• TABLE OF CONTENTS
HIDE
 Front Cover
 Title Page
 Table of Contents
 List of Tables
 Introduction
 Comparison of costs, revenues,...
 Financial and organizational...
 Summary and conclusions
 Appendix I. Total truck and trailer-on-flatcar...
 Appendix II. Costs associated with...
 References
 Back Cover
 Historic note






Group Title: Bulletin - Agricultural Experiment Stations, University of Florida ; 839
Title: Shipping by piggyback
CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00027453/00001
 Material Information
Title: Shipping by piggyback a potential alternative for Florida produce transportation
Series Title: Bulletin Agricultural Experiment Stations, University of Florida
Physical Description: 36 p. : ill. ; 23 cm.
Language: English
Creator: Beilock, Richard
Publisher: Agricultural Experiment Stations, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville Fla.
Publication Date: 1984
 Subjects
Subject: Piggyback transportation -- Economic aspects -- Florida   ( lcsh )
Farm produce -- Transportation -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Bibliography: p. 35-36.
Statement of Responsibility: Richard Beilock.
 Record Information
Bibliographic ID: UF00027453
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000401521
oclc - 10680678
notis - ACE7369

Table of Contents
    Front Cover
        Front Cover
    Title Page
        Title Page
    Table of Contents
        Table of Contents
    List of Tables
        Page i
    Introduction
        Page 1
    Comparison of costs, revenues, and service considerations for trucks and trailers-on-flatcar
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
    Financial and organizational considerations
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
    Summary and conclusions
        Page 26
        Page 27
        Page 28
    Appendix I. Total truck and trailer-on-flatcar costing model
        Page 29
        Page 30
        Page 31
    Appendix II. Costs associated with transit speed, reliability, and handling
        Page 32
        Page 33
        Page 34
    References
        Page 35
        Page 36
    Back Cover
        Page 37
    Historic note
        Page 38
Full Text
100

January 1984
January 1984


Bulletin 839


SHIPPING BY PIGGYBACK:
A Potential Alternative for
Florida Produce Transportation


Richard Beilock




















Agricultural Experiment Stations
Institute of Food and Agricultural Sciences
University of Florida, Gainesville
F. A. Wood, Dean for Research









Shipping by Piggyback:
A Potential Alternative for
Florida Produce Transportation

Richard Beilock

























Dr. Beilock is an Assistant Professor in the Food Resources
and Economics Department, University of Florida, Gainesville.











Table of Contents

Page
Introduction ........................................ ........ 1
Comparison of Costs, Revenues, and Service Considerations
For Trucks and Trailers-on-Flatcar ............................. 1
Fuel Efficiency ............................................. 2
Labor Costs ..................... ........................... 9
Total and Rail Distances to Market ............................. 9
Dependence on Trucking ..................................... 15
Transportation Service Considerations ........................... 17
Financial and Organizational Considerations ....................... 20
Trailer-on-Flatcar Plans ...................................... 20
Full Service Firm s ............................................. 20
Individual Shipper or Receiver Ownership ....................... 22
Shipper Association and Cooperatives ........................... 23
Summary and Conclusions ........................................ 26
Appendix I ................. .......................... 29
Appendix II ................................................ 32
References ............................................ 35










List of Tables

Table Page
1 Simulated Fuel Needs for Trucks and Trailers-on-Flatcars (TOFC)
from Florida to New York City (Gallons Diesel) .................. 4
2 Simulated Fuel Cost Differential Between Truck and
Trailer-on-Flatcar from Florida to New York ..................... 4
3 Estimated Fuel Expended Per Loaded or Revenue Mile for Truck
and Trailer-on-Flatcar Shipments Between Florida and
New York ...................................... ............. 5
4 Basic Assumptions of the Model .............................. 7
5 Produce Shipments by Trailer-on-Flatcar by Point of Origin (1,000
hundredweight) ....................... .................. 12
6 Trailer-on-Flatcar Shipping Plan .............................. 21



