Master of Science Thesis STOCKHOLM, June 2009

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3 TEC-MT Cost Model for Pre-and-Post Haulage Road Freight Transport to and from the Intermodal Terminal Master of Science Thesis STOCKHOLM, June 2009 KAZI SAZZAD HOSSAIN Division of Transportation and Logistics KTH Railway Group

4 Contents Preface... 4 Summary Introduction Background Goal, Purpose and Scope Methodology Literature Study Intermodal Transport Pre and post Haulage (PPH) Costs Classification in Freight Transport Activity Based Costing (ABC) Freight Transport Model Transport Regulation and Constraints Structuring PPH road freight transport Overview Operational Planning and Management Cost Allocation Reposition Empty Return Cost Calculation and Cost Model Structure Truck Operating Cost Cost per Loading Unit Empty Run Factor and Cost Cost Model Structure Validity of Cost Function and Examples of Result Data Source Data Analysis on 3-Axle Trailer Data Comparison and Verification Examples of results Discussion and Conclusion Strategic and Methodological Issue

5 6.2 Conclusion Appendices Appendix-1: Purchase Price Appendix -2: Driver salary Calculation Appendix-3: Overhead Cost Calculation Appendix-4: Fuel, Tyre, Repair and service Appendex-5: Calculating cost summery Appendix-6: Validating results Appendix- 7: Regression Analysis of LU status and Per LU cost (Distance) Appendix-8: Regression Analysis of LU status and Per LU cost (no of flows)

6 Preface I would like to convey my deepest gratitude to my thesis supervisors, Gerhard Troche and Anders Lindahl, for their rich consultation and sincere co-operation in developing my master s thesis. I am also grateful to the relevant authority to provide me necessary support in doing my thesis as well as completing my master program at KTH. Furthermore, I express my best appreciation to my office (where I am employed) chief Ms Marufa Ismat, from whom I have taken essential suggestions in some queries related to transportation economics. My thanks also go to all of my friends, to assist me in the study related issues and to give me heartfelt company in the daily activity. I am particularly thankful to Lars Ahlstedt to deliver his valuable assistance by giving necessary thesis relevant data and widespread knowledge. Again, I am obliged to my principal supervisor Gerhard Troche for his insightful guidance and cordial accompany beyond the thesis work. I especially express my final recognition to my wife Sonia for her extraordinary patience, and love and care for my son and daughter in my absence during two years study at KTH. Stockholm, June 2009 Kazi Sazzad Hossain hossaink@rhd.gov.bd 4

7 Summary Freight transport systems are characterized by the consecutive movement of goods between supply and demand points. Freight transport actually makes vital input to the economy and the society and performs as a key factor of globalization. Intermodal freight are recently utilizing as an efficient transport system in logistic market. Road transport is the leading sector in European transport which is apparently used as the pre and post haulage under intermodal transport chain to and from the intermodal terminal. Moreover, road freight vehicle is dominantly utilized in terms of better accessibility and flexibility for door to door collection and distribution of goods. The activity of freight transportation comprises all activities that require movements of goods. The transport companies are presently trying to establish a reliable and effective service on a suitable accounting structure in a high level of competition. The existing bottlenecks of short distance road transport need to be identified and has to derive a promising solution by all of the actors involved in transport chain. The goal of a truck company is to minimize their cost in relation to truck operation in a competitive market. The activities of operating a freight vehicle could be developed by proper vehicle routine and scheduling in pickup and delivery, organizing the flows in connection to satisfying customer s demand and managing different status of loading units, and to reposition empty movements. All of these activities have a better impact on lowering the operating cost of a truck company. The cost of operating a freight vehicle comprises various costs components like capital cost, fuel, repair and maintenance, tyre, driver, overhead costs such as administrative cost, license, insurance, tax and toll costs. The truck company needs to assign cost for various flows and actors as well. Improved planning, data exchange and organization of backloads can be achieved through a co-operation between shipper, transport companies and intermodal terminal operator. This paper will focus on the vehicle operation in feeder road freight transport. The aim of the study is to determine an activity based cost model for feeder road freight transport in accordance with estimating the operating cost per km for commercial vehicle operator. 5

8 1 Introduction 1.1 Background Freight transport market is growing fast due to increasing economic growth, business competitiveness and technological development. Freight transport apparently makes a vital input to the economy and the society, and is at the heart of the globalization. Intermodal transport has considered as sustainable and efficient transport system in freight market. In a competitive situation between traditional all-road transport and intermodal transport, the lack of tools in relation to cost, infrastructure and technology are going to be recovered to promote the intermodal transport. To offer more flexible freight services, intermodal service operators need to provide both speed and reliability for door to door time sensitive traffic. The data on freight transport activity by ton-km illustrated in the figure below. Freight transport activity in railway and sea is more or less constant in terms of several years while road transportation rises gradually. In the last two decade, road freight transport shows the trend to increase its activity substantially. Figure-1.1: Freight transport activity in ton-km in Sweden (Source: Statistics Sweden (SCB)) 6

9 Intermodal transport constitutes a combination of at least two transport modes to form a transportation movement. The movement of consignment carried out in a sequence of activities such that loading a consignment, pre-haulage to the terminal, handling near to the shipper, the main haulage, and terminal handling close to to the consignee, the post haulage and finally receiving consignment 1. Road transport is dominantly used for better accessibility and flexibility to pickup and delivery of goods. Road transport is typically allotted as pre and posthaulage (PPH) to and from the main terminal. In contrast to rail and waterborne transport, road transport is especially suitable for collection (from consignor) and distribution (to consignees) of freight. Figure- 1.2: Inter-modal transport chain ( Hossain, K.S.) Road transport represents a moderately big share of intermodal transport costs. Road haulage companies largely incur costs in respect of owning and operating a vehicle (delivering taxes), vehicle movement, and loading and unloading goods. Pre and post haulage carry out a heavy load on door-to-door intermodal transport due to short distance in comparison to long distance all road transport. Researcher found that the cost of inefficient pre-and post-haulage process adds upto 37% to the cost of intermodal transport in typical markets 2. Cost in connection to PPH can be reduced by providing better plans for PPH operation and improving vehicle load factor, reducing vehicle waiting time in main terminal, better co-ordination between shippers, hauliers and intermodal operators. Moreover, an empty vehicle with return haulage is presently a tough issue for freight carriers. Pre and post haulage improvement can lead to a 1 RECORDIT. Actions to promote intermodal transport 2 Wicher,J., Weidmann,U., Fries,N., Nash, A. Strategies for increasing intermodal transport between eastern and western Europe 7

10 substantial growth of intermodal transport. The modeling of cost in freight market keeps in touch with the representation of economic activities of a region, production, consumption, import and export of goods. Consequently, it is necessary to come up with realistic and innovative solutions the existing problems and bottlenecks. A strategic planning tool arises from a model can reproduce current situation and to produce robust analysis of future. Therefore, it is important to formulate a cost algorithm or model which will deliver an optimum solution to overcome those obstructions of pre and post- haulage potential transport movement. 1.2 Goal, Purpose and Scope Goal The goal of this thesis is to develop an activity based cost model for pre and post haulage freight transport to enhance the vehicle operation in relation to market competitiveness of intermodal freight transport system Purpose The purpose of this thesis paper is to present a model which makes it possible to improve pre- and post haulage vehicle operation of intermodal transport chain to come up a promising solution for the present bottlenecks of pre and post haulage to provide some strategic tools for the transportation firms for future planning of vehicle operation Scope & Delimitation a) Scope The scope of this study lies in the intermodal terminal catchment area and the concerning road network for PPH transportation. Different activities and the resources of the PPH vehicle operation will be taken into account for analyzing the respective production system. Moreover, the present practices of short 8

11 distance freight transportation in Europe particularly in Sweden will be focused in defining different strategy. b) Delimitations The pre and post haulage cost model under consideration will establish the costs by business-economic perspective of the shipper. Among different activities of transportation chain this paper will concentrate on the vehicle operation on the road. However, the price for the customer will beyond the scope of this study. Furthermore, the external costs will also be excluded in the concerning model as it does not influence truck operator s pricing. 1.3 Methodology Freight transportation systems are characterized by the successive movement of goods between supply and demand points, performance measures and decision criteria- and their interactions. To prepare the concerning model the activities are as follows: Literature study Analyse the product and production systems in feeder transportation Identify and define the cost relevant activities and cost drivers for those activities Prepare module for different activities in developing vehicle operation Assigning costs for various flows and resources of freight transportation Formulate a function for calculating per unit costs in vehicle operation Constructing cost model structure Validate the model by a case study The underlying cost model will be formulated on the basis of activity based cost (ABC) approach by defining cost relevant activities carried out by the truck company. The cost drivers will be identified and will be assigned to the activities and activities will be allotted to cost objectives i.e. trucks, services, or customers on the basis of usage of the activities. 9

12 2 Literature Study Three basic elements: goods, vehicle and infrastructure are organized in this transport chain 3. These three elements interact in pair in three different subsystems. Among these subsystems, firstly, it contains the activity system` which constitutes all activities that is needed for the movement of goods, secondly, the transport system` where the demand for transport service is harmonized by vehicle operation. Finally in the traffic system represents the physical movement of vehicle where the traffic units absorb infrastructure facility. Figure- 2.1: Activity, transport and traffic system. Source: (Sjöstedt, 1994) 2.1 Intermodal Transport In a freight transport, the shipping of goods can be carried out from the point of origin to the point of destination by more than one mode of transport. The distinct modes of transport are: road, rail, inland waterway, maritime, air freight transport where intermodal transport utilizes the suitable combination of these different modes on the basis of geographic location. The basic criterion for intermodal transport is accomplished by integrating at least two modes of transport in a single transport chain, without a change of loading unit for the 3 Behrends,Sönke (2008). Empowering urban freight and intermodal transport for sustainable mobility 10

13 commodity. In this point of view, intermodal transport has been defined as follows: The movement of goods in one and the same loading unit or vehicle which uses successively several modes of transport without handling of the goods themselves in changing modes 4 According to the above definition the following condition need to be fulfilled in intermodality: Set up two or more different transport modes (lorry, train, barge, ship, plane) A change in the load unit does not require a reposition of the carried goods themselves In the freight transport, intermodal transport is implemented as a component of a supply- demand chain where the truck companies supplies the demand by offering transportation resources. In the whole itinerary process, the shipper focused on just-in-time delivery and safety of his goods, and the transport company concentrates on the transportation cost and service efficiency of its vehicle movement Intermodal Transport Chain Intermodal transport chain constitutes a door to door delivery and pick up of commodity. The layout of this chain can be depicted as a sequence of activities which are as follows: Loading a consignment Pre-haulage to a intermodal terminal (typically road transport) Transferring loading unit to the terminal Main-haulage (rail, inland waterway, maritime transport) Moving loading unit from the main terminal Post-haulage (typically road transport) Receiving commodity by the consignee Different activity of intermodal transport chain described earlier can be addressed more precisely in the following diagram: 4 WORKFRET project( 1997). Working cultures in the face of Intermodal Freight Transport Systems 11

