Evaluating Different Railway Wagon Alternatives for Timber Transportation by Discrete Event Simulation

Finland with Sweden is one of the most important pulp producing countries in Europe, and in paper production these two countries are accompanied with Germany and France as being most important countries of production. For the production of pulp, most important parts are (1) the quality and scale of production process as well as (2) cost efficient and high quality raw material. In addition to using its own raw material sources, Finland purchases wood from various different regions, including Russia. In a frequent number of cases raw material transports is completed with rail transports, especially in the case of Russia where distances are relatively long for transports (several thousand kms). Until now Russian timber has had a cost advantage in comparison to Finnish raw material. The availability of a cheaper alternative has also kept the price of domestic raw material at a relatively low level. However, Russia has announced a schedule to increase tariffs for timber exports. As a consequence the exporters of Russian timber need to examine and fine tune their cost structure of timber procurement to correspond to this new demanding environment. In this paper we examine the transportation cost of forest industry raw material using different types of railway wagons. The case network consists of four Russian terminals and two mills located in Finland. The evaluation is based on a discrete event system simulation model concentrating on timber transport within the case network in question. To make this evaluation even more interesting, Russian railway deregulation has its own special feature: Railway customers are allowed to own railway wagons, but nationally owned RZD owns the locomotives and charges for traction. Our research results show that the traction charge of RZD and competing road transport prices are the most influential factors, when determining the most cost efficient wagon type and network structure for timber transportation.