List of Figures

Figure Page
1 Minimum Fuel Cost-Percent Full TOFC Return Combinations
Necessary for TOFC to be Cost Competitive with Trucking on a Per
Revenue Mile Basis .............................. ............ 8
2 Graphic Representation of the Relationships of Distance to
Market and Drayage Distances to the Relative Costs of Trucks
and TOFC ................................... ............ 10
3 Minimum Percentages of Full TOFC Backhauls Necessary for
TOFC to be Cost Competitive with Trucking on a Per Revenue Mile
Basis Given Differing Distances to Market and Trips Per Year .... 13
4 Location of TOFC Loading Facilities in Florida ................... 14
5 Market Share of Fresh and Vegetable Shipments by Truck from
Florida ................................. ................. 16
6. Selected Florida Fresh Fruits and Vegetables by Value and
Shelflife ................................................ 19
7 Monthly Shipments of Fresh Fruits and Vegetables from Florida
and California (1980) ................ ...................... 22
8 Weekly Truck Rates From Florida to New York City for Sweet
Corn, Tomatoes and Grapefruit-October 1979 to June 1980 and
October 1980 to June 1981 ...................................... 24










Introduction
Over the past 10 years there has been a growing interest in Florida
to develop expanded straight rail or intermodal systems to deliver
fresh fruits and vegetables. At present between 98 and 99 percent of
all shipments from Florida are by truck (USDA, 1956-1981). Piggy-
backs or truck trailers on railroad flatcars (TOFC) are usually iden-
tified as the most logical alternative. TOFC is a hybrid mode between
trucks and rails. It offers some of the advantages of trucking with
respect to smaller-than-boxcar loads, and the ability to use the road-
ways to reach out beyond the railheads for pickups and deliveries.
During the rail portion of a movement, TOFC can take advantage of
fuel and labor economies commonly associated with railroads.
Recent regulatory changes have established conditions which are
more favorable for TOFC. Shippers and railroads may now establish
contractual agreements specifying prices and service levels. In addi-
tion, the over-the-road portion of the move is essentially deregulated.
In this study the advantages and disadvantages of employing
TOFC to ship produce from Florida are examined. The factors which
affect the relative costs of truck and TOFC services are analyzed in
the first part of this study. It is argued that while fuel costs are
important, it should not be the single or even focal consideration in
determining the relative advantage of trucks and TOFC. Labor costs
are probably at least as important. Also important are the distance to
market, the proportion of a TOFC movement which is by rail, equip-
ment utilization levels, risks associated with dependence on one
mode, and the willingness of receivers to accept shipment by TOFC.
In the second part of the study, organizational and financial consid-
erations for TOFC are discussed. In this section it is argued that the
requirements are such that successful TOFC service generally ne-
cessitates formation of broadly based shipper associations.

Comparison of Costs, Revenues, and Service
Considerations for Trucks and Trailers-on-Flatcar
TOFC and truck transportation are substitutes. As the price of one
rises relative to the other, consumers of these services will substitute
the cheaper mode for the more expensive one, ceteris paribus. The
costs of the modes are influenced by the costs of the inputs. The force
or speed of the influence of changes in the costs of these factor inputs
will depend upon such factors as the degree of competitiveness in the










Introduction
Over the past 10 years there has been a growing interest in Florida
to develop expanded straight rail or intermodal systems to deliver
fresh fruits and vegetables. At present between 98 and 99 percent of
all shipments from Florida are by truck (USDA, 1956-1981). Piggy-
backs or truck trailers on railroad flatcars (TOFC) are usually iden-
tified as the most logical alternative. TOFC is a hybrid mode between
trucks and rails. It offers some of the advantages of trucking with
respect to smaller-than-boxcar loads, and the ability to use the road-
ways to reach out beyond the railheads for pickups and deliveries.
During the rail portion of a movement, TOFC can take advantage of
fuel and labor economies commonly associated with railroads.
Recent regulatory changes have established conditions which are
more favorable for TOFC. Shippers and railroads may now establish
contractual agreements specifying prices and service levels. In addi-
tion, the over-the-road portion of the move is essentially deregulated.
In this study the advantages and disadvantages of employing
TOFC to ship produce from Florida are examined. The factors which
affect the relative costs of truck and TOFC services are analyzed in
the first part of this study. It is argued that while fuel costs are
important, it should not be the single or even focal consideration in
determining the relative advantage of trucks and TOFC. Labor costs
are probably at least as important. Also important are the distance to
market, the proportion of a TOFC movement which is by rail, equip-
ment utilization levels, risks associated with dependence on one
mode, and the willingness of receivers to accept shipment by TOFC.
In the second part of the study, organizational and financial consid-
erations for TOFC are discussed. In this section it is argued that the
requirements are such that successful TOFC service generally ne-
cessitates formation of broadly based shipper associations.

