64 s Transportation Research Record 1707 Paper No. 00 -1112 Value Pricing and Freight Traffic Issues and Industry Constraints in Shifting from Peak to Off-Peak Movements Pierre Vilain and Paul Wolfrom The Port Authority of New York and New Jersey (PANYNJ), in associa- facilities between the hours of 6 and 10 a.m. underpriced if the toll is tion with Louis Berger & Associates, Inc., completed a study to determine invariant? If value pricing strategies were initiated, would a signiﬁ- the potential for reducing peak-period commercial traffic at the interstate cant proportion of commercial traffic now using the crossings be crossings between New Jersey and New York City. One of the policy encouraged to switch to the off-peak? (Whereas the value-pricing lit- options examined, and the focus here, was the feasibility of encouraging erature usually emphasizes congestion surcharges, PANYNJ carried a reduction in peak-period congestion through the use of congestion- or out the study under the assumption that value pricing could take sev- value-pricing incentives. (PANYNJ recognizes the need for a coordinated eral forms: a peak-period surcharge, an off-peak discount, or even a approach to reducing congestion involving as many of the regional trans- mixture of both. These were usually the types of value-pricing options portation authorities as possible. Also, it is clear that congestion reduction discussed with trucking industry representatives during interviews.) strategies must focus on all vehicles and not simply commercial traffic. In answering these questions, theoretical models of the freight The purpose of this research was to better understand the constraints fac- industry are ambiguous. Typically, such models stress that a funda- ing that segment of the market. It was not intended to suggest pricing poli- mental aspect of commercial traffic is its nature as a derived demand, cies focusing exclusively on commercial traffic.) Summarized are some of namely derived from the demand for the good being shipped. Further, the ﬁndings of a large number of interviews carried out with trucking incorporating the assumptions of microeconomics regarding the ﬁrms, in particular key personnel of the ﬁrms in positions of responsibil- behavior of producing firms, one can derive a demand curve for ity or authority with respect to scheduling of deliveries. The interviews, freight transport that is itself downward sloping with respect to the each fairly detailed and in-depth, elicited signiﬁcant and valuable infor- shipping rate (5). Accordingly, imposing a peak-period congestion mation to help understand what could be the response of commercial surcharge could be expected to reduce the demand for peak-period traffic to value-pricing initiatives. Another part of the analysis also is dis- freight deliveries, possibly increasing the demand for a substitute such cussed, involving calculating the total value of tolls at the interstate cross- as off-peak deliveries. ings as a proportion of the generalized cost of travel (GCT) facing trucks. However, extending the analysis to include inventory costs, as well The analysis was carried out to assess how much the GCT would be as uncertainty with respect to the actual timing of demand facing affected by value-pricing incentives. firms, complicates matters. As will be discussed, ﬁrms have a strong incentive to minimize these logistic costs (which we deﬁne as includ- The rationale for value pricing is by now well known and described ing inventory costs, as well as costs associated with the reliability of in numerous publications, including Vickrey, Keeler and Small, Hau, shipping deliveries). This could imply that, for certain ﬁrms, the value and Kain (1–4). Brieﬂy, the theory states that the private cost of using of deliveries made at an optimal time with minimum degrees of cer- a road network may be signiﬁcantly below the “social” marginal tainty is high. In other words, the derived demand curve for certain social cost, as users typically will not be considering either their types of deliveries may be quite inelastic to the shipping rate, imply- effect on overall congestion on the road or other factors, such as the ing that congestion surcharges could have limited impact on this type cost of road maintenance. Under these conditions, the use of the road of commercial traffic. For many ﬁrms operating under the constraints is underpriced, and the eventual number of users will be higher than of inventory cost minimization, it could well be that the cost of a would be the case in a social optimum. One possible remedy is to freight delivery made after the start of the business day outweighs an impose a toll that would add to the private cost facing users (typically imposed congestion surcharge levied on the peak-period delivery. time in travel and vehicle operating costs). Ideally this toll could The interviews carried out with members of the regional freight approximate the difference between the private cost and the