Strategies for Improving the Profitability of a Korean Unit Train Operator: A System Dynamics Approach

Abstract

A unit train (UT) has been developed primarily in countries that have wide or long territories, to move freight quickly over long distances. In South Korea, UTs have contributed to the facilitation of the overland export/import logistics for the last decade. However, UT operators in South Korea, which is a small country surrounded by North Korea and bodies of water, suffer from low profitability when competing with trucking companies because of diverse reasons that they cannot control. On this account, this research aims to develop business strategies for improving the profitability of a Korean UT operator. We analyzed both the revenues and expenses of a representative operator in Korea, and found simple but meaningful financial circular causality, using the system dynamics methodology. Thus, we presented and scientifically reinterpreted two strategies that might be acceptable alternatives: the internalization of shuttle carriers and the securing of more freight.