TITLE:
Exploring the Use of Systems Dynamics for the Valuation of Freight Transport Time Changes
AUTHORS:
Irene Ramfou, Evangelos Sambracos
KEYWORDS:
Systems Thinking, Freight Transport Time, Systems Dynamics, Benefit-Cost Analysis, Supply Chain Management
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.6,
December
11,
2023
ABSTRACT: This article aims to explore the use of System Dynamics modeling as a
tool to assess the impact of changes in Freight Transport Time (FTTC) on
transport companies. After conducting a thorough literature review, it became
clear that there is no consensus on the appropriate methods used, and the
estimates of freight travel time values vary significantly. The two primary
tools currently employed in Benefit-Cost Analysis (BCA) to estimate the value
that shippers and carriers place on FTTC are the Factor Cost and
Willingness-to-Pay methods, akin to valuing travel time changes in passenger
transport. However, due to the distinct characteristics of freight transport,
traditional methods are less effective in accurately gauging FTTC values. In
this paper, we adopt a methodological stance grounded in Systems Thinking. In
contrast to existing methods, which primarily rely on event-oriented thinking
and perceive freight transportation as an activity isolated from the broader
company ecosystem, we consider the interconnections between freight
transportation and other business operations. Lastly, to demonstrate the
application of the Systems Thinking approach, we utilize Systems Dynamics
modeling and simulation in a typical retail company that forms part of a
traditional supply chain to determine the value of FTTC.