social community conﬁrmed the proposition that a signiﬁcant amount of marginal cost. deliveries made during the peak period were indeed deliveries made A large focus of value pricing is to address the imbalances to ﬁrms operating under strong inventory cost constraints. But other between congestion levels at peak versus off-peak periods. These factors also are signiﬁcant in explaining why so many deliveries con- imbalances imply that a unique toll charged for the use of a facility tinue to be made during the peak period of the working day. These could be underpricing the use of the facility during peak periods. To factors are described after detailing the characteristics of PANYNJ’s what degree can this rationale be applied to commercial traffic using interstate crossing facilities. the interstate crossing of the Port Authority of New York and New Jersey (PANYNJ) during the morning peak period? Is the use of the PANYNJ INTERSTATE FACILITIES P. Vilain, Louis Berger & Associates, Inc., 797 South Second Street, Philadel- phia, PA 19147. P. Wolfrom, Port Authority of New York and New Jersey, Office PANYNJ’s interstate transportation facilities include the following of Policy & Planning, One World Trade Center, 61N, New York, NY 10048. six crossings between New Jersey and New York City: Vilain and Wolfrom Paper No. 00 -1112 65 • George Washington Bridge, Weekday truck traffic at the George Washington Bridge exhibits a • Lincoln Tunnel, pronounced peak in truck traffic between 4 and 10 a.m., with peak- • Holland Tunnel, hour traffic of more than 1,100 trucks between 6 and 7 a.m., the high- • Goethals Bridge, est hourly truck volume among the Port Authority’s six crossings. • Outerbridge Crossing, and Weekday truck traffic at the Lincoln Tunnel also displays a morning • Bayonne Bridge peak pattern, with peak hourly volume reaching 380 between 5 and 6 a.m. Truck traffic at the Goethals Bridge displays an even ﬂatter Figure 1 provides a map of the 17 counties that comprise the morning peak pattern, with its peak truck volume reached between PANYNJ 17-County Metropolitan Region. Figure 2 outlines the 8 and 9 a.m. As with the George Washington Bridge, trucks at major truck corridors in the region, and Figure 3 shows the crossings Goethals Bridge consist mainly of large trucks, with their share in relation to the major regional port facilities. These maps show how accounting for 50 to 80 percent, depending on the time of day. crucial the interstate transportation facilities are to the ﬂow of com- This pattern is evident at all six crossings, with each facility dis- mercial traffic within the region, providing the primary road link playing a peak period during the morning hours, though the timing between New York City and Long Island on the one hand and New and spread of the peak may vary. It is interesting to note that except Jersey and other points to the west on the other. Further, a signiﬁcant for the George Washington Bridge and the Lincoln Tunnel, the peak volume of traffic bound for New England also uses various interstate hour for trucks typically is 1 h earlier than for all traffic. Overall, crossings, particularly the George Washington Bridge. the data imply that a signiﬁcant proportion of truck traffic already Table 1 outlines the average weekday eastbound traffic volumes tries to avoid the periods of peak congestion by making use of the for each of the crossings (or southbound in the case of the Bayonne peak-period “shoulders.” Despite this use of prepeak periods, the Bridge). Since PANYNJ currently imposes tolls only in the east- heaviest truck traffic still occurs between 5 and 8 a.m., contributing bound direction, our analysis is focused on eastbound traffic pat- signiﬁcantly to congestion at the crossings. terns and the possibility of influencing the morning eastbound peak through value pricing. As shown in Table 1, truck traffic is a significant proportion of TOLLS AT INTERSTATE CROSSINGS AS total vehicle traffic at the crossings. Also included in the table is a PROPORTION OF GENERALIZED COST OF TRAVEL more accurate measure of the contribution of commercial traffic to congestion. This is obtained by converting the truck population Trucks face a current toll in the eastbound direction of $4 per axle, into personal car equivalents (PCEs), in which large trucks typi- which equals $16 for the typical large truck. How important is this cally are each given values of 3 car equivalents and small trucks toll as a percentage of the generalized cost of travel (GCT) facing 2 car equivalents. It is calculated that in terms of PCE, the share trucks making a peak-period interstate crossing? The question is of of total traffic accounted for by trucks is over 23 percent for the interest, since a congestion surcharge that only marginally affects George Washington Bridge, 10 percent at the Lincoln Tunnel, and the GCT may not signiﬁcantly change the behavior of these trucks, nearly 25 percent at the Goethals Bridge. while a surcharge that