Last Mile Prices on the Rise

Truck volumes have been rising at a compound annual rate of 2.2% since 1996, says the Bureau of Transportation Statistics (BTS). Based on freight ton-miles, motor carriage grew volumes 21.8% from 1996 to 2005. (A ton-mile is defined as one ton of freight shipped one mile.) The current figures available from BTS place truck volumes at1.3 trillion ton miles, up from just over 1 trillion in 1996.

For commuters in major urban areas, the problem with growth is apparent in the near gridlock conditions on roads during peak demand. Motor carriers entering and leaving these areas to make deliveries or pick up shipments experience comparable productivity losses.

The US Department of Transportation (DOT) recently announced aid to five urban areas in nearly every part of the country to support efforts to relieve congestion. The federal initiative offers Miami $62.9 million, Minneapolis $133.3 million, Seattle $138.7 million, San Francisco $158.7 million, and New York City $354.5 million to implement “traffic fighting plans.” The funds are allocated in a lump sum to get projects “off the drawing board and into action,” according to DOT Secretary Mary Peters.

New York has indicated it will use the federal aid to establish a congestion pricing scheme that would charge vehicles a toll for entering the city’s busiest district during peak hours. One report indicates the New York plan could charge cars $8 to enter the business district during peak hours and trucks would pay $21.

Most attention has focused on commuters and retail consumer behavior and the impact such charges would have on local merchants. While they worry about “front door traffic,” merchants and other businesses located in major urban areas face additional challenges at the back door where shipping and receiving operations take place.

Companies receiving multiple deliveries from various suppliers could see costs add up as those peak-hour tolls are passed on in the transportation costs the consignee pays (directly or indirectly).

Jose Holguin-Veras, Rensselaer Polytechnic Institute, conducted a study of the challenges to off-peak freight deliveries in 2004 and indicated at that time that carriers doing pick ups and deliveries in New York City were paying as much as $2,000 per month per vehicle in parking violations because there were not spaces available for the trucks making deliveries or picking up shipments. Peak-hour tolls, especially if they apply each time a vehicle enters or leaves the central business district, could also escalate the cost of logistics operations.

Clearly, the incentive is to shift to off-peak pick ups and deliveries, but this presents a whole set of issues for shippers and consignees. On the outbound side, off-peak pick ups could push shipments beyond cut off times for connecting with other modes such as express air service. On the receiving side, consignees would need to have someone available to receive shipments or make arrangements for unattended deliveries. As Holguin-Veras points out, some businesses such as restaurants can’t take off-peak deliveries because they are either preparing for their own evening peak or serving those customers.

While the peak pricing schemes do appear to shift some commuter traffic to public transport there may be fewer alternatives for freight movement. Fewer vehicles on the roads could improve efficiency for carriers entering and leaving the business district, but the time and fuel savings could be sacrificed to other operating costs.

Shippers and carriers will need to take a vocal role in the development of the peak pricing schemes where they have been funded if freight issues are to be addressed.

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