Freight Management in Manhattan: Tax Incentives and High-Tech Tools for Night Owls

October 9, 2007

Freight Management in Manhattan: Tax Incentives and High-Tech Tools for Night Owls

Researchers win $1.2M DOT grant to develop methods for shifting truck deliveries to off-hours

Troy, N.Y. — Researchers at Rensselaer Polytechnic Institute have won a competitive $1.2 million grant from the U.S. Department of Transportation to identify the perfect combination of technology and financial incentives that could help alleviate daytime traffic congestion and boost economic growth in New York City.

When fully deployed, the program — the first of its kind in the world — is expected to reduce daytime truck deliveries in Manhattan by up to 20 percent in certain industry segments by shifting a portion of those deliveries to off-hours. 

The transition will help reduce congestion on city streets and in turn improve environmental conditions by trimming automotive emissions. The move could also increase the competitiveness of participating New York businesses by offering tax incentives to those willing to accept off-hour deliveries. Plus, with fewer trucks on the road, it will be easier and faster for customers to visit downtown businesses, the researchers predict.

The two-year project, titled “Integrative Freight Demand Management in the New York City Metropolitan Area,” brings together an influential group of partners from government, academia, small business, and large corporations under the leadership of Jose Holguín-Veras, a world-renowned expert in freight transportation systems and professor in Rensselaer’s Department of Civil and Environmental Engineering, and network modeling expert Satish Ukkusuri, assistant professor of civil and environmental engineering. 

Holguín-Veras and his team are looking to tackle the problem of urban congestion from the perspectives of technology, policy, and economics. 

The delivery industry is extremely competitive, which makes trucking companies unable to unilaterally change their delivery times. Their customers — those businesses receiving packages — have a considerable say in when deliveries are made. Likewise, competition in the delivery industry renders trucking companies unable to pass on toll costs to customers. This puts delivery companies in the precarious position of absorbing any toll increases and suffering lower profits, or having to raise prices to reflect the toll increases and risk losing customers.

Holguín-Veras’ research shows that after the Port Authority of New York and New Jersey increased tolls in 2001, only 9 percent of trucking companies passed on the increased costs to customers. This low number reflects the industry’s weak bargaining position, he said. The problem, Holguín-Veras suggests, is that if trucking companies cannot pass the tolls to their customers for fear of losing business, the customers do not have any incentive to receive off-hour deliveries. As a result, the only impact of increasing tolls is to eat away the truckers’ profits, with no real impact on traffic congestion.

Trucking companies are stuck between a rock and a hard place, Holguín-Veras said, and the current policies based on increasing tolls to trucks — in the hope that higher costs will prompt the drivers to shift some deliveries to the off-hours — will not do the trick, as they stand only to further penalize the delivery industry. 

Instead, with this new project, he is proposing a set of comprehensive policies that target both the delivery companies and their customers. Receivers willing to accept off-hour deliveries will benefit from economic incentives that may be funded from so-called “time of day” or another, yet-to-be determined mechanism.

Holguín-Veras said his team will conduct extensive polling to determine how economic incentives — most likely in the form of tax breaks — can help persuade business owners to volunteer to begin accepting off-hours deliveries. He sees no downside to this system, since the proposed approach relies on voluntary participation of businesses that receive packages. 

At the same time, the research team will outfit delivery truck drivers with “smart” cellular phones that feature satellite global positioning system (GPS) technology. Data collected from these devices, which can provide drivers with real-time traffic information and real-time suggestions for avoiding congestion and optimizing routes, would be shared with delivery firms, enabling them to do dynamic fleet management at a fraction of the cost of alternative systems currently available. 

Data collected from the smart phones would also allow Holguín-Veras and city officials to ensure delivery companies are complying with the program. Researchers also will use this dynamic data to create freight transportation models as well as network traffic simulation.

“In one shot, the proposed approach is expected to improve traffic conditions, reduce the environmental externalities associated with truck traffic which would bring about health improvements, and, more importantly, increase the economic competitiveness of the core of the urban areas by virtue of the tax deductions,” Holguín-Veras said. “We do not need to move the operations of all businesses to the off-hours, we only need to move some of them to produce a noticeable improvement in traffic conditions and environmental sustainability.”

Holguín-Veras said the project, if successful, could serve as an example for similar programs implemented to help fight traffic congestion in cities around the world. In general, the cost of off-hour deliveries is almost 30 percent lower than during the congested daytime hours, thanks to quicker travel times and more available parking, which result in overall higher productivity.

“This project has the potential to become a showcase of what could be achieved by integrating cutting-edge freight management transportation research, technology, traffic simulation, and policy around the objective of improving urban traffic conditions in the largest and most complex urban system in the nation,” Holguín-Veras. “If it works in New York City, it will work anywhere.” 

The research team will spend a year to 18 months conducting surveys, collecting data, creating models, and running simulations. Afterward, they will launch a pilot program that includes up to 300 businesses from a particular sector, probably the restaurant sector, and up to 50 carriers, who will be outfit with the smart phones and begin shifting some of their deliveries to off-peak hours.

If the pilot program is successful and the freight management system is adopted on a wide scale, it could result in dramatic improvement in daytime traffic conditions, according to Holguín-Veras. In Manhattan alone, there are more than 6,000 restaurants, each of which receives an average of six or seven daily deliveries — for a combined total of more truck trips than those produced by the Port of New York and New Jersey. 

“Even shifting one out of 10 or one out of five of these deliveries to off-peak hours will make a substantial difference,” said Ukkusuri, who is leading Rensselaer’s traffic simulation efforts. Both Ukkusuri and Holguín-Veras are members of Rensselaer’s Transportation Systems Group.

Under Holguin-Veras’ leadership, Rensselaer will partner with Professor Kaan Ozbay from Rutgers University, Allison de Cerreño, director of New York University’s Rudin Center for Transportation Policy and Management, and Alain Kornhauser from Princeton, N.J.-based ALK Technologies Inc. to tackle the project. As part of the project, a business advisory group comprising leading business and trade organizations and agency advisory groups with representatives of the key transportation agencies will provide input to the project.

The project is funded by the U.S. Department of Transportation.

About Rensselaer’s Transportation Systems Group
The Transportation Systems Group at RPI is one of the top transportation programs in the nation with an ongoing mission of conducting world class research in transportation; educating the next generation of transportation professionals; and serving the community by responding to the transportation needs of New York. This is accomplished by three outstanding faculty and a strong graduate program comprising of students from U.S. and other parts of the world. This program is funded by the National Science Foundation, U.S. Department of Transportation, New York State Department of Transportation and many other state transportation agencies.

Contact: Michael Mullaney
Phone: (518) 276-6161
E-mail: mullam@rpi.edu