affects the total GCT to a considerable degree In terms of patterns by time of day, Figures 4 through 6 show the should be more likely to do so. hourly patterns for this weekday eastbound traffic, by vehicle type In order to carry out the analysis rigorously, the Port Authority’s for three representative facilities. Note that the data again are dis- Interstate Network Analysis (INA) model was used. The INA model aggregated into small trucks and large trucks of more than two axles. is a regional road network assignment model that covers the entire FIGURE 1 PANYNJ 17-County Metropolitan Region. FIGURE 2 Major truck corridors in the Port Authority of New York and New Jersey metropolitan region. FIGURE 3 Port Authority interstate crossing facilities and regional port facilities. TABLE 1 Daily Eastbound Traffic at PANYNJ Interstate Crossings, Typical 1998 Weekday 68 Paper No. 00 -1112 Transportation Research Record 1707 pocket toll expenses. For example, the estimate for the GCT for trucks traveling between Bergen County, New Jersey, and lower Manhattan during the peak period is $56, while the GCT for the longer trip between Bergen County and Nassau County on Long Island is over $92. Not surprisingly, the highest GCTs are for the relatively long trips between Orange County, in the Hudson River Valley, and the various destinations in New York City and Long Island, or those between Middlesex County, New Jersey, and Nassau County. FIGURE 4 Weekday hourly percentage of daily traffic, George Washington Bridge eastbound. The relative importance of the interstate crossing tolls as a propor- tion of GCT then is calculated for the same origin-destination pairs, as outlined in Table 3. As expected, the $16 toll is a fairly high pro- portion of short trips, such as those between Bergen County and lower Manhattan, but a smaller proportion of longer trips. For example, for trucks traveling between Middlesex County and Nassau County on Long Island, the $16 toll is equal to 10 percent of the GCT. In this case, even a doubling of the toll would only raise the total trip cost by 10 percent. However, doubling the toll for trips between Bergen County and lower Manhattan has a more pronounced effect, increasing total trip cost by 29 percent. A tentative conclusion of the analysis is that, while signiﬁcant for FIGURE 5 Weekday hourly percentage of daily traffic, Lincoln Tunnel eastbound. certain trips, it is not clear that a peak-period congestion surcharge would entail such a large increase in the total trip cost. It also is worth considering how politically feasible a doubling of peak-period tolls would be. If not, smaller congestion surcharges would obviously PANYNJ region as well as several counties in Connecticut and the have even smaller effects on behavior. Further, if other types of costs Hudson Valley region of New York State. (The INA model contains were accounted for, the relative importance of the congestion sur- several hundred origin-destination pairs, with estimates of the peak- charge might be even more reduced. For example, what costs would period and off-peak-period traffic volumes on each of these pairs. The be incurred by trucking ﬁrms if they were to shift operations to empha- model uses detailed information about the road network to calculate size off-peak movements? Further, is the GCT even the appropriate the likely route, travel time, and travel distance for traffic on each of measure of shipping costs facing ﬁrms? the origin-destination pairs.) With the use of the INA model, an esti- mate was derived of the total peak-period travel time for trucks mak- LOGISTICS COSTS: BEYOND GCT AS INDICATOR ing trips between each origin-destination pair contained in the model. OF SHIPPING COSTS This estimate also was combined with an estimate of the total distance traveled on each origin-destination pair. After reasonable estimates An important point regarding the estimate of GCT is that these were assigned for the value of time of trucks and vehicle operating cost estimates include only factor costs involved in making the various per mile, estimates of the peak-period GCT for all origin-destination eastbound trips, namely, crew-time costs, vehicle operating costs, pairs were derived. Since the INA model also accounts for tolls, the and tolls. As such, they reflect the costs incurred by trucking firms estimates included tolls charged at the interstate crossings. in bringing deliveries to their clients; and given the competitive Table 2 outlines estimates of the GCT for selected origin- environment in the industry, these costs, along with the appropri- destination pairs that use the interstate crossings. For ease of pre- ate markup for profit, will approximate the basic shipping rate the sentation, the very precise (and numerous) origin-destination pairs clients will pay. have been aggregated to county level, except for the case of Man- While the estimated GCT may be a good indication of the basic hattan, which is separated into several zones. In