14 MAIN HAULAGE PRE- POST- HAULAGE CONSIGNOR Loading Goods HAULAGE Origin Transshipment INTERMODAL TERMINAL INTERMODAL TERMINAL Transshipment Destination Unloading Goods CONSIGNEE Figure-2.2: Layout of intermodal chain (Hossain, K.S.) The shipper or the consignee, road transport operator (for pre and post haulage) and the intermodal terminal operator are the main performers of transporting goods. Intermodal transport cost is the sum of costs of post and pre-haulage cost, terminal cost and main haulage cost activity. 12

15 2.1.2 Freight Transport Organization The movement of goods is organized by a truck company which is responsible to dispatch the commodities to the consignee in the whole transport chain. Different actors participate in different stages as a sequence of travel itinerary in the intermodal transport process. A forwarder acts as a key organizer for shipping goods on the basis of customer s demand. The whole transportation cost in the intermodal chain is carried out by the forwarder. CONSIGNOR Select freight forwarder FORWARDER OPERATOR Organise freight activity and contact operator Liable for carriage of goods by providing vehicles & drivers DRIVER Drives vehicles and may choose route CONSIGNEE Receives consignment Figure-2.3: Actors in shipping commodities (figure by Hossain, K.S.) Consignor: Need to send their commodity to the consignee and require transportation firm to distribute the goods. As such, the sender chooses a forwarder based on the price and reliability. Freight forwarder: Take the responsibility to manage the whole transportation of consignment. The forwarder coordinates with the sender 13

16 and receiver, the vehicle operator and the intermodal terminal operator and makes a schedule for the whole transport chain. Operator: The operator is liable for the carriage of goods by providing necessary freight vehicle i.e. truck/load carrier, loading units such as container, swap bodies, and trailer. The operators make a vehicle schedule, deploy a driver, and notify the transport links. Driver: Drives the vehicle from the predefine origin to the destination. He can choose the road link/route between two points if the link is not preplanned by the operator. Vehicle speed as well as the travel time depends on the driver s activity. Consignee: Entitle to receive the goods. Takes into account in-time deliberation and ensures quality of transported goods. 2.2 Pre and post Haulage (PPH) Pre and post haulage carry out as an initial and final leg of the intermodal transport (e.g. rail) chain. Pre and post haulage is recognized as an integral part of intermodal transport chain taking into account the complexity of the chain. PPH as feeder transportation, from and to the intermodal terminal, is typically provided by road transport companies. The numbers of intermodal terminal are limited in a region and each terminal has some catchment area in that region. The more terminal will produce shorter pre and post haulage legs. The shippers can transport their goods from their industries or warehouses to the consumers by utilizing a loading unit. These loading units are carried out by a truck or trailer as the initial transport chain and reaches to the customer s by executing minimum two transshipments in between. According to several studies, PPH costs compensate a substantial part of the total intermodal transport costs. Moreover, organization of PPH is one of the major bottlenecks of the logistic chain for small and medium-sized companies due to relatively high cost proportion as well as insufficient service level. The cost formation is same for both pre-haulage and pre-haulage though the cost figure differs in respect of distance, geographic location (urban/non-urban), and shipping time. An economic driver (e.g. cost reduction, service level improvement) can be implemented to improve the problems of PPH. The co-operation between different actors of pre and post haulage companies failed due to the competitive attitude of the road hauliers involved. 14

17 2.2.1 Load Carrier and Loading unit in PPH Road transport is efficiently used in pre and post haulage shipping to and from the intermodal terminal. Loading unit remains unchanged in different modes of transport and the respective transshipment. Different types of loading units utilize in the road transport considering the harmonization and handling convenience for terminal transfer in the intermodal terminal. Loading and unloading of commodity providing maximum permitted load need to be easy and safe in the distribution. The load carriers have to abide by some regulations in connection with vehicle dimensions and gross weight. Different loading units are: i) Container: A container is a specialized box specifically designed to facilitate the carriage of goods, by one or more mode of transport without reloading in-between. The container exploited as a standard and large loading unit transported by the truck in the land and commonly used in sea transportation. Container is designed according to the international standard which follows ISO. These ISO standard containers are equipped with bottom and top corner fittings, fork tunnels and grip-arm fittings which enable it to be handled by fork lift-truck or grip-arm equipped cranes and trucks. 5 Container is uniformly utilized as a heavy freight vehicle all over the world due to its length and height, horizontal or vertical transfers in the terminal. Different dimension and weights of container 6 Length : 40 feet, 30 feet, 20 feet and 10 feet Width : 8 feet Height : 8 feet, 8 1 /2 feet and 9 feet Gross weight : 30.5 tons, 25.4 tons, 24 tons, 10.2 tons Advantage of using containers: Terminal transfer time reduces due to increased loading and unloading speed with faster stowing Required less stuff for transshipment Cargo keep safe and undamaged during loading and unloading 5 Bergqvist, R and Esping, P (2002) 6 Nelldal, B.-L (2005) 15

18 ii) Swap Bodies: Mainly designed to be transported between land modes which is easier to be lifted or to be staked unlike ISO containers. Most swap bodies are built-in with four folding legs under their frame, to make it possible to change or to leave the swap body from at a destination, without needing to use a crane of some sort. Swap bodies have more doors and sliding panels compare to others which makes loading and unloading activity faster and easier in a wide variety of situation. The loads of several swap bodies are protected due to heavy curtain on the sides. Different dimension and weights of swap body 7 : Length : A type : 45 feet, 40 feet ;C type: 25 feet and 23.5 feet Width : feet Height : 8.8 feet and 9 1 /2 feet Gross weight : A type : 34 tons; C type: 16 tons In Europe, 8.4 feet (2.55 m) wide swap-bodies are generally used. A wide swap body of 8.5 feet (2.6 m) is permitted in Sweden. Furthermore, Swedish 83 feet (25.25 m) vehicle with 72 feet loading area length are efficiently used to carry 40 tons payload (gross weight 60 ton). A gross weight of 44 tons having the weight 16 tons each of swap-bodies is allowed in some EU countries e.g. in Germany to transport commodities to and from the intermodal terminal. Swap bodies are typically more than twice as expensive as equivalent payload of ISO containers in Europe. However, the initial purchase cost and long term fuel costs of swap bodies are lower than other loading units as swap bodies are usually build with lighter materials. Swap bodies are utilized as a most competent load carrier as it is flexible to handle and make the most of the capacity of both truck and railway wagon in road-rail intermodal traffic. iii) Semi-trailer: A semi-trailer is just a trailer without a front axle where the large proportion of its weight is beard by a road tractor or by a dolly, a detachable front axle assembly, or by the tail of another trailer. The trailers can be coupled and uncoupled quickly by allocating shunt for loading and to be trunked between depots. A road tractor connected to a semi-trailer named as semi-trailer truck or semi. Semi-trailers consists two trailer units called B-Doubles or Road Trains. A prime mover towing two semi-trailers are incorporated in a B-double where the first one is attached to the prime mover by a fifth wheel coupling and the second one is joined to the first one by a fifth wheel coupling. A Road train 7 Nelldal, B.-L (2005) 16

19 implies a combination, other than a B-double, comprising of a motor vehicle pulling as a minimum two trailers which is counted as a single trailer a converter dolly supporting a semi-trailer. Figure-2.4: Container Figure-2.5: Container Truck Figure-2.6: FRC Swap body Figure-2.7: Swap body vehicle Figure-2.8: Van semi trailer Figure -2.9: Semi trailer truck 17

20 Different dimension and weights of container 8 Length : 59 feet and 45 feet Width : 8.5 feet and 8.4 feet Height : 11.5 feet and 8.8 feet Gross weight : 41.5 tons and 32.5 tons Advantage of Semi-trailer: The turning circle of a semi-trailer truck is smaller than its overall length which makes it more maneuverable compare to rigid vehicle A semi-trailer can haul longer objects than a full trailer due to the longer overall length of the cargo bed A semi-trailer has greater load capacity because of the equal length of the composition Disadvantage: Semi-trailer are difficult to drive in snow and ice as they lose traction more easily than a straight truck It has a high centre of gravity since a semi-trailer rest on top of a tractor, which makes it less stable than a rigid vehicle 2.3 Costs Classification in Freight Transport In road transportation the underlying costs often divided into two types, fixed and variable costs. Another classification of costs that is usually applied is: Direct and Indirect costs. Different categories of costs are described below: Fixed cost: A cost that remains constant within relevant period, regardless of the extent of activity of a business. Fixed costs include costs that are not depended on the level of output and of the resources utilized. Moreover, fixed costs are typically connected with equipment and construction, administration and management. In transportation, fixed costs incur costs such as: Depreciation of own vehicles or leasing costs for hiring vehicle Administration and salaries Insurance and taxes 8 Nelldal, B.-L (2005) 18

21 Variable cost: All other costs which vary with the amount of consumption or utilization and type of use are variable costs. In transportation, variable costs are proportional to the total time and distance of travelling, waiting time at customer sites and terminal. Variable costs fluctuate directly with the changes in output. Variable costs for transportation service are: Fuel and oil cost Maintenance and repair Cost of tyres Crew cost Road tolls/charges Total costs decomposed in fixed costs and variable costs typically. Specific and Unit Costs: Those costs which are determined by a direct assignment process on the basis of traffic movement or service known as specific cost. 9 These costs are completely variable cost. Unit costs are directly characterized to a specific segment of the traffic and services. The unit cost is determined from the direct association between expenses and workloads. Direct Cost: A cost that can be directly traced to produce specific goods or service. Direct cost like equipment and labor can be specifically assigned to a unit of product. Direct cost may be fixed or variable and can be charged against a product, a sales program, or a marketing plan. Indirect Cost: Costs that are not directly accountable to a particular function or product represents indirect cost. Indirect costs are incurred for a common or joint purpose and therefore cannot be identified readily. Taxes, administration, personal and security cost which are overhead cost are included in indirect costs. Indirect cost can be subdivided into two parts as follows: Common cost: The cost that incurred in making a group of product or services available which cannot be directly attributed to the product or 9 CTA Canadian Transportation Agency (2006) 19

22 services. Producer usually chooses to share the activities that make common cost due to the economic benefit. Joint cost: When multiple products or services or activities are offered by the same production unit, so to say, by a freight vehicle, then the joint cost arises. In freight transportation, there exist some activities which can be shared by the resources. Transportation costs can also be categorized according to whether those are bear by the user directly or imposed on non-users. These types of costs can be described as follows: Internal Costs: The costs borne directly by the road freight transport operator consisting operating costs e.g. fuel, labour, repair and maintenance, road toll/charges, taxes, insurance and capital investment like depreciation and overhead. Internal costs are sometimes referred to as market or private costs. External Costs: The costs of the negative effects of transport that are not paid by the transport user themselves but by society as a whole. Main categories of external costs are: Air pollution Accidents Congestion Noise External costs are real costs to society due to its adverse impact. Transport users normally do not take into decision in relation to externality. Internalisation is taken into account by increasing the price of transport services in proportion to all the relevant social and environmental costs to adjust the anomaly of this externality. 20

