Boxcars, Linear Programming, and the Sleeping Kitten

The sleeping kitten is the corporate symbol of the Chessie System, made up of the Chesapeake and Ohio, Baltimore and Ohio, and Western Maryland railroads and their subsidiaries. It is the largest hauler of coal in the nation and a major transporter of merchandise freight. To maintain earning capacity, large amounts of money are invested annually in the purchase, building, and repair of freight cars (worth over $4 billion). Chessie's Management Science team developed a linear programming model of the freight car fleet to maximize long-term net discounted cash flow without exceeding the capacity of physical facilities available. The first projections of the model output increased contribution to profits of the Chessie fleet in 1978 by $2 million, while reducing the yearly budget for the mechanical department by $6 million. Continued use of the model has resulted in a $2.5 million improvement in employee productivity, as well as a $28 million increase in car sales.

Management accepted the recommendations from the model because (1) an immediate budget problem was solved, (2) each repair recommended was financially justified, and (3) the underlying assumptions and logic were quantified and comprehensible. The Mechanical Department now uses the model as the complete basis for its annual budget proposals, and management decisions to sell unused stock and build cars for sale have been facilitated.