these calculations, the shipping rate faced by the producing ﬁrms that are users of freight- INA model produced estimates of the least-cost route available given shipping services, the shipping rate is only part of the consideration the volume of traffic on the entire network for each of the origin- facing producing ﬁrms in their decisions regarding shipping. Since the destination pairs. Trips along these least-cost routes then were given demand for shipping services is itself derived from the demand for the a cost in terms of travel time, vehicle operating costs, and out-of- goods or services of the manufacturing, service, or retail ﬁrms (3), FIGURE 6 Weekday hourly percentage of daily traffic, Goethals Bridge eastbound. Vilain and Wolfrom Paper No. 00 -1112 69 TABLE 2 Average Generalized Cost of Travel for Trucks During the Morning Peak Period for Selected Origin-Destination Pairs other considerations become extremely important. For example, as costs are further reduced by having deliveries of goods made at the noted by Allen et al. (6), the reliability of the delivery time of ship- start of the business day. ments can be signiﬁcantly more important than the shipping rate for The fact that the logistics costs are a more appropriate measure of the producing ﬁrm. The importance of reliability is due to various fac- true shipping costs is demonstrated in studies estimating the observed tors, including its impact on the amounts of safety inventory required value truckers themselves place on time savings in transit. Since or the risks of disruptions to the production process of the producing truckers need to respect the wishes of their clients at least in part, one ﬁrms. Reliability also is crucial in reducing the risk of perishability of would assume that the value they would place on time savings would goods or even affecting the producing ﬁrm’s reputation due to delay reﬂect in part the value their clients place on reliability. This “sub- in its own deliveries. jective” value of time that truckers express, either through surveys or The total logistics costs for shipments therefore should include through their actual behavior, therefore should be higher than the the shipping rate charged by the trucking ﬁrm as well as the inven- simple factor costs (wage rates, vehicle operating costs, and tolls) tory costs for goods while in transit and the “excess” inventory that that comprise the GCT. As reported by De Jong in a review of sev- is necessary to guard against unreliability in deliveries (6 ). As an eral studies, the subjective value that truckers place on their own time example of the last item, consider a manufacturing ﬁrm that must usually is signiﬁcantly above the GCT (7). This presumably reﬂects always have several costly components in inventory, as running out the fact that these truckers are giving a value to their time that incor- would severely disrupt production. If deliveries were made with cer- porates, at least partly, the more extensive logistics costs that matter tainty at a given date and time, the inventory costs of holding these most to their clients. extra components could be reduced signiﬁcantly. Similarly, con- A major finding from the interviews with trucking operations sider the example of the supermarket that must always keep a buffer was that logistics costs usually are far more important to producing inventory of 378 L (100 gal) of milk to avoid running out and los- ﬁrms in the region than mere shipping rates. This is due to the fact ing customers. Again, deliveries made with certainty at a particular that the potential disruption to production, or loss of retail sales, time can allow the supermarket to hold a smaller buffer inventory, from having a delay in delivery time has attendant costs that far out- reducing these inventory costs. Note that in both cases, inventory weigh the magnitude of the shipping rate. This explains a point that TABLE 3 Tolls as a Proportion of Generalized Cost of Travel for Trucks During the Morning Peak Period 70 Paper No. 00 -1112 Transportation Research Record 1707 was mentioned repeatedly by trucking ﬁrms during the interviews: (The interviews did involve an exercise in which interviewees were customers (in other words, the producing firms that have goods presented with a series of congestion-reduction policies and asked to shipped) usually insist on deliveries in quite narrow time windows. estimate their response to the strategies. The strategies proposed The reasons for this is that morning deliveries are crucial to ﬁrms included various pricing scenarios. However, the exercise produced concerned with reducing inventory costs as well as maintaining a only a limited sample of quantitative data and therefore will not be smooth ﬂow of production while minimizing the amount of wasted presented in this paper.) or idle labor. Not surprisingly, the impetus to reduce inventory costs is encouraged further by the high cost of real estate in the region. • As suggested by the data in