The value of freight travel time savings and reliability improvements - recent evidence from Great Britain

Various studies, in Great Britain and elsewhere, have been conducted into the willingness to pay for freight service quality improvements, but not all have yet made it into the public domain. These studies have clarified some matters, but these have not yet been stated clearly in a public document, and this paper seeks to rectify that. In particular, a study involving roughly 100 face to face interviews with distribution managers and other logistics decision-makers of large UK firms was conducted in the Autumn/Winter of 2003/4 by Booz Allen Hamilton and ITS Leeds for the British Strategic Rail Authority, and we understand that its report is shortly to be made available on the UK Department for Transport's website. One half of this study was centred around almost 50 interviews with the Leeds Adaptive Stated Preference (LASP) methodology. The paper will draw heavily on those results, supported by earlier LASP findings (principally those on delay valuation for the GB Highways Agency), the results from the other half of the 2003/4 study and recent international findings. The principal lesson is that we should consider the implications of reduced scheduled journey times and of reduced variability in journey times under three headings. The first implication is the reduced cost in terms of (non-labour) vehicle operation. This will largely depend on how the time saving is achieved. If it is by removing a bottleneck that was causing start-stop driving then fuel consumption and noxious emissions may be improved. If, on the other hand, the free flow speed is increased, then the vehicle may now be working harder than its most efficient and with air resistance increasing with the square of speed, the fuel efficiency may be worsened, with consequential increased problems from emissions. Note that measures to increase free flow speeds will result in no time savings from vehicles already travelling at their desired maximum speed. The second heading is the cost of the drivers. Normally, time savings and delays can be valued at the gross wage rate. However, severe delays may occasion overtime payments and may even cause the driver to 'run out of hours' and legally be required to take a rest. On the other hand, if the movement in question is part of a 'peak vehicle requirement', getting the driver and lorry free earlier may be of no value if there are already surplus drivers and vehicles at that time. These points suggest that we should expect strong non-linearity and asymmetry in valuations and threshold effects. The third heading is the benefit to shippers/receivers of getting goods to destination more quickly. Historically, the UK DfT official methodology has not incorporated this aspect into the values of travel time saving used in appraisal. However, the evidence that the value placed on this is non-zero for many commodity type movements is now compelling, and it is high time for official thinking to change. The same argument applies for unexpected delays. The paper will set out the empirical evidence, with a view to demonstrating its robustness. All the above has implications for freight value of time surveys. An own-account operator will face all the above costs and we can hope that they will report them correctly in a survey. Conversely a freight shipper paying a sum of money to have their goods moved, by whatever mode, will only place a value on the third heading above, having no direct interest in vehicle or driver costs. In practice, many shippers will have some experience of own-account movements or will read through into how the charge they have to pay to their haulier/3PL is related to vehicle and driver costs, and so may include some element of those costs in their response. Conversely, freight hauliers are only directly concerned with the first two headings, though they may appreciate that the shipper would be willing to pay a higher rate (on account of heading three) if the journey were made quicker and more reliable. Careful consideration of these points is called for when designing surveys and interpreting responses. For the covering abstract see ITRD E135582.