23 The figure bellow illustrates the category of costs by various attributes: All Costs External Costs Internal Costs Fixed Internal Costs Variable Internal Costs Specific Unit Cost Figure-2.10: Systematization of Costs 2.4 Activity Based Costing (ABC) Activity based costing identifies the casual relationship of cost drivers with activities which are associated with different products and service performed in a firms. ABC measures the costs of resources used rather than the costs of resources supplied, the difference being excess capacity. It is wrong to allocate unused capacity to the customers 10. The utility of ABC are: Identify and define related activities and major elements of cost that perform by the company Find out the relationships between activities and cost Helps to deal with more resources that are profitable Identify cost drivers to allocate costs to the activities Plan a cost accumulation model Conventional costing avoids necessary variation between products and services, markets, and customers, which acquire overhead cost. The thought of conventional accounts deals with the finance and merely describes historical inputs that shared among other authors of costing methodology. Any cost that 10 Griful-Miquela, C (2006) Activity based Costing Methodology for Third-Party Logistic Companies 21

24 cannot be attributed directly to a product flow into the activities, activity based costing system make those costs necessary to flow to the product(s). The transportation company carries out some common activities such as delivery and pickup commodity, returning empty loading units, loading and unloading loading units at the sender s, receiver s site and in intermodal terminal, scheduling vehicle for executing collection and distribution timely etc. 2.5 Freight Transport Model 1) SAMGODS /STAN Model The Swedish National Freight Transport model system SAMGODS is a comprehensive model for air, rail, road and maritime transport to undertake forecasting, infrastructure planning and transport policy analysis. SAMGODS model is owned by VINNOVA (the Swedish Agency for Innovation Systems) and SIKA (the Swedish Institute for Transport and Communications Analysis). 11 The first SAMGODS model in the early 1980 was based on STAN-model (Strategic Planning of Multi-Modal Multi-Product Freight Transportation) for developing road transport only. In the next decade, SAMGODS model has applied taking into account the supply factors (network and transport costs) for national and international road, rail and sea transports. This model has also included the assignment method for modelling mode-split and route choice on the assumption that the operator costs will be equal to the prices compensated by the transporter. In STAN, The allocation of demand to the modes and routes is controlled by the cost conditions of the transport services production system, which are represented as parameters (cost functions) In the network model, using a system cost minimizing algorithm. 12 STAN database includes tone-km, vehicle km, generalized link cost, operative link cost which are divided geographically or commodity. In STAN pre- and after model a result module has also been used to carry out cost benefit analysis (CBA) and consequence analysis. These analyses have been introduced to rise above the drawbacks of dividing generalized costs (GC) into operative transport cost (OC) and qualitative costs (including value of time). 11 Inge Vierth, SIKA (2004) 12 SAMPLAN report

25 Weaknesses: The model does not take into consideration logistical concepts Lack of transport cost sensitivity of matrices Local/regional distribution and collection traffic has not focused Freight transport demand and goods flows between regions has not taken into account 2) NÄTRA and DISTRA Model Transport movement shorter than 25 km (intra-municipal shipping) are excluded from the current SAMGODS system. For regional/local distribution and collection, a separate database and modeling system has been developed through a new system named as NÄTRA was introduced in 1990 which is presently available for Stockholm region. Apart from distribution and collection of goods this system, also covers the movement of goods connected with certain trades, services though it only comprises road traffic. 13 Among others the important limitations of NÄTRA system has stated below: Transport condition and/or charges/taxes have no impact on the demand matrix of NÄTRA Environmental restrictions, axle or gross load restriction are not considered in present NÄTRA version The system is not entirely transparent Vehicle choice does not taken into account in the present model version DISTRA model has inaugurated as an extension of SAMGODS model to analyse local/regional problems and to enhance the national model such that it could provide more comprehensive information. This model precisely analyse the intra-municipal road transports and other transports less than 25 km and service transport is additionally incorporated in DISTRA. The road network that gives traffic work, transport times and costs for goods and service transport of different vehicles is used as an output of DISTRA model. The add-ons modules of DISTRA can positively overcome the problems of transport that cannot be 13, 14 SAMPLAN report

26 switched by SAMGODS model. Add-ons have been prepared for the problems below 14 : Collection and distribution logistic: Combine a number of destination where it originate from one zone to a route and engage the specification of transport costs within the region Time-of-day considerations: The regions where the accessibility for trucks on specific time period is rigid, time-of-day module is especially appropriate in those regions by providing a more complete account of the peak hour freight traffic patterns than the usual method. Alternative modes of transport: This add-ons try to identify the rail terminal location inside a region with a view to correct the sensitivity of the truck trips which are connected with access and egress transport to or from the main railway network. The add-ons determine the degree to which truck trips will load onto the road network keeping rail transport on a private industrial site. Location changes by firms: In a more enlarged zone, some of the firms change their firm or warehouse locations due to some faint shift in the economic activities. These underlying discontinuities are hard to predict by applying continuous models which is typically employed in transportation planning. Logistic module could simulate the complexity of discontinuity. The key purpose of add-on modules is - To permit a region specific and flexible amplification of the DISTRA model system, harmonizing the base module according to regional needs and resources To progress the potentiality of DISTRA for policy study at the regional level Shortcomings of DISTRA DISTRA only deals with trucks on the road network It represents the transport demand regardless of trip type and vehicle type `Non-freight and `business trip overlapped in DISTRA 24

27 3) RECORDIT Project RECORDIT (REal COst Reduction of Door- to- door Intermodal Transport) project has been designed to establish a complete accounting framework for calculating real cost (RECORDIT) of door-to-door transport services of intermodal freight transport in Europe. The mechanism of both cost and price formation of the current intermodal market has been developed in RECORDIT. The ultimate objective of RECORDIT is to improve the competitiveness of intermodal freight transport in Europe through the reduction of cost and price barriers which currently hinder its development, while respecting the principle of sustainable mobility 15. It has reviewed the whole process of all activity in transport services at the maximum possible disaggregation level, and drawn all cost attributes linked to each step of accounting framework. 16 To test the usefulness of the accounting framework and to assess the real cost RECORDIT has undertaken a study on three trans-european routes, door-to-door corridors. Thereafter, RECORDIT has done logical comparisons of costs in four aspects: i) across corridors, ii) between intermodal and all-road options, iii) between real cost and prices paid, and iv) between external costs and taxes and charges. The overall approach of the project has partitioned into three working area with logical sequence of eleven work packages: the first one is concerned with methodological development the second one has pay attention on complete analysis of three transport corridors the last one concentrates on the analysis and interpretation of the corridor findings 4) IMPREND Project In 1996, three research organization (Buck Consultants International (Dutch), NEA (Dutch) & INRETS (France)) and two intermodal organization (Intermodal Transport Foundation (Dutch) & European Intermodal Association (Belgium)) has developed a project proposal called IMPREND (IMprovement of PRe- and END haulage) with the purpose of solving the problems of pre- and post haulage of intermodal transport. The main objective of the IMPREND project is the improvement of pre- and end haulage from, to and at terminal as a part of RECORDIT, Action to Promote Intermodal Transport (Final Report, 2003) 25

28 intermodal chain which is now costly and non-transparent, more transparent. 17 IMPREND project tried to prepare some practical and innovative solutions for some real-world problems which exist in the field of pre- and post haulage, thus motivating the use of intermodal transport. The project has carried out some method of working (four work packages) to achieve the objectives of the project. The aims of the first work package are: to get insight into the intermodal state-of-art in connection to preand post haulage to study the present pre and post haulage practice at terminal to recognize the existing bottlenecks in pre and post haulage Improvement of possible solution by providing some formulas and to discuss them with market parties was the main goal of second work package. The main objective of third work package was to test formulas for the solution of bottlenecks associated to pre and post haulage. Work package four, the most fruitful demonstrators have been identified and evaluated by matching the results of previous work package. Based on the outcomes, IMPREND project has recommended some suggestion at the strategic level, at the tactical level and at the operational level. 2.6 Transport Regulation and Constraints In freight transport market transportation firms have to abide by some institutional regulations (created by state authorities or haulage commissions) in operating and organizing transportation policies. The regulation consists of fixing tariffs, setting quantity restrictions, quality necessity, working conditions and standards for vehicle operation. These regulations established to control the behavior of company and to minimize the deterioration of environmental and safety standards. To a large extent, the legal framework for the transport market settles on the cost level of vehicle operation. In case of road sector, most important regulations are 18 : Maximum gross weights, axle loads and safety features of vehicles Upper and lower limits of vehicle and fuel taxation Abolishment of obligatory tariffs for national market OECD (1997). Liberalisation and Structural Reform in the Freight Transport Sector in Europe 26

29 An increase in road haulage licenses Individual working hour for drivers Operation periods and driving ban period for vehicles Driving and operating rules Toll and charges Charges for environmental damage Licenses and quotas in intermodal road transport Environmental regulations Under heavy market competition, road haulage firms sometimes adjust shipping activity to keep their customers by reducing cost through better logistics, lowering wages and improving load factors. A further influence on cost is carried out by the national taxation where the tax structure plays a vital role with the tax magnitude. For instance, per km vehicle taxation bear a financial burden to the short distance truck operation compares to long distance one. In Sweden, the market share is typically stronger for road haulage due to complying maximum weight regulation of 60 tones. Sweden, however, has implemented such taxation systems that are strongly oriented to environmental goals. 27

30 3 Structuring PPH road freight transport 3.1 Overview Freight transport is strongly related with the activities of industry and trade where it comprises a by-product of the production process. Freight transportation industry need to attain high performance level in respect of economic efficiency and quality of service. Production and logistic constraint has a better impact on transport chain. The shipper, consignee, carrier and transport operator are the indicator of door-to-door tracking of each shipment in conjunction with the transport chain. The products of freight transport particularly for road transportation are the services that are delivered to the freight customers. Transportation services should ensure to the high standards in the entire transport chain by performing just-in-time delivery and service reliability. The production system of road freight transport is the sum of all resources that are utilized in carrying out the movements of goods. Vehicle routing in time window, managing loading units and reposition of empty return are the key management policy/strategy of a transportation firm. These strategies try to maximize the volume of the customer s demand by exploiting the best use of the available resources. The resources are: Loading units and carriers Crews Road Network Vehicle operating standard Organizations involved in transportation A product is any commodity either goods or passengers which generates a link flow. Each product transported over intermodal network is shipped from a certain origin to certain destination within the network. For PPH movement the destination is the intermodal terminal from where the goods are shipping and treats as an origin in the distribution area of the goods. To increase the frequency of a direct service between the place of collection and the place of distribution of transportation would indicate a faster and reliable service for the corresponding traffic. Consequently, the routing of all traffic, the level of service on each route, the costs and the service characteristics will simultaneously provide the best solution for the consumer and the transportation company. 28

