing the math, this agreement is for (possibly) leasing 135 locomotives for 90 days to five years, along with maintenance on the 469 units that CBN currently has in stock. That comes out to be 604 locomotives under an agreement that has an average of 15 years. The company is supposedly going to save 5 million a year by not buying parts and materials. That's 604 units, +/- 15 years. With (5m x 15yrs) = 45m savings in parts and materials. However, the case does not state whether CBN will rotate the 135 new leases with ones that need repair, or if CBN will run all. My suggestion is just that. If there are delays to the customers, I would get on the ball and get have the 135 new locomotives out on the tracks, while 135 of the current stock is under maintenance. I can't see an issue with the "power by the mile" arrangement with the outmoded equipment because if CBN plays their cards right, the agreement to fix the old one should start at "reset", and continue form there. So after the maintenance is finished, get them out on the track, so on, and so forth.