Among some of the challenges that CBN Railway Company faces, this paper will focus on a solution to overcome the inefficiency that exists with the maintenance of their equipment; namely their locomotives. CBN Railway Company is also considering leasing locomotives from various sources, unspecified. We will analyze some possible solutions and weigh the pros and cons of the possibility of leasing equipment. These two challenges facing this company are causing the quality of customer service to frail amidst an increase in business in the rail industry.
Power by the Mile Leasing Arrangements
Leasing of equipment for some companies can be advantageous. Depending on the lease terms, some firms can have great success with leasing the equipment they use due to the fact that the leasing company provides services and maintenance of the equipment they lease. This feature of a lease can be cost effective to the company leasing the equipment in a sense that the company does not have to maintain payroll of maintenance personnel or cost of maintenance in order to keep the said equipment in working order. Maintenance of equipment is probably one of the most expensive aspects of any business. It takes a good maintenance system, which costs money, to efficiently and effectively maintain equipment. This aspect will be provided by the leasing company, given the fact that it is stated on the lease agreement. The downside to the agreement that CBN is looking to enter is that they will have to provide the actual labor on the locomotives (Coyle, Novack, Gibson, Bardi, 2011). This seems to be that CBN will pay for the lease and also will need to maintain a maintenance labor force to provide service to the locomotives as needed. This concept in itself deems this agreement to be unfavorable for CBN due to the fact that CBN will pay double; they will pay for service according to the lease agreement and also pay to maintain a team to do the actual labor on the
References: Coyle, J., Novack, R., Gibson, B., Bardi, E. (2011, 2003) Transportation: A Supply Chain Perspective. Mason, Ohio: South-Western Cengage Learning