31 As pre and post haulage takes a comparably higher share of cost in intermodal transport costs, the operating cost framework need to be well formed. A set of studied have been done on intermodal transport cost in the mean time, whereas the study in connection to pre and post haulage cost has touched rarely. In this point of view, this paper will emphasize to establish a cost model for short distance haulage. The transport company has to make a proper vehicle operation strategy to minimize the costs in competitive market. Three strategies such as vehicle routing and scheduling, managing different flows and repositioning empty vehicle has been discussed hereby to build a better cost formation. 3.2 Operational Planning and Management The ultimate goal in the competitive freight business of a transportation company is to minimize the operating cost of vehicle movement and by improving the operations system through strategic and tactical plans. In order to conform the demand within the required service criteria and the efficient usage of resources of the carrier, different issues need to be addressed at the operational level. Operational planning and management issues for a freight carrier have a positive impact on future policy and performance Vehicle Routing for Pickup and Delivery Pre and post haulage of intermodal terminals absorb the pickup or delivery of commodity at customers locations. Efficient organization in road segment can raise the attractiveness of intermodal transport. Vehicle fleets is required to pickup and/or deliver goods at customer spot. A delivery activity to a receiver initiated from the intermodal terminal with full loading unit and a pickup activity returns a loading unit to the intermodal terminal for the transportation by the train. The obstacle of a truck company is to set an assignment of delivery and pickup customers to a fleet of vehicles, in order to minimize the total cost of serving every customer. A truck company need to serve a set of transportation request to serve geographically dispersed customers at total minimum cost subject to a set of constraints by generating a set of routes and this type of problem named as pickup and delivery problem (PDP). Furthermore, a pickup and delivery problem with time windows (PDPTW), a generalization of PDP, a time window constraints are added to satisfy a number of transportation 29

32 request. Time window specifies a time interval for pickup, delivery and at the intermodal terminal with a pre-specified daily time. Usually, in each transportation request, pickup location, delivery location, the earliest pickup time, and the latest delivery time of the customer is notified to the truck company. PDPTW consist of two components, the routing and the scheduling of vehicles. The optimal visiting sequence of the customer is determined in routing and the scheduling indicates the service time of the customer. In time window context, not only the total travel distance and the service time but also the total cost of waiting (if the truck arrives too early at a customer location or the customer makes delay to load or unload) are included in the total cost. Benefits obtained from pickup and delivery routine and scheduling: Reduced pickup/delivery time Delivery and pickup priorities are measured and carried out by giving better customized services Maximizes total number of customers served Minimize total distance travelled Cost minimization by optimizing the routes Adaptation and execution among all routing heuristics become easier Travelling costs are proportional to the total time required to provide each customer which includes travelling time and the truck waiting time at the sender/receiver location. For this reason, all trucks need to return to the terminal previous to the end of their depot window. An arc is used to attach a customer location with the depot, only at the commencement and at the end of a route. In the road haulage, an enormous waiting time between the delivery location and pick up site will not usually be cost efficient. In vehicle trip planning, some of the pickup and delivery customer could be combined into pairs of customers. In PPH substantial cost as well as time saving can be perceived by merging pickup and delivery customers in a single trip based on insertion heuristic procedure. In forming the pairs of pickup and delivery, a limit can be obliged on the waiting time between delivery and pickup. Therefore, those customers that are very far away from each other can be removed from vehicle operation plan. The pairs of pickups and delivery can be ranked on the basis of four criterions below 19 : 19 Caris A, Janssens GK, A Deterministic Annealing Algorithm for the Pre-and End-Haulage of Intermodal Container Terminal 30

33 Criterion 1: The smallest possible time window slack between to customers i and j Criterion 2: Travel time saving should be as large as possible achieved from serving a specific delivery i and pickup j together Criterion 3: Opportunity cost OC1i (respectivelyoc1j) that represents the difference in travel time saving by the best pair of delivery i (or pickup j ) and the current selected pair Criterion 4: Opportunity cost OC2i (respectivelyoc2j) that represents the difference between the time window slack of the current combination and the least time window slack of specific delivery i (or pickup j) in any combination These four criterions are aggregated by imposing respective weights and an algorithm stated below 20 : w 1. L j E i s i t ij + w 2. t ij t i0 t 0j + w 3. OC1 i + OC1 j + w 4. OC2 i + Where OC2j (*) w k = represents the importance provided to criterion k L j = latest start time of pickup j E i =earliest start time of delivery i s i =service time of delivery i t ij =travel time from delivery i to pickup j t i0 =travel time from delivery i to terminal 0 t 0j = travel time from terminal 0 to pickup j The smallest value obtained from the algorithm for a pair of pickup and delivery customer is selected first. The weights express the importance of each criterion and increases in relation to savings in waiting time or savings in travel time. The weights used in this procedure are implemented to make an initial solution. The 20 Caris A, Janssens GK, A Deterministic Annealing Algorithm for the Pre-and End-Haulage of Intermodal Container Terminal 31

34 procedure of pairing customers continues until no more feasible customer exists with respect of residual pickup and delivery customer. Further improvement can be done by the local search procedure where neighborhoods are characterized as below: CROSS Operator Recombines pairs of customer of different routes Reduces travelling cost COMBINE Operator Join two routes into one Removes the no. of trucks INSERT Operator Reinserts the pairs of customer into another route Eliminate route Figure-3.1: Three local search neighborhoods in improved heuristic based on Caris A, Janssens GK The CROSS operator chooses two pairs of pickup and delivery customer e.g (P1,P2) and (D1,D2) from two different routes and recombines them into new pair, (P1, D2 ) and (P2, D1 ). Firstly, considering the time windows an inventory of all feasible CROSS moves are made where pickup and delivery customers can be combined into new pairs. Secondly, these new pairs can be reinserted into the routes, either (P1, D2) and (P2, D1) into the first and second route respectively or other way round. In COMBINE operation, the two routes can be merged in such a way that the last pair of the first route can be served before the recent starting time of the second route. The INSERT operator tries to reduce routes through removing the pairs of pickup and delivery customer from their original routes. Pairs of customer can be added in the starting, between pairs of customer or at the finishing of a route. INSERT operator stands for a 2-consecutive-node interchange mechanism and that of COMBINE represents for n-consecutive-node. However, both INSERT and COMBINE operators aim to decrease the fixed vehicle cost, on the other hand CROSS operator reduce the variable cost. A multistart 32

35 approach by using the selection algorithm of insertion heuristic (*) is applied to find the best overall solution. Most of these issues need to consider the time factor. So to say, a truck has to pick up a load for the departing rail in the intermodal terminal within a specific time window by assigning an empty truck to the customers door. Hence, a transportation firm has to respond customer requests in real time, to ensure time constraint on operations, to harmonize current decisions Loading Unit Management in PPH The vehicle operation activity in PPH is a little compound as the loading unit containing the goods is not the same with the truck(s) shipping the goods. The trucks are operated several times to move the empty LU from some previous delivery location. These empty LUs is either stored in the depots or utilized to pick up the goods from a new customer. Consequently, for any freight flow empty return is a typically happened. Utilization of loading unit and trucks are therefore dissimilar in freight activity. The shipper s empty LU is provided through depots typically. There exist five sources of collecting empty LU 21 : From a leasing company by leasing on the LU From the intermodal terminal by means of inbound train From a consignee subsequent to unloading of the full LU From LU repair or inspection firm after LU recovery The allocation of empty loading unit can be handled in the following activity: To dispatch empty LU to meet current demand To relocate empty LU for future demand To lease on/off LU s to adjust deficit/surplus of the opeator s own LU inventory These tasks are assigned to comply with the demand of empty LU for the transporter with a view to fill in their outbound shipment over a constant time period, and to minimize overall purchase/lease and operating costs. The geographic position of depots in the terminal catchment area has an influential effect on the service as well as relevant costs for the transportation 21 Qiang Gao (1997), Models for Intermodal Depot Selection 33

36 firms. A suitable location and sizes of candidate depots can offer a sufficient amount of empty LU to the shippers at the right time and right location for their outbound consignment and its LU associated capital/leasing and operating cost can be reduced. Therefore, the potential location of depots can minimize the total cost of depots, transportation, and LU inventory by satisfying the consumers demand for empty LUs. Afterward, the coordination among depots and demand and supply customers in relation to empty LU allocation can provide a day-to-day guide for significant empty LU operation. 1) Loading unit status Three levels of load status and associated costs are arisen in operating trucks in road transportation. Trucks with: Loaded with loaded LU Loaded with empty LU Empty return Per LU cost will be lower if the return movement is fully or partially loaded by some customer. Conversely, if backloads are not available then the transportation costs become high. The haulage rate is average in general for collecting empty loading unit. A transportation company needs to be efficient in handling their all freight vehicles in satisfying their customer s demand and adjusting empty return and moving empty loading units. Empty loading units are generally stored in the intermodal terminal which is organized by the terminal. The cost for using the depots divided a daily storage fee for each loading unit stored in the terminal. However, the empty loading units can also be either in shippers or consignees hand after stripping the full LU. A suitable location and sizes of candidate depots can offer a sufficient amount of empty LU to the shippers at the right time and right location for their outbound consignment and its LU associated capital/leasing and operating cost can be reduced. The different freight shipping activity of a transportation firm for satisfying the demand of customers by providing loading units and load carrier as well as to manage the empty loading units can be illustrated in the following diagram: 34

37 2 1 F3 F3 3 F1 F2 F4 F1 F2 F4 F5 6 F11 F12 F10 F8 F9 F6 5 F7 5 F7 F5 F6 F4 4 Customer Truck company Intermodal Terminal & LU Depot # Flow No Loaded LU Empty Flow Loaded with Empty LU Figure-13: Status of loading unit (self) Figure-3.2: Flows with different types of loading unit status (Hossain, K.S.) The different possible combinations of trips and flows (hypothetical) of a vehicle to satisfy the customer s demand can be mentioned on the basis of the figure-13. In this figure, the daily activities of a freight vehicle have shown in twelve flows to comply with the delivery and pickup of six customers. Furthermore, flows to move empty loading unit and empty return flows have included in the total flows. The respective costs in operating vehicle have to be allocated properly based on flow status by the concerning companies. The combinations of trips and flows for each customer are as follows: i. Truck company-empty flow (F1)-Pickup customer(1)-loaded LU flow (F2)-Intermodal terminal ii. Intermodal Terminal-Loaded LU flow (F3)-Delivery customer (2) - Empty return (F4) 35

38 iii. iv. Intermodal terminal-loaded LU flow (F5)-Delivery customer(3)- giving back LU Loaded with empty LU flow (F6)-Pickup customer (4)-Loaded LU flow(f7)-intermodal terminal v. Intermodal terminal-empty flow (F8)- Delivery customer (5)- Loaded LU flow(f9)-intermodal terminal vi. Intermodal terminal- Loaded LU flow(f10)-pickup customer (6)- Loaded with empty LU flow (F11)-Intermodal terminal vii. Intermodal terminal-empty return (F12)-Truck company Hypothetical flow summary: a) Loaded LU flows- 6 nos. (F2, F3, F5, F7, F9 and F10) b) Loaded with empty LU flows- 3 nos. (F6, F8 and F11) c) Empty Flows- 3 nos. (F1, F4 and F12) Table-3.1: Start and destination point of different loading status Sl No. Flow status Start point Destination point a) Loaded LU i) Consignor Intermodal terminal ii) Intermodal terminal Consignee iii) Consignor 1(single Consignor 2 (other LU) LU) iv) Consignee 1(single Consignee 2 (other LU) LU) b) Loaded with i) Truck company Consignor empty Lu ii) Intermodal terminal Consignor iii) Consignee Intermodal terminal iv) Truck company Intermodal terminal v) Consignee Consignor c) Empty flow i)truck company Consignor ii) Intermodal terminal Consignor iii) Consignor Intermodal terminal iv) Consignee Intermodal terminal v) Consignee Consignor vi) Intermodal terminal Truck company 36