Figures 4 to 6, a signiﬁcant pro- portion of commercial traffic tries to avoid the most congested part of the peak period. Trucks making an off-peak crossing do so SELECTING FIRMS TO BE INTERVIEWED because they can. For example, trucks making a longer trip between southern states and New England can time their trip so as to avoid The interview approach used contrasts with the typical stated- the peak period if they use the PANYNJ facilities. Alternatively, preference study, in which a large number of fairly short interviews truckers making pickups or deliveries to 24-hour facilities also ben- would be administered to drivers, presumably at the point of mak- eﬁt from increased ﬂexibility in their time of crossing. Trucking ing the interstate crossing. Here, a selected group of 50 trucking ﬁrms are more aware than anyone of the increased cost of conges- firms was interviewed, with the interview conducted with various par- tion that can be expected with a peak-period crossing, and whenever ties intimately knowledgeable about current shipping practices as well possible they will try to avoid the peak. Various factors conspire to as the constraints imposed by the demands of their clients. force truckers into the peak, however. Some are examined here. The selected ﬁrms comprising the sample were chosen to be rep- • The single biggest constraint in avoiding peak-period interstate resentative of users of the interstate crossings during peak periods. crossings are customers. This constraint applies to all segments of An estimate of some of the characteristics of peak-period commer- commercial traffic to varying degrees, whether for-hire or private car- cial users of the interstate crossings was derived from a windshield riers. Most customers require a particular level of service, includ- survey at three of the six crossings. These three crossings—the ing deliveries during working hours. This is particularly the case George Washington Bridge, the Lincoln Tunnel, and the Goethals for trucking ﬁrms making express overnight deliveries, as their main Bridge—each serve a different segment of the population using the reason for being is precisely to make deliveries early in the working crossings. The George Washington Bridge serves what is commonly day. In general, customers want their deliveries in the morning and known as the Northern Corridor into Manhattan, the Lincoln Tun- pickups in the afternoon. This makes sense in the context of inventory nel serves the Midtown Corridor, and the Goethals Bridge serves the cost minimization, in which ﬁnished goods are shipped out rapidly, Southern Corridor into Staten Island. and goods are delivered for use in production or sale at the start of the The truck population was broken down into for-hire carriers working day. [including less-than-truckload (LTL), truckload (TL), and drayage] It should be noted that “just-in-time” inventory management is a and private carriers. The segmentation was based on visual identiﬁ- signiﬁcant factor cited by many of the ﬁrms interviewed, not only cation of certain characteristics (carrier name, size of truck, origin, with respect to manufacturing ﬁrms but also various types of retail. commodity shipped), and was to a degree arbitrary and possibly It is not surprising that inventory management and cost minimization imprecise. However, with these caveats in mind, it was estimated that, would be so prevalent in a region where real estate costs are high. depending on the facility, between 22 and 47 percent of the trucks There may be an increase in after-hours operations for warehouses using the crossings are LTLs, and most of the remainder are TLs (with and some grocery facilities, but such delivery ﬂexibility still charac- drayage a fairly small proportion of the volume). Differentiating terizes a limited share of the customer base of most truckers. For between LTL and TL trips was based on a variety of factors, includ- example, most large grocery stores require deliveries in the morning, ing name recognition of large carriers. Deduction also was used to dif- typically in an 8-to-10-a.m. window, which in turn allows for shelv- ferentiate. For example, a two-axle panel truck with local plates doing ing by the larger daytime staff. Smaller grocery stores, including the business as “XYZ Express Lines” would be assumed to be an LTL ubiquitous deli, are much more ﬂexible in delivery times. Given their trip, whereas a ﬁve-axle truck with nonlocal plates usually would be longer hours, these stores have staff on hand to accept deliveries at assumed to be a TL trip. times when large stores refuse deliveries. However, these stores still With respect to the origin of the trucks, visual inspection of the are relatively limited shares of the customer base of the typical trucker vehicle license plates revealed that, depending on the facility, be- making retail deliveries, and the typical delivery route between New tween 73 and 91 percent of the trucks were local (in other words, from