Freight value of time : An exploratory study for modelling freight.

Abstract: The main purpose of this project was to examine the reliability of Value of Time for freight applications by comparing the functionality of the Freight Value of Time modelling concept, with the functionality of the freight market. The research questions of this report are: How can the Freight Value of Time concept fulfil the requirements that decision makers in international freight have on the reliability of the modelling outcome? What are the differences between the multimodal and the unimodal applications of Value of Time in terms of validity? Within the scope of this study; modelling in the field of freight, logistics and supply chain management are presented with focus on Value of Time models. An overview of common freight models is initially presented as a starting point for literature reviews on trends and characteristics of the freight market , and on Freight Value of Time. These two literature reviews constitute the main methods of information retrieval on which the later analyses are based. The trends and characteristics of the freight market section provided the general requirements and a context for modelling freight, which was used for analysing and discussing Freight Value of Time. Additionally, a survey was performed in order to provide some insight into the requirements that analysts and decision makers have. The survey results were presented in the form of six examples of Swedish decision makers in freight. However, the survey results were deemed unsuitable for general conclusions due to a low response rate (6 out of 60). The analysis chapter of the report is divided into three parts; a general analysis section, a validity test of Freight Value of Time and a conceptual feasibility example. The general analysis focussed on issues with Freight Value of Time, the survey, freight market trends and multimodality. In the general analysis Global production networks and supply chains were identified as major trends and were used as the main modelling context when analysing Value of Time as a modelling concept for freight. The rest of the general analyses focuses on how well the modelling concept Value of Time corresponds to the functionality of the market. The validity test section showed that there are some possible issues with Freight Value of Time and that they can possibly be attributed to poor data availability and high aggregation levels. Therefore, the feasibility example study was performed for a conceptual case where data that is often missing was available. The specific data was characterised as supply chain data, which could be available to external analysts if the companies decide to share it. The feasibility study thereby tested if it actually was the lack of data that is the main reason for models including Freight Value of Time to lack validity according to the validity test. Access to data was found to be an important factor when creating a freight model with Value of Time, because by adding the supply chain data the performance of Freight Value of Time in the validity test was improved. However there were still potential issues with using Freight Value of Time concerning testing and verification in relation to the complexity of large scale freight models and the complexity of multimodal freight transport. The main issues with Value of Time identified throughout the project were: 1. Discrete choice model selection 2. High aggregation levels due to lack of data 3. Explanatory variables 4. Identification of decision makers 5. Transport flow heterogeneity A set of four recommendations for analysts were devised from the hypothesis of: Models using Freight Value of Time are not reliable enough to be used in practise. The recommendations to analysts interested in Freight Value of Time were: - The specific model should be verified and validated before being used, which is probably best done for the specific application with a standardised verification and validation method such as the VV&A (used by Department of Defense in the USA). - Freight Value of Time is best used for unimodal applications, but for multimodal applications it could be reliable enough if the model is properly adapted to the complexity of the reality which is modelled. - The higher the complexity of a modelling scenario, the more data is needed. Therefore an analyst needs to make sure that this trade-off is kept at a level where the results fit the requirements of the application. - Low aggregation levels benefits the accuracy of the model, but increase the amount of calculations. It is therefore good to be aware of the risk of calculation errors. Summarised, the report concludes that Value of Time is sometimes the best method at hand but difficulties in gathering data can affect the accuracy negatively. Furthermore the complexity of multimodal freight transportation makes Value of Time less valid than for unimodal freight.