39 Proportion of loading unit status: Let, total no. of flows for `loaded loading unit in a particular period of time is f LLU total no. of flows for `loaded with empty loading unit of that period is f LELU total no. of empty flow of that period is f EF Then the proportion for the number of flows will be a) For loaded loading unit, P no LLU = f LLU f LLU +f LELU +f EF (1) no b) For loaded empty loading unit, P LELU = f LELU f LLU +f LELU +f EF 2 c) For empty flow, P no EF = f EF f LLU +f LELU +f EF (3) 2) Travel time for different loading status The travel time for three categories of flows is different due to the load on the truck and the speed. For the same distance of travelling, the travel time for loaded LU, empty LU and empty flow will vary for a specific type of loading unit. Consequently, the running time for a specific load carrier has an impact on time and distance based costing. For a specific period of time, let the travel time (in hour) for delivering or picking up the commodity, so to say the loaded LU, is tt LLU, that for the empty LU is tt LELU and for empty flow it is tt EF. Therefore, the proportion of travel time for three loading status is: tt a) P LLU = tt LLU tt LLU +tt LELU +tt EF (4); for loaded LU tt b) P LELU = tt LELU tt LLU +tt LELU +tt EF (5); for loaded empty LU c) P tt EF = tt EF tt LLU +tt LELU +tt EF (6); for empty flow 37

40 3) Inbound and Outbound Flow of LU The inbound and outbound flow of each delivery/pickup customer can be carried out by the combination below (first alphabets before, denotes inbound flow and the outbound stated in later alphabets): a) (EF, LLU) b) (LLU, EF) c) (LELU, LLU) c) (LLU, LELU) d) (EF, LELU) e) (LELU, EF) Figure-3.3: LU combination where, EF=Empty Flow, LLU= Loaded with Loading Unit and LELU=Loaded with Empty Loading Unit The cost resources and relevant extent of cost can be determined on the basis of the inbound and outbound flow status of vehicle movement. 4) Flows which are irrelevant to convey goods a) Loaded with empty loading unit in the inbound flow and empty flow in the outbound flow or vice versa b) Empty flow as an ending flow of the day from the intermodal terminal to the truck company The costs related to this type of flow(s) can be adjusted by merging this cost with the total daily/monthly cost. The allocation can be done by the usual way afterwards. 3.3 Cost Allocation Allocating cost due to distance and time In short haul road transportation, the costs of vehicle operation arise in different activities, resources, trip/flow characteristics and loading status. The cost associated with various activity need to be identified and assigned to some customers by the truck company. The utilization of loading unit increases by assigning the units to different flows and consequently the transportation cost 38

41 can be allocated suitably to different customers. Due to empty flow and loaded with empty loading unit flow the process of cost allocation become complex. If the return trip is fully or partially born by another shipper, then the respective cost can be allocated proportionally to two shippers on the basis of the ratio of distance on which the vehicle has used to convey the goods of each firm. Consequently, the utilization and, or the load factor of this both way trip is higher in this case. Furthermore, if any empty loading unit is instantly delivered to a customer then the transport cost becomes higher due to higher time which arises due to load the LU on shipper s site. The two customers can divide the total transportation cost as a proportion of total both way distance Allocating cost on account of loading unit status Flows due to three types of loading status and its organization turn into the vehicle operation more complex. Allocation of costs on the basis of these three categories of flow which are loaded LU trip, unloaded LU trip and empty flow can be determined on two contexts as below: No. of flows of each loading status in a particular period Travel time of each loading status in a particular period In the previous section the proportions (equation 1 to 6) for three status of loading units in the above two context have been formulated. Those proportions can be averaged as follows for three loading status: a) AP LLU = P no LLU b) AP LELU = P no LELU tt +PLLU 2 tt +P LELU 2 (7) ; for loaded LU (8) ; for loaded empty LU c) AP EF = P EF no tt +P FE (9) ; for empty flow 2 The total transportation cost can be subdivided on the basis of the above proportions (formula 7, 8 & 9) and the unit cost for each LU status can be derived by dividing the cost by the respecting no of flows. Let the total operating cost for a specific period of cost is C t then per flow cost for each loading unit status are: 39

42 a) CpF LLU = C t AP LLU f LLU (10) ; for loaded LU b) CpF LELU = C t AP LELU f LELU (11) ; for loaded empty LU c) CpF EF = C t AP EF f EF (12) ; for loaded empty flow Where CpF= Cost per flow for each loading status f = Total no. of flows for each loading status in a particular period of time AP = Average proportion of the number of flows and the travel time for each loading status The cost allocation of a customer can be done by taking into account the combination of different inbound and outbound flows for each customer (figure- 14).The whole module has illustrated below by giving a hypothetical example: Table-3.2: Flows and travel time (hypothetical) of three LU statuses Let, the total truck operating cost of a day =10,000 SEK LU Status No Flows (per day) of Travel time (min) Proportion of flow Proportion of travel time Average of Proportions (in %) Cost per flow for each LU status (SEK) (1) (2) (3) (4) (5) (6) (7) LLU LELU EF Total LLU= Loaded Loading Unit, LELU=Loaded with Empty Loading Unit and EF=Empty Flow Table-3.3: Allocating cost for inbound and outbound flow to a customer 40

43 Trip No Flow Cost Combination Cost for the trip Combination (SEK) (SEK) (from col-7 of table-1) 1 (LLU,EF) (1088,893) (EF, LLU) (893,1088) (LLU, LELU) (1088, 990) (LELU, LLU) (990, 1088) (LELU, EF) (990, 892) 1882 Total LLU=4,LELU=3 & EF=3 10, Reposition Empty Return Overview Empty vehicle movement is a vital and challenging issue for the freight transportation system. In fact, empty movement exists due to the imbalances in the trade flows and that create inconsistency between supply and demand in various geographic locations or terminals of the system. The empty movement cannot be eliminated completely. But to continue the vehicle operation of a truck company, empty movements need to be minimized. Consequently, the major objective of vehicle planning and operation of most transportation firms is the empty repositioning or empty balancing which defines the allocation of empty vehicles to balance the supply and demand in future period. High transportation cost resulting from low load factor of a vehicle can be improved by minimizing the empty flows Improving Empty Movement Co-operation between truck company and intermodal terminal operator can reduce the empty flow. Truck company can carry out future vehicle fleet planning by providing necessary loading units to and from the intermodal terminal through electronic data exchange. The difference between the inbound and outbound no of loading units in the terminal can be adjusted either by communicating with the terminal operator or by accessing the electronic database of incoming and outgoing shipments. Firstly, if the outbound no of 41

44 loading units is smaller than that of inbound, the deficit can be tuned by the previously stored empty loading units from the depots. This strategy can be applied in response to anticipated future demand/supply imbalance. Secondly, the storage of empty LU for the prediction plan need to carry out for the next instantaneous period instead of the total projected demand bearing in mind the capacity of the depot in the terminal. Thirdly, if the transportation cost for transferring empty LU to the depot/terminal and the storage fee in the depot for that period of time for the adjustment is lower than the respective empty movement then it will be cost-reduction incentive for the transport operator need to be taken into account. Two individual shipments with two empty flows can be merged by diminishing minimum one flow. In order to reduce empty shipping, truck company and the shipper attempt to find backloads from another customer. Different types of merged flows can be presented in the following diagram: A B C D Individual Trip Merged Trip Loaded Flow (Single delivery) Loaded Flow ( Double delivery) Empty Flow Delivery/Pickup Point Intermodal Terminal/Transport Firm Figure-3.4: Balancing empty flow based on wagon turnarounds Troche, G (2009) In case of A and B, two individual trips are done for delivering two customers where transportation cost is higher due to full empty return. As the return distance is almost same as the direct flow the empty haulage share of the total 42

45 turnaround is therefore more or less 50 %. All the costs for the empty movement can be allocated to one specific flow. The reposition of empty movement is managed by merging individual delivery and pickup trips into one trip (case C). The empty movement becomes shorter where the distance lies between the delivery location and pickup location. As a result, assigning empty LU to several flows during a turnaround is a means to reduce costs for empty movement and the relevant costs can be shared by the different flows. The cost of conveying the goods in direct and return movement can be shared by the proportion of the distance run for each customer to the total both way distance of the trip. Furthermore, a truck company can distribute two loading units to two different customers (case D) and the return trip can either be empty or loaded by the last customer. The transportation cost in this regard can also go halves between the two customers. 43

46 4 Cost Calculation and Cost Model Structure To enumerate all of the foregoing cost components, an Excel based costing spreadsheet that calculates annual component cost for a specific type of truck, operated as a part of fleet operation. Different loading units in respect of payload capacity and types of trucks are used in the goods movement. The loading units usually used in road freight transportation are: 40 and 20 feet container, semitrailer and class A and class C swap body. The utilization of vehicle is an important criterion of freight transportation which usually depends on some factors such as seasonality, hauling distance, traffic congestion, or urban/ regional operation. The costs of operating a truck have done in two stages. In the first and main stage, the truck companies bear the major costs for owning and operating a truck which depend on the no of trips. In the later stage, costs will be determined on the basis of loading units used in the truck for those trips. All cost items in this paper have been determined on per km for a specific type of truck. Therefore, per unit cost output will be varied for different categories of load carrier or truck. All of the per unit cost components defined by taking into account the vehicle usage data for both pre and post haulage. 4.1 Truck Operating Cost Capital Cost for Truck Capital costs are consisting of depreciation and interest cost. Depreciation is the loss in value of a vehicle which is not restored by repair or maintenance. The interest costs are the opportunity cost of vehicle ownership. These two costs are the significant component of the vehicle operating cost. Capital cost and their distribution are sensitive to both the utilization of vehicle and it s service life. Predicting depreciation cost can be categorized into four classes: Value age Capital recovery Optimal life Other technique Total depreciation has defined as the distinction between the cost of new vehicle, less tyres (to avoid double counting), and the residual value of the vehicle. In this 44

47 paper, capital recovery technique (CRT) has been applied to tune both the new and residual values due to the consequence of time on capital by transferring them to an annual cost. To find the unit cost of capital the depreciation and interest costs has been divided by the annual truck-km run by all specific type of truck. CC KmT = Where, ADIC t TTruckKm CC KmT = Capital Cost per km per specific type of truck of the truck company ADIC t = Annual total depreciation and interest cost of all specific type of truck of the truck company TTruckKm=Total annual truck-km run by all specific type of truck for all transport operations and services = TKm TNoTruck TKm=Total km run annually by all specific type of truck TNoTruck=Total no of specific type of truck utilized annually for all transport operations and services The depreciation and interest cost can be determined by using the following equation through capital recovery technique 22 : ADIC t = i (1+i) t 1 RptVP(1 + i)t RdlVP ADIC t = Annual depreciation and interest cost per truck RptVP = Replacement vehicle price less tyres of the specific type of truck that has used in the transport RdlVP= Residual vehicle price of the specific type of truck i = Interest rate per year (decimal value) t= Vehicle service life in year 22 Bennett, C.R and Greenwood, I.D (2003), Modelling Road User and Environmental Effects in HDM-4, page