Jersey and New York usually must include deliveries to large stores either New Jersey or, to a lesser extent, New York). These observed in the 8-to-10 a.m. window. characteristics of commercial traffic during the peak period were the There are, of course, items that are less time sensitive, and delivery basis for the selection of interview ﬁrms. For example, a large major- of these goods may provide more ﬂexibility. For example, newsprint ity of ﬁrms interviewed were based in New Jersey, and the break- requires a period to adapt to the temperature of the printing environ- down between for-hire and private carriers was representative of ment. Clearly, a delivery of this commodity does not need to coincide peak-period commercial users. with the start of the business day. But a trucking operation involved in delivering newsprint, interviewed during the study, is perhaps typ- ical: it already is taking full advantage of the ﬂexibility provided by FINDINGS OF INTERVIEWS the commodity, making off-peak movements whenever possible. • Important restrictions facing truckers also included pier oper- A summary of interview ﬁndings is outlined here, grouped by theme. ating hours, neighborhood curfews, and union-negotiated hours of Note that no attempt is made to attach a numerical value or statisti- operation. The region’s maritime terminals typically operate between cal signiﬁcance to any of the responses elicited during the interviews. 6 a.m. and 5 p.m., which generally moves truckers into peak-period Vilain and Wolfrom Paper No. 00 -1112 71 crossings. For example, New Jersey truckers making pickups at the highly competitive nature of the trucking industry, it is not surpris- Howland Hook Marine Terminal in New York City would almost ing that an operating cost increase would be passed on to customers. certainly make an eastbound interstate crossing no earlier than 5 a.m. However, it is not clear that the rate increase would be passed on to Crossing any earlier would simply mean that drivers would be idle, only peak-period deliveries. The fact that an interstate crossing is waiting at the terminal until it opens. Neighborhood curfews were typically followed by several deliveries would mean that the increased mentioned by some ﬁrms as posing restrictions to evening deliveries rate would probably be uniform regardless of the time of the actual or pickups, principally to some retail stores in residential neighbor- delivery, reducing the effectiveness of a congestion surcharge. The hoods. In terms of labor rules, some of the ﬁrms interviewed oper- reason for this is simple: If a trucker were to make a peak-period ated under union contracts, which sometime stipulate the hours of crossing and pay a congestion surcharge, which subsequent delivery operation. In the case of one trucking ﬁrm, a union contract stipulated should absorb the surcharge? Would the 10 a.m. delivery be charged hours of operation starting at 8 a.m., which would guarantee traveling more than the noon delivery? Would this be feasible, particularly if during some of the more congested parts of the peak. the timing of the particular delivery really reﬂected the scheduling • The more time sensitive the goods delivered, the less likely the preferences of the trucker? For example, ﬁrms located in Manhattan impact of a congestion surcharge. In general, ﬁrms with highly time- near the interstate crossings typically receive deliveries earlier in the sensitive deliveries will be unlikely to switch their delivery times. working day, as they are the logical ﬁrst deliveries for a truck com- This is particularly true of express delivery services guaranteeing ing into New York City from New Jersey. Following the imposition overnight deliveries. As also reported in Golob and Regan, this seg- of a congestion surcharge, should these ﬁrms then pay a higher deliv- ment of the market may well favor some forms of congestion sur- ery rate than those located in Queens or Brooklyn, which, because of charges if they lead to reductions in the peak-period congestion that their location, may be scheduled for later deliveries? they cannot avoid (8). For this segment, the reduction in peak-period Given the difficulties in assigning a peak-period surcharge to spe- congestion (and presumably, variability in travel time) would be a ciﬁc deliveries, it appears likely that trucking ﬁrms would continue valuable commodity worth the surcharge. to charge a uniform rate, albeit a higher one, to all customers. If the An interview with an express shipper was particularly enlighten- delivery charge to individual ﬁrms would fail to reﬂect the conges- ing. The regional operations manager of the company was quite ada- tion surcharge at the crossing, part of the purpose of the surcharge mant in stating that the company would be happy to pay for various (namely, encouraging ﬁrms to opt for later or earlier deliveries) congestion mitigation strategies (notably, hypothetical “truck only” would not be accomplished. lanes at