Get instant access to this case solution for only $15
Burlington Northern: The ARES Decision (A) Case Solution
| Solution Id | Length | Case Author | Case Publisher |
|---|---|---|---|
| 581 | 516 Words (2 Pages) | Julie H. Hertenstein, Robert S. Kaplan | Harvard Business School : 191122 |
A Word File
Burlington Northern (BN) railroad was formed by the merger of four different companies and owned substantial natural resources. The railway was used to provide service to outside customers as well as transport the major products of the company around the US. In July 1990, BN’s management was considering investing in Advanced Railway Electronic System (ARES) which was developed by the company over more than ten years of research and development.
After the deregulation of the railroad industry, BN had modernized its railroad operations. The industry seems to be attracting customers due to low cost. However, it faced huge competitors in the railroad industry as well as the truck transportation industry. Moreover, the current condition of the business operations show inefficiency with regards to the communication, maintenance and scheduling
Case Analysis for Burlington Northern: The ARES Decision (A)
Therefore, it was vital for BN to invest in the project. The main advantage of this investment would be faster service to the customers. The customers would only be attracted to use the railroad service if the commodities are delivered in minimum time and with the least delay. With improved technology, the planning would be automated and more efficient causing minimum delays. Furthermore, the communication will also be improved between the dispatchers and the maintenance staff. Over the years, the just-in-time manufacturing strategy is being operated by various businesses. These businesses require fast delivery at a lower cost. Hence, for BN’s new automated railway this could be the target market.
The present value of the benefits from this investment turns out to be around $600 million while the costs will be around $220 million. This show that payback period on the investment will not be long and the company will be able to get high returns due to more customers. This shows that, economically, the investment is profitable. Another gain from this investment is the reduced expenditure in labor, equipment and fuel, damage preventation and enhanced revenue. The human errors will also be eliminated by the automation of the railway.
Following the automotive segment, the food and forest products earn the highest profit for BN. Advancement in technology of transportation would make the delivery and sales for these segments more efficient by eliminating the existing bottlenecks. Agricultural products gave a cyclical demand but the ARES will assist in the planning of grain delivery in the future.
Get instant access to this case solution for only $15
Get Instant Access to This Case Solution for Only $15
Standard Price
$25
Save $10 on your purchase
-$10
Amount to Pay
$15
Different Requirements? Order a Custom Solution
Calculate the Price
Related Case Solutions
Get More Out of This
Our essay writing services are the best in the world. If you are in search of a professional essay writer, place your order on our website.