48 4.1.2 Fuel & Oil Cost Fuel consumption is the vital attribute of vehicle operation. Speed act as an important factor in fuel consumption and the maintenance cost and thus the operating cost rise with increasing speed. Moreover, vehicle size along with the no. of axle affects fuel consumption and thereby changes operating cost. Oil and lubricants are used either distance travelled or particular period of time to make the engine activity smooth. Furthermore, oil is consumed due to oil contamination and oil loss. Per unit fuel and oil cost derived from the total fuel and oil consumption in a year for a specific type of truck. Fuel price depends on the current market rate which varies on geographical location and supplydemand condition. The rise of the price of fuel and oil has a higher impact on vehicle operation cost. FOC KmT = TFCon TTruckKm FP + TOCon TTruckKm Op Where FOC KmT = Fuel and Oil cost per km per specific type of truck TFCon = Total annual fuel consumption (in liter) of all trips and flows of all specific type of truck TOCon = Total annual oil consumption (in liter) of all specific type of truck FP = Average per liter fuel price in the year OP= Average per liter oil price in the year TTruckKm=Total annual truck-km run by all specific type of truck for all transport operations and services 46

49 4.1.3 Tyre Cost The cost of tyres of a truck depends on the number of tyres for the particular vehicle and cost of new tyres purchased in a region, and the service life of a tyre bearing in mind the road surface condition. Tyre consumption is influenced by some other factors such as: Vehicle loading Road alignment Traffic condition Climate Tyre properties Tyre life varies greatly from tyre to tyre even under the same operating condition and same itinerary. The truck company has an approximate idea about the longevity and the utilization (in km) of a new tyre. TC KmT = TNTP + TRTP TTyreL km Where, TC KmT = Tyre cost per km per specific type of truck TNTP = Total price of new tyres that have set up in all specific type of truck TRTP= Total price of retreated tyre that fixed in all specific type of truck TTyreL km =Total tyre life (in km) of those tyres for which new and/or retreated tyres have been set upped Maintenance and Service Cost The maintenance costs consists two components: parts consumption and labour hours. The improved road condition has a significant impact on the maintenance costs. The maintenance cost of a vehicle is difficult to measure empirically and to predict as 47

50 The relevant cause occur infrequently over the lifespan of the vehicle Maintenance practice of the operator have a major effect on the cost Vehicle operating in harsh condition may be of robust construction The total maintenance costs can be divided into routine and non-routine maintenance components. The routine costs usually done by the maintenance policy of the manufacturers which is distance based. The non-routine costs are figured on the assumption of a fixed percentage of the routine costs or calculated based on the distance life of different components on the vehicle. MSC KmT = TFMC + TDMC TTruckKm Where MSC KmT = Maintenance and service cost per km per specific type of truck TFMC= Total annual fixed maintenance and service cost for all specific type of truck TDMC= Total distance based annual maintenance and service cost (including spare-parts) for all specific types of truck TTruckKm=Total annual truck-km run by all specific type of truck for all transport operations and services Driver Cost The management of driver costs depends upon whether the drivers are paid by the hour or by the trip. In this paper, it is assumed that the drivers are paid in respect of hour and trip together. The driving time as well as the non-driving activities such as loading, unloading and layovers has taken into consideration. The drivers have to wait in the intermodal terminal to pick up the loading unit from the train and for the transshipment. The vehicle needs to keep in the shipper s location to load the LU with the cargo as well. Rest time among the trips could be included in the cost calculation. The transport company needs to pay additional amount for working in the weekend and trips at night time. The figure of driver s salary is defined by the truck company on the basis of transport market competitiveness, salary regulations and socio-economic perspective. It 48

51 also varies on which hour of the day and which days in the week the vehicle is going to be operated. DW KmT = Where TDW TTruckKm + TOA TTruckKm DW KmT = Driver wage per km per specific type of truck TDW= Total driver wages paid annually for all specific type of load carriers = DT + WT + RT DW h DT= Total annual driving hour for all trips and flows for all specific type of truck WT=Total annual waiting time for all trips and flows for all specific type of load carriers in the intermodal terminal or pickup /delivery location RT= Driver s total annual rest time taken in all trips for all specific type of load carriers DW h = Driver wages per hour for a specific type of truck TOA h = Total all other driver allowances for all specific type of truck TTruckKm=Total annual truck-km run by all specific type of truck for all transport operations and services Toll fee and Road Price/charges This cost component consist all charges and tolls incurred for using the infrastructure by the operator for different categories of freight vehicle. Transportation firm have to pay some amount of toll for running in some specific toll roads and bridges. Moreover, to enter in a specific area and time of the day, particularly for using urban roads, vehicle operators need to pay some price/ charges. These types of fees have been included in operating costs as below: TlRpc KmT = (TTl + TRpc) TTruckKm 49

52 Where TlRp KmT =Toll and road price/charge per km per specific type of truck TTl= Total toll paid per year for all specific types of truck run on the toll roads and bridges TRpc= Total road price and/charges paid per year for all for all specific types of truck TTruckKm=Total annual truck-km run by all specific type of truck for all transport operations and services Overhead Costs Overhead costs are a type of indirect costs that comprise costs such as administration, interest, insurance, licensing and taxes etc. which are independent of vehicle utilization i.e. irrespective of time and distance. Administration and interest on working capital costs depend on the size of the firm and fleets of trucking business. Insurance rates which are a percentage of revenue indicate recent risk and claim performance of the trucking industry. Overhead cost is carried out by the truck company which operates all types of trucks. Therefore, the items of overhead cost bears irrespective of truck type and the unit cost derived taking into account total annual trip km as a denominator. OC KmT = Where (OR + AC + OM + TI) TTruckKm attruck OC KmT = Overhead cost per km per truck OR = Total annual office rental charge AC = Total annual administrative cost OM= Total annual office maintenance cost TI= All taxes and Insurances (including driver insurance) paid annually for all types of trucks of the truck company 50

53 TTruckKm attruck = Total annual truck-km run by all types of trucks of the truck company for all transport operations and services = TKm attruck TNoTruck attruck TKm attruck =Total km run annually by all types of trucks of the truck company TNoTruck attruck =Total no of all types of trucks utilized annually for all transport operations and services of the truck company Total cost Total cost (per unit) will be the summation of all cost components stated above. The total cost will reflect the per km cost for a specific type of truck. The cost will vary for different types of truck with different dimension and weight capacity. Total per unit cost for operating truck by the truck company- Tot_Trk_Op_Cst KmT = CC KmT + FOC KmT + TC KmT + MSC KmT + DW KmT + TlRpc KmT + OC KmT (a) Where Tot_Trk_Op_Cst KmT = Total truck operating cost per km per specific truck of a truck company CC KmT = KmT CCCapital Cost per km per specific type of truck of the truck company FOC KmT = KmT FOC Fuel and Oil cost per km per specific type of truck TC KmT = Tyre cost per km per specific type of truck MSC KmT = Maintenance and service cost per km per specific type of truck DW KmT = Driver wage per km per specific type of truck TlRp KmT =Toll and road price/charge per km per specific type of truck OC KmLu = Overhead cost per km per truck 51

54 4.2 Cost per Loading Unit The loading units are not usually owned by the truck company. The loading units are purchased by a third company and the freight forwarders typically rent the loading units from that company for a specific period of time and deliver to the customers or the truck company for shipping goods. The truck company needs to make a plan their activities of conveying goods on the basis of customer s demand and also need to organize the daily trips for transporting unloaded loading units and empty flows. The loading units are different in respect of length, width and payload capacity. In this paper, the loading units are categorized in two classes where the LU s of each category are more or less same in dimensions and weights. Those are: Category- 1: Forty Equivalent Unit (FEU):40 feet container, class A swap body, semi-trailer Category- 2: Twenty Equivalent Unit (TEU): 20 feet container, class C swap body The costs of conveying a 40 feet container and a Class A swap body are very similar in terms of weight and utilization. This attribute is also true for 20 feet container and Class C swap body. For several transportation, the cost of 20 feet container turn into half compare to a 40 feet container. Conversely, in a total transport chain, the shipping cost of a 20 feet container tend to bear rather more than half as the vehicle utilization in pre and post haulage is poor as well as the cost of transshipment in the terminal are almost same for all loading units. The truck company has to create a cost efficient truck trips to satisfy different demand of the customers by making a combination of two categories of loading units. The cost for category- 1 loading unit will differ from that of category 2. The truck company has the database, how many different types of loading units have been used for goods transportation and what no of loading units can be carried by the specific truck. Consequently, the truck company can determine the operating cost per loading unit as that of operating cost for specific type of truck has already been derived (in section 4.1). Tot_Truck_Op_Cst Lu(i)T = Tot _Trk _Op_Cst T TNoLu (i) (b) Where, 52

55 Tot_Truck_Op_Cst LuT = Total truck operating cost per loading unit of i th category for the specific type of truck of a truck company Tot_Trk_Op_Cst KmT = Total truck operating cost per specific truck of a truck company TNoLu(i)=Total annual no of loading units of i th category used by the truck company 4.3 Empty Run Factor and Cost Empty Run Factor The cost of calculating real cost of vehicle operation the empty run need to take into account. The transportation company has to bear the running cost for unloaded LU which has to assign to some flow and customer. Consequently, an empty running factor is implemented for finding the actual cost figure. This is given by- ERF = 1 + AERD Tkm ALRD Tkm Where, ERF= Empty run factor for specific type truck AERD Tkm = Average Empty Running Distance in Truck-km for all specific type of truck ALRD Tkm = Average Loaded Running Distance in truck km for all specific type of truck To find the general operating cost, empty run factor (ERF) is added subsequent to determining overall per unit cost, multiplying that unit cost by ERF. 53

56 4.3.2 Cost Allocation for Backload Return The cost for the empty return in any trip can be allocated to different flow if any the return flow is loaded carrying out full or partial distance. The share of costs for the two flows will be determined out as follows: Let, The operating cost for two flows of any trip= ε Distance on direct flow, say F1, from the shipper to the intermodal terminal is α Distance on backload flow, say F2, from the terminal to a third customer, is β Share of loaded transport as well as share of operating cost with this backload flow is: i) For flow F1 = ii) For flow F2 = α α+β = P 1, say (Cost = P1 x ε) β α+β = P 2, say (Cost = P2 x ε) 4.4 Cost Model Structure Overview The purpose of the cost model is to find an efficient cost system of vehicle operation on the basis of different activities and resource utilization. The model will represent market interaction and the consequential market demand for various transport solutions. A rational choice between transports alternatives with different activities are assumed by the shipper. Therefore the total perceived cost by the shipper are modeled and applied by the truck company. The objective function of a model computes the generalized cost which consists of various productivity measures related to transportation operations. The models discussed in the literature study in section 2.4 are also different types of freight model. One of the models focused on national and international traffic, some of the model deals with the local and regional movement but taxes and charges have not been considered and, travel demand analysis done without 54