various crossings). To them, the value of reduced uncertainty • Rates currently charged by trucking ﬁrms do reﬂect the different in travel times is high, particularly as their business involves quite costs attributable to deliveries at different locations but not different strict delivery windows. For this reason, off-peak discounts (includ- delivery times. For example, a trucking ﬁrm based in New Jersey was ing those currently offered by the New Jersey Turnpike) are of no use. found to charge $200 to $225 for deliveries between Port Newark and The service they offer simply does not allow rescheduling deliveries Carteret, New Jersey, as opposed to $375 to $425 for a delivery to to avoid the peak period. Maspeth, Queens. Although such rate differentiation based on loca- • It is not clear that there are sufficient incentives for many ﬁrms tion is the norm, no rate differentiation based on time of delivery to accept evening, night, or early-morning deliveries. The imperative was used by any of the 55 ﬁrms interviewed, even though an 8 a.m. to minimize inventory costs, particularly of perishable goods, makes delivery is arguably more expensive in time and resources than a early-morning deliveries at the start of the business day optimal for 2 p.m. delivery. As mentioned previously, a major reason for this is many, if not most, businesses. Off-hour deliveries, on the other hand, undoubtedly that trucks typically make more than one delivery typically entail the added costs of extra workers, possibly at higher along a route. Given this fact, it becomes difficult to pinpoint which hourly rates. Would any congestion surcharge ever be enough to delivery should be charged more, particularly as the actual delivery motivate this type of reorganization? For example, it is interesting time may be due to the trucker optimizing the efficiency of his or her to note that there are essentially no off-hour deliveries made to ﬁrms delivery schedule rather than customer preferences for a particular in the garment district in midtown Manhattan, even though these delivery window. firms are located in a very congested part of New York City. In the • The lack of alternatives to the interstate crossing facilities implies words of one manager at a trucking ﬁrm specializing in deliveries to that peak-period surcharges would not lead to signiﬁcant deviation the garment sector, “Nighttime deliveries will never happen there.” toward other routes. Trucking operations are keenly aware of tolls Although one can argue with so categorical a conclusion, it is still and, where practical, will try to avoid them to minimize their costs. clear that garment firms do not find it in their interest to reorient If they can select a route that avoids tolls while not adding on more operation in order to accommodate off-hour deliveries. costs in terms of time and operating costs, they will choose it. How- • Even if most customers were willing to accept deliveries after ever, as can be seen from Figures 2 and 3, there are relatively few 10 a.m., it is not clear that truckers would choose to postpone their options for avoiding the tolls at the interstate crossing facilities, with time of crossing. Truckers making an interstate crossing may have a the Tappan Zee Bridge the main alternative eastbound crossing. This route that will take them to various customers, ending the working implies that although trucking operations do look to avoid toll charges day by 4 or 5 p.m. In order to optimize the revenue from the route, it if it is efficient to do so, it is unlikely that limited peak-period toll makes little sense to wait for the peak period to end before making surcharges, for example, would lead to signiﬁcant traffic deviation. the crossing. In the words of an operations manager for a ﬁrm mak- • In general, the interviews suggested that the response to conges- ing retail deliveries, “Nobody leaves after 6 a.m.—it’s just not worth tion surcharges would be relatively modest. When faced with hypo- it to them.” Similarly, trucks leaving at 3 or 4 a.m., while avoiding thetical peak-period congestion surcharges of up to 100 percent, most signiﬁcant congestion, would ﬁnd themselves in New York City with operations managers indicated their response would be fairly mini- no one open to accept deliveries. mal. Notable exceptions included trucking ﬁrms that deliver fairly • Many (but not all) of the trucking ﬁrms indicated that a conges- time-insensitive items to wholesalers and smaller grocery stores. One tion surcharge would be passed on as higher delivery rates. Given the such ﬁrm indicated that a 50 percent surcharge (which would raise the 72 Paper No. 00 -1112 Transportation Research Record 1707 toll to $6 per axle) would lead to a shift of 30 percent of peak-period A tentative conclusion of the analysis is that “realistic” value- crossings to the off-peak, while a 100 percent surcharge would lead pricing scenarios may result in only modest changes in behavior by to a 50 percent shift. This