Valuation of transport time savings and improved reliability in freight transport CBA

The purpose of this chapter is to show how freight transport time savings (VTTS) and reduced variability in transport time (VTTV) are valuated in cost-benefit analysis (CBA) and to discuss alternatives. The chapter suggests a structure of the benefit components where VTTS compromises the reduction in (a) transport resources required for a given service VTTS (T), (b) capital tied up in goods while transported VTTS (G) and (c) goods users' opportunity costs VTTS (O). VTTV (T) and (b) users' opportunity costs VTTV (O).

Normative and behavioral approaches are applied to determine VTTS and VTTV. The VTTS definition differs between countries: Sweden, Norway, Germany and the United Kingdom calculate VTTS (T) based on market prices, the Netherlands use an all encompassing VTTS derived from SP data. Sweden and Norway are the only countries that use VTTS to denote only VTTS (G). Only the Netherlands, Sweden, and Norway apply preliminary VTTV in their CBA.

Different VTTS and VTTV constructions make the transfer of results difficult. It is found that the savings in transport resource costs VTTS (T) can be calculated with help of engineering formulae. Provided that the VTTS can be limited to VTTS (G), where market-based approaches can be used, and VTTS (O). The incorporation of VTTV in CBA requires further development of the valuation methods. The use of information of the trade-off between transport costs and inventory costs is one promising approach. Hopefully lessons can be learned from the Dutch and Norwegian SP studies for VTTS and VTTV. A better understanding of the opportunity costs is needed.

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