57 taking into consideration the types of trip and vehicle. However, RECORDIT project has created a cost and price formation mechanisms, and then estimate total real costs (internal and external) for door to door intermodal freight transport. RECORDIT has performed a systematic cost comparison for intermodal and all road alternatives. The cost model in this paper has been formatted on the activity-based approach (ABS). The outcome of freight vehicle operation derives on the basis of some relevant activities. Sequence or patterns of activity behavior have a better impact on the trip demand and supply. ABAs reflect the scheduling of activities in time and space. Moreover, costs are allocated on different activities and resources. Vehicle routing and scheduling, loading unit management, repositioning empty flows are important activities of potential vehicle operation which have discussed in the previous section in 3.2. Different modules or algorithm have been provided to make a proper operating schedule and, to organize different types of flows in relation to loading unit status and to minimize the empty vehicle flows. Activity based cost (ABC) model recognizes various activities performed in a company and assigns cost of each activity resource to all products and services on the basis of consumption by each. ABC determines which activities are cost effective and what strategies need to be obtained to minimize cost or raise profit of a firm. Moreover, those activities which are supposed to be cost excessive can be outsourced or removed by the transport company. It is important to identify most relevant cost driver for each activity as the cost driver causes a cost to be incurred. The cost of performing a activity is reflected by selecting a appropriate cost drivers. The process of building activity based cost model that has been discussed in this paper has illustrated below in the flow chart: 55

58 Operating Cost (Per Unit) Identify Operating Cost Components and Cost Drivers Workflow Dataflow Capital Cost Fuel& Oil Cost Tyre Cost Maintenance & Service Driver Cost Toll & Road Price Overhead Cost Vehicle Usage Data Input Price & Expense Data Vehicle Data LU Data Km travelled Veh. hour Identify No Per Unit Cost Minimum? Go Cost Activities Yes Modify Veh. Routing & Scheduling Organize Flows for diff. LU Status Reposition Empty Movement End Output Data Figure-4.1: Flow chart for working process in ABC model (Based on EvaRail Workflow, Troche, G. (2009) 56

59 Working steps of building ABC model: 1) Identify vehicle operating cost components and cost drivers of each components 2) Determine each cost components on the basis of vehicle usage data (i.e. km travelled, vehicle usage hours), input prices and expenses, types of vehicle or truck, and no of loading unit used to convey goods 3) If the per unit cost of operating vehicle is satisfied by the truck company, then that will be the final cost figure 4) Otherwise, the truck company need to recognize and modify the activities of vehicle operation such as vehicle routing and scheduling, managing flows for different loading unit status, and balancing empty movement 5) Then the company determine the cost components again and continue the whole process until satisfactory output Cost calculation The cost model is supported rightly by a spreadsheet analysis. The spreadsheets related to physical characteristics of vehicle, unit cost of vehicle operation, vehicle utilization database, administrative costs, all insurances, taxes and charges data are linked to have the final result. The worksheet consist all input attributes and the worksheet that contains result will be in the separate file. In result file, one sheet will illustrate the output of each cost component which will be achieved by applying formulas, the total per unit cost as a summary of different cost factor will be shown in other worksheet. The cost components and relevant cost drivers in pre and post haulage truck operation are given below: 57

60 a) Pre and post haulage vehicle operating cost (for a specific type of truck) Table-4.1: Cost drivers of various cost item Sl Cost item Cost driver/determinants no 1. Capital cost Replacement vehicle price Residual vehicle price Interest rate Vehicle service life 2. Fuel and oil cost Annual fuel consumption (in liter) Annual oil consumption ( in liter) Average cost of one liter fuel Average cost of one liter oil 3. Tyre cost Total number of tyres purchased in a year Cost of different types of new tyre Cost of different types of retreated tyre Life time (km) of new and retreated tyre 4. Maintenance, Repair and service cost Annual fixed maintenance cost (routine maintenance) Annual distanced based maintenance and service cost 5. Driver cost Total annual driving hour Total annual waiting time Total annual rest time Per hour driving wages Total annual allowance given 6. Toll and road price Annual toll delivered for travelling particular road Annual road prices given 7. Overhead cost Annual office rental charge Annual administrative cost Annual office maintenance cost Annual motor vehicle tax Annual cost for vehicle and driver insurance 58

61 b) Utilization of vehicle (for specific type of truck) Table-4.2: Basic data of vehicle utilization Sl no Item Unit 1 Distance travelled Annual kilometer 2 Specific type of truck Total number of trucks used annually 3 Trips carried out Total number of trips per year 4 Time spent Hours vehicle utilized annualy c) Physical characteristics of vehicle Table-4.3: Truck characteristics Types of truck 1 Semi trailer 2 Truck 3 Trailer.. Number of axle Total No of vehicle using by the company Payload capacity (in ton) Pickup and Delivery Time Window The objective of pickup and delivery problem with time window (PDPTW) is to serve all customers by minimizing the number of truck, travel distance, schedule time and waiting time without breaking the capacity constraint and the time windows of any customer. A module will decide which pairs of customer will be served first and which one will be the next and so on. This procedure will implement a harmonization of truck operating activity of the truck company. 59

62 Table-4.4: Transport data for pickup and delivery activity Item Data on 1 Distance i) All possible distances among different customer s locations in the terminal catchment area ii) Distances from intermodal terminal to all customers 2 Time window (Delivery & Pickup) Intermodal terminal and all customers 3 Travel time i) Among all customers location ii) From intermodal terminal to all customer Insertion heuristic and local search procedure by applying algorithm (*) in section will provide a better solution of pickup and delivery activity problem after using the input values of table Loading Unit Status The daily activity of a truck company deals not only with conveying commodities with a loading units but also have to move empty in the return flow particularly and sometimes need to move some empty loading units to the pickup customer or to the loading unit depot in the intermodal terminal. Therefore, the cost allocation for these three types of movement is necessary for the truck company. 60

63 Table-4.5: Loading unit status relevant data LU Status/ item Data required 1. a) Loaded loading unit (LLU) Total number of flows of each status b) Loaded with empty loading Total travel time of each status unit (LELU) c) Empty flow (EF) 3. Combination of loading unit status i) All combinations carried out in a time period ii) Number of each combination carried out in a time period 4. Total cost Total transport costs in that time period The formula 10, 11 and 12 in section will determine the cost of each flow by considering the inputs of table-4.5 for different loading unit status which could be assigned to the customer afterwards. The underlying transport cost model will be a arrangement per unit cost calculation and the improvement of relevant activities such as pickup and delivery time window, allocating costs due loading unit status. 61

64 5 Validity of Cost Function and Examples of Result Validity of a model refers to a process to identify whether the underlying model is free from both systematic and random error. Moreover, validity ensures the measuring tools that have been considered theoretically to measure and the applicability of the tools in the real world. The availability of the relevant data and information has a key effect on the validation and reliability of the model in question. 5.1 Data Source The cost data in connection to the vehicle operating cost of any truck company are not obtainable generally. As any company typically do not provide or print their cost inputs publicly due to company s confidentiality and the market competitiveness. Consequently, the data scarcity is a weakness from scientific perspective. The input data required by the model in this study have collected from a relevant expert through an interview. The cost database has been obtained from an expert in transport arena particularly in railway, LARS AHLSTEDT, who has also delivered his extensive knowledge in transportation cost. Those input data have collected from the source `Swedish Association of Road Haulage Companies`. Therefore, the secondary data achieved from the expert has been modified with the cost model discussed in this paper. All the costs figures of that source focused on a specific type of truck called `three- axle trailer`. Above all, for validation, the findings of the data has then compared with the related cost outcome of a study of some European corridor (in connection to Sweden) carried out by RECORDIT project. 5.2 Data Analysis on 3-Axle Trailer To estimate the per unit cost of operating of a three-axle trailer, reduced data through spreadsheet analysis for various cost component have been presented below in different table: 62

65 1) Vehicle Utilization per year (2007) Table-5.1: Vehicle Usage Vehicle Operation Time 2,600 hours Distance travelled 130,000 km 2) Capital Cost The total depreciation cost including interest cost has calculated by using capital recovery technique (CRT) which indicates the difference between the new vehicle, less tyres, and the residual value of the vehicle by taking into account 6 % interest rate and 8 years vehicle service life. i) Vehicle Purchase Price Table-5.2: Price of tractor and chassis Item Price (SEK) a) 3- Axle Tractor 960,000 b) Container Chassis 255,000 c) Tyre Price - 66,280 Total Rep. Price 1,148,720 ii) Depreciation & Interest The replacement price has considered as the new purchase price of the truck and without tyre. The corresponding residual price is around 12 % of the purchase price. Table-5.3: Depreciation and interest cost calculation Item Figure a) Replacement price 1,148,720 SEK b) Residual price 140,000 SEK c) Interest rate 6 % d) Life 8 years Annual Depreciation & Interest Cost 170,840 63

66 3) Fuel Cost The price of each liter of fuel is for the year 2007 and the fuel consumption is around 0.38 liter per kilometer. Table-5.4: Fuel data Item Unit Amount a) Consumption litre 49,400 b) Price per litre SEK 8.00 Total Annual Fuel Cost SEK 395,200 4) Tyre Cost Retreated tyre has been used with the new one to prolong the tyre life 150 thousand km. The price of retreated tyre is about 50 % of the new tyre. The average price of new and retreated tyre been taken to find the per km cost of tyre. One new and one retreated tyre are used in the round rig, to set up tyre in future. Retreated tyre could not be used in front axle. Table-5.5: Tyre relevant data Position Item Front axle Axle 2 Axle 3 Trailer a) No. of Tyre required b) Life time (km) New Tyre 150, , , ,000 Retreated Tyre - 150, , ,000 c) Price per tyre (SEK) New Tyre 3,900 4,100 3,900 4,400 Retreated Tyre 2,200 1,800 2,550 d)balancing cost per tyre (SEK) Total Total tyre cost (SEK) New Tyre 8,900 9,100 8,700 14,550 Retreated Tyre - 5,300 4,500 9,000 Total tyre cost (SEK) 8,900 14,400 13,200 23,550 60,050 Average tyre cost per 10 km (SEK)