response was the most extreme of all the commercial traffic. The costs of shifting to off-peak are apparently ﬁrms interviewed. too high in most cases. Further, it is not clear that a congestion sur- charge would not simply be passed on to customers as a uniform rate increase, regardless of the delivery time. In this case, one of the CONCLUSIONS implicit objectives of a congestion surcharge, making the customer assume the marginal social cost of the peak-period delivery, would An analysis of available data reveals that commercial traffic using not be achieved. the PANYNJ interstate crossings does try to spread its peak period The present research suggests a relatively inelastic peak-period to a degree. However, even despite these efforts, the hours of heavi- demand for commercial users of the interstate crossings. Although est use of the crossings are similar to those of other vehicle types, this implies modest changes in peak-period volumes under the sug- meaning that commercial traffic is a major contributor to peak-period gested levels of value pricing, this does not necessarily argue against congestion. such policies. The general impetus for value pricing is to try to ensure Would commercial traffic respond to value pricing? An analysis that users pay a charge that approximates the marginal cost of their of the generalized cost of travel facing trucks using the crossings trip. Whether traffic volumes are significantly altered in the pro- revealed that current tolls account for between 10 and 29 percent of cess is not necessarily the only yardstick for imposing this type of the GCT, depending on the origins and destinations. Assuming a pricing. doubling of the tolls were politically feasible, this would increase the total GCT by 10 to 29 percent. Given the highly competitive nature of the trucking industry, it is assumed that these costs would REFERENCES be mostly passed on to producing ﬁrms. However, the factor costs that make up the GCT are only one aspect of the logistics costs fac- 1. Vickrey, W. Congestion Theory and Transport Investment. American ing producing ﬁrms, for which the costs of switching to off-peak Economic Review Papers and Proceedings, Vol. 59, No. 2, 1969, deliveries may far outweigh the higher peak-period tolls. pp. 251–260. Therefore, it is not surprising that the single most important con- 2. Keeler, T., and K. Small. Optimal Peak-Load Pricing, Investment and Service Levels on Urban Expressways. Journal of Political Economy, straint facing truckers is delivery windows imposed by customers. Vol. 85, 1977, pp. 1–25. These delivery windows tend to force trucking operations toward 3. Hau, T. Economic Fundamentals of Congestion Pricing: A Diagrammatic peak-period interstate crossings. Delivery windows are most bind- Analysis. Policy Research Working Papers WPS-1070. The World Bank, ing in the case of express overnight delivery; however, some trucking Washington, D.C., 1992. 4. Kain, J. Impacts of Congestion Pricing on Transit and Carpool Demand and firms reported that extremely rigid delivery times are sometimes Supply. In Special Report 242: Curbing Gridlock: Peak-Period Fees to imposed by some manufacturers and retailers as well. Other factors Reduce Traffic Congestion, TRB, National Research Council, Washington, that constrain the ability of trucking operations to shift to off-peak D.C., 1994, pp. 502–553. deliveries include the operating hours of piers, curfews, and, in some 5. Allen, W. B. The Demand for Freight Transportation: A Micro Approach. instances, union regulations. Transportation Research, Vol. 2, 1977, pp. 9–14. 6. Allen, W. B., M. M. Mahmoud, and D. McNeil. The Importance of Time Another constraint in avoiding peak-period interstate crossings is in Transit and Reliability of Transit Time for Shippers, Receivers and due to regional geography. Typically, a trucking ﬁrm making an east- Carriers. Transportation Research B, Vol. 198, No. 5, 1985, pp. 447–456. bound crossing will do so early enough to be able to schedule a prof- 7. De Jong, G. Freight and Coach Value of Time Studies. Presented at Pub- itable number of pickups and deliveries in New York City and Long lic Transportation Resources Council Seminar on the Value of Time, Island. This will always force the crossing into the peak period, as London, 1996. 8. Golob, T. F., and A. C. Regan. Freight Industry Attitudes Towards Poli- waiting until 11 a.m. to cross simply will mean postponing the begin- cies to Reduce Congestion. Presented at 78th Annual Meeting of the ning of deliveries. Given the constraints imposed by customers, this Transportation Research Board, Washington, D.C., 1999. really translates into losing half the working day. Likewise, crossings made before 5 a.m. translate into drivers being idle, even if deliveries Publication of this paper sponsored by Committee on Urban Freight Trans- begin in Manhattan as early as 7 a.m. portation and Committee on Taxation and Finance.
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