67 5) Repair and Service Cost Repair and service cost of trailer and chassis are comprised of parts consumption and labor hour which is done in terms of time and distance. Where the truck company perform their time dependent service are as a routine work of vehicle maintenance. Furthermore, time dependent cost is over 80% of the total repair and service cost. The maintenance cost of the chassis is three times higher than that cost of the subsequent trailer. Table-5.6: Repair and service figures Action Based on Expense (SEK) a) Servicing chassis i) Major service cut Time 8,400 ii) Small service cut Distance 7,800 b) Repairing chassis i) Total 400,000 SEK at 8 year Time 50,000 ii) Paint after 5 year 24,000 SEK Time 3,000 c) Trailer i) Service Distance 3,250 ii) Repairing Time 10,000 iii) Consumables Distance 3,250 Total Annual Repair and Service Cost (SEK) 85,700 6) Driver Cost Driver cost is a major component of vehicle operation and defining the final cost is complex as various factors need to take into account to derive actual working hour and the driver s salary. Drivers work as a staff in the truck company. Out of 261 weekdays 48.5 days has been subtracted due to the holiday, sick leave for different days, paternal leave, paid leave with permission and paid training. The company pay each driver 278 thousand SEK annually as a gross salary including around 43 thousand SEK facility allowance/ compensation. Around 29 thousand krona is reduced annually for sick/vacation leave which is delivered by the Swedish social insurance named `Försäkringskassan`. The annual net salary of a 65

68 driver fixed as 348 thousand krona. Moreover, drivers are paid additionally krona (simple) and krona (qualified) for working out of schedule service time or in weekend/vacation. i) Working time Table-5.7: Working statistics of a driver Item Figure a) Actual working day per year b) Working hour per day 8 c) Annual normal working hour 1700 ii) Payment structure Table-5.8: Wage relevant information Item Time unit SEK/unit Amount (SEK) a) Salary 12 month 19, ,368 b) Premium wage 1700 hour 5 8,500 c) Meal coupon day ,667 d) Holiday compensation/ 28,824 vacation pay Sub Total 278,359 e) Sick leave/vacation pay (-) 29,397 Total salaries and allowances 248,962 f) Employer s annual contribution (+) 99,130 Total Annual Driver s wage 348,092 7) Overhead Cost Overhead cost comprises all taxes, insurances, administrative and other costs are a vital fixed cost having 16% of total cost. Administrative cost incurs 48% of total overhead cost. Vehicle taxes and insurances represent around 34 % cost of total overhead. 66

69 Table-5.9: Overhead items and costs Item Annual Expense (SEK) b) All Taxes 20,958 c) Insurances 50,000 d) Others* 37,250 e)administrative 101,233** Total Annual Overhead 209,441 *Telephone, Parking and Washing ** Taking 8% of total cost 8) Vehicle Operating Cost Summary Each cost components have expressed in total, per unit and percentage figures in the following table. The underlying cost function in this paper constructed for per unit costs (per km for a specific type of truck). For this example, all the items of the cost stated per 10 kilometer or Swedish mile. Table-5.10: Breakdown of costs Cost Components Cost/year Cost/10 % (SEK) km (SEK) 1. Depreciation & Interest 170, Fuel cost 395, Tyre cost 60, Repair & service 85, Driver cost 348, (134) 6. Road Toll 11, Overhead cost 209, Total annual cost 1,280, Cost per 10 km 97.9 Note: Figures in parenthesis indicates cost per hour 67

70 Comment: a. The overall operating cost is about 98 krona per 10 km b. Fuel cost is the highest cost having 31 % of total c. Driver s salary is the second highest cost item, the concerning company need to pay 134 krona per hour d. Per unit tyre cost calculated in terms of tyre life in km rather than vehicle usage e. The truck company has to pay around 171 thousand krona annually as a depreciation and interest cost for a 3-axle trailer which is 13 % of total annual cost Operating Cost Component 4. Repair & service 7% 5. Driver cost 27% 3. Tyre cost 5% 2. Fuel cost 31% 7. Overhead cost 16% 1. Depreciation & Interest 13% 6. Road Toll 1% Figure-5.1: Share of cost components 9) Vehicle operating cost per loading unit Table-5.11: Cost per loading unit No of LU used per year 1380 Annual Cost per LU (SEK) 928* * Assuming 100 % backload 68

71 10) Fixed and Variable cost Depreciation with interest and overhead cost has been included as fixed cost. However, fuel, tyre, repair & service, driver wage and road toll cost components incorporated in variable cost. Cost type Cost/year (SEK) Cost/10 km (SEK) Fixed Cost 380, Variable Cost 900, Total 1,274, % Fixed Cost 30% Variable Cost Table-5.12: Amount of fixed and variable Figure-5.2: Fixed and variable cost Cost share 11) Time and Distance Dependent Cost Costs which are given per year usually considered as time dependent cost which are depreciation cost, driver wage, overhead cost and time based repair and maintenance cost. Conversely, fuel, tyre, road toll and distanced based repair and service taken as distance dependent cost Item Cost/year (SEK) Cost/10 km (SEK) Time 799, Dependent Cost Distance 480, Dependent Cost Total 1,280, % 62% Time dependent cost Distance dependent cost Table-5.13: Time & Distance based Cost Figure-5.3: Time and distance based cost share 69

72 5.3 Data Comparison and Verification Data on Malmö-Gothenburg segment A set of data and its output have been produced by RECORDIT project through carrying out a study at different corridors in Europe. Among those corridors, door to door intermodal operating costs in Humberg-Gothenburg corridor has selected. Particularly post haulage cost on Malmö-Gothenburg segment of that corridor has taken into account to justify the cost function of this thesis study. 1) Adjust the findings The resultant costs in post haulage leg in the Gothenburg area have been recalculated to compare the both findings in the same scale. The unit data in that study has given in Euro per loading unit considering the loading factor. The recalculated value determined by dividing 50 km trip distance and then multiplying with 60% loading factor. The calculation That has given bellow: Table-5.14: Per km cost calculation on Malmö- Gothenburg segment Cost Item Cost per truck km (Euro) Cost per 10 km (SEK) On 2002* Estimated Cost for 2007 ** Depreciation Fuel Tyre Maintenance Driver Insurance of truck Road Toll & veh. tax Other cost * 1 Euro=9.23 SEK on Jan 2002 **at 4.3% interest rate and 1.43% inflation rate on average for 2002 to 2007 (Source: Statistics Sweden) Source: RECORDIT, Resource Cost Calculation for Selected Corridor (2002) page ) Measuring Result Error To verify the figures of per unit operating cost that has derived in this paper two statistical test tools are done below: 70

73 a) Root Mean Squared Error (RMSE) Mean squared error is one the most commonly used measures of determining the difference between values actually observed and the values obtained/predicted by a model. In this paper, it has been used to obtain the difference between two findings with the same attributes. Table-5.15: Cost comparison between the estimated data and selected corridor Component Cost per 10 km (SEK) Abs. Error Estimated In selected in this corridor paper (Ei) (Oi) Error Square Abs. Difference loi-eil (Oi-Ei) 2 loi-ōl 1. Depreciation Fuel cost Tyre cost Repair & service Driver cost Overhead cost Total Average(Ō) RMSE= O i E i 2 n = = 6.07 ; n= no. of cost components The resulted value of RMSE is not large. b) Relative Absolute Error (RAE) Relative absolute error is the proportion of total absolute error and the error that would have been if the forecast could is performed by only taking the average of the observed values. The formula and the result is: RME = O i E i = 30.6 O i O 81.1 =0.38 RME lies from zero to infinity. To have zero or tends to zero indicates that there exists no error between the value to be compared and the reference value. In this 71

74 case, RME is a minor which point out low variation between the costs that have been estimated in this paper and the reference value of RECORDIT project. The variation in two sets of figure could happen due to the type of truck as this paper only focused on the specific `3-Axle trailer however the result from the selected corridor arises from different truck and trailer. The layout has assumed on the basis of Danish experience which has provided by Tetraplan. Moreover, the data has been projected for 2007 on the basis of collected data on Vehicle operating cost for Mercedes Benz ACTORS 1840 LS Tractor The results of the model calculation for the ACTORS 1840 articulated vehicle which is used for long-haulage. The figures regarding costs of oil consumption, repair, servicing etc. has provided by Mercedes Benz Charterway and the result has published in a project named COST 334. The figure has given below in piechart: Figure-5.4: Share of operating cost components for Actors 1840 Source: Addis, R (2002). Effects of Wide Single and Dual Tyres (Vehicle Operating Cost Version) 72

75 Table-5.16: Comparison for two different types of truck and RMSE calculation Component Cost in % Estimated in In selected this paper (Ei) Vehicle (Oi) (Oi-Ei) 2 1. Depreciation Fuel cost Tyre cost Repair & service Driver cost Overhead cost Total Root Mean Squared Error RMSE= O i E i 2 Example n = = 4.12 ; Small value 5.4 Examples of results In this section, cost for different types of vehicle movement with different loading unit status and the impact of reducing empty return distance on cost have been analyzed. The resultant value produced on the basis of some hypothetical figure. The process of calculating cost in different loading unit status is the principal goal of this section Cost per LU in different LU status The annual cost of operating a 3-axle trailer is 1,280,709 SEK ( from table 5.10 ). Let us assume that- No of trip per day is 3 and No of loading units (LU) used per trip are 2 (a) Vehicle utilized per year is 230 days 73

76 Cost per LU Then total loading units used per year is 1,380 and the cost per loading unit is 928 SEK. Flows in relation to three types loading unit status have been discussed in section. Cost for different proportion of flows in a time period of this three status of loading units carried out as different scenarios. Actual costs by taking into account the empty run factor has determined thereafter and compared. Table-5.17 : Per loading unit cost in different proportion of flows Scenario % of flows in a period Empty Loaded LU Unloaded Empty Run LU Movement Factor* Actual Cost per LU Snrio Snrio Snrio Snrio Snrio Snrio Snrio * determined by section If flows of loaded loading units decreases (or flows of empty movement increases) the actual per loading unit cost reduces. The regression analysis for empty movement flows and actual costs (based on above table 5.17) finds that if the empty movement flow increases 1% then the cost raises 32 SEK per loading unit. The output of regression provided in the appendix-8. For practical viewpoint, empty movement over 50 % has not considered in table Costs for different scenarios given in the diagram below: Per loading unit cost for different LU status Scenario Figure-5.5: Per LU cost in different LU status 74

77 5.4.2 Cost per LU in different backload distance The actual cost reduces if the empty return decreases which means how many distances in the empty flows have shared by the another company by transporting goods. Here the costs per LU calculated on the basis of the proportion of distance travelled in the direct flow and in the return flow. Different proportion of distances has taken into account as different scenarios. The table below represents the costs in several scenarios. Table-5.18: Per loading unit cost in different proportion of flow distance % of trip distance ERF Actual Cost Scenario (SEK per Loaded flow Empty flow LU) Snrio-1 100% 0% Snrio-2 90% 10% Snrio-3 80% 20% Snrio-4 70% 30% Snrio-5 60% 40% Snrio-6 50% 50% The table indicated that if the distances in the empty movement reduce in any trip the respective actual cost will also reduced. The regression analysis between empty movement distance and actual per LU cost shows that if the distance in the empty flow reduces 1 % the actual cost will decrease 18 SEK per LU. (The regression analysis delivered in the appendix-7). The relevant diagram has also presented below: 75

78 Cost per LU Per unit cost different empty trip distance Scenario Figure-5.6: Per LU cost in different flow distances All the per unit costs in different scenarios are based on operating a specific type of truck named 3-axle trailer and assumption given on equation (a) in Another field of scenarios can be discussed for different types of trucks as well as for different no of trips per day and the no of loading units used per trip. 76