Comparison of Costs, Revenues, and Service
Considerations for Trucks and Trailers-on-Flatcar
TOFC and truck transportation are substitutes. As the price of one
rises relative to the other, consumers of these services will substitute
the cheaper mode for the more expensive one, ceteris paribus. The
costs of the modes are influenced by the costs of the inputs. The force
or speed of the influence of changes in the costs of these factor inputs
will depend upon such factors as the degree of competitiveness in the







markets and the presence or absence of government subsidies or tax
incentives. In the longer run, however, the underlying cost elements
will tend to dominate. It follows, then, that long-run transportation
planning requires an assessment of the future costs of inputs and of
the effects of these costs on the relative costs of the modes. The larger
the proportion or share of an input in a product or service (such as
transportation service), the greater will be the effect from changes in
the cost of that input or the price of the product or service. Therefore,
as relative modal costs are of interest, attention should be focused on
those factors in which the modes have widely divergent factor shares.
Fuel and labor costs are typically singled out as being the two most
crucial transportation cost elements, and the two for which there are
the greatest differences in the proportion of total costs for trucks and
TOFC. In a study of produce transportation for the U.S. Department
of Transportation it was estimated that, on average, line-haul (i.e.,
running) labor and fuel costs each account for between 5 and 10
percent of straight rail and TOFC costs on long hauls as opposed to
between 20 and 25 percent each for labor and fuel costs for compara-
ble truck line-hauls (Manalytics 1977, Vol. 5, pp. 114-116). For
individual movements, these percentages may vary, depending upon
factors such as the length of the line-haul and the amount of empty
mileage. Moreover, the estimates do not include shipping point and
destination labor and fuel inputs. In the following two sections the
importance of fuel and labor costs on the relative costs of TOFC and
trucking is examined.
Fuel Efficiency
Typically the most asked question when comparing TOFC and
trucking is just how fuel efficient is TOFC relative to trucking.
Unfortunately there are no easy answers. The relative fuel efficien-
cies of the modes depend upon road and track conditions, drayage'
distances, cargo densities, equipment types, road and track circuity
("round aboutness"), etc. Fuel economies relative to trucking result
from the rail portion of the trip. As drayages to and from TOFC rail
terminal facilities are in reality over-the-road movements, the longer
the drayages are relative to the rail movement, the more similar are
the fuel requirements of TOFC and trucks. At one extreme, if the
TOFC unit is drayed all the way from shipper to receiver, then the
move is equivalent to a truck shipment in all practical respects,
including fuel usage. At the other extreme, the maximum relative
savings in fuel can be realized if the TOFC trailer is loaded on a
flatcar at the shipper's location and unloaded at the receiver's.

1. Drayage refers to the over-the-road portion of a TOFC movement.







In various studies of specific TOFC and truck operations relative
fuel efficiency estimates range from a 2-to-1 advantage in favor of
TOFC (U.S. Department of Transportation, 1980) to a 4-to-3 advan-
tage in favor of trucks (Parson, 1980). A recent study by the U.S.
Congressional Budget Office (1982) suggests a 5-to-3 advantage in
favor of TOFC (for the rail portion of the movement only). The
variation between these estimates is largely due to differences in
assumptions regarding trip length and the proportion of the trip over
which drayages are necessary. Judging from the majority of these
and other studies, it would appear that for every 1 gallon of fuel a
shipment by truck requires, a TOFC movement uses between /2 and
1 gallon.
The following simulated movement from South Florida to New
York serves to impart some idea of the relative fuel requirements of
trucks and TOFC. Assume that the movement is 1,300 miles and that
a truck operates at 4.5 miles per gallon when full and 5.5 when empty
(Beilock, 1981). The assumption will also be made that, after taking
account of circuity2 in the rail portion of a trip, a TOFC unit uses half
the fuel per mile that a truck does, whether full or empty. Because of
the low clearance of the Baltimore tunnel, most north-south TOFC
movements along the East Coast begin or end at the Alexandria,
Virginia, rail yards, leaving approximately a 210 mile drayage be-
tween the northern shipper/receiver and the TOFC rail loading facil-
ity in Virginia.
The movement from South Florida to New York requires 289
gallons of diesel for a truck compared to 172 for a TOFC trailer, a
saving of 117 gallons (see Table 1). At $1.20 per gallon, this trans-
lates into a fuel-related saving over trucking of $140 per load (Table
2) or approximately 6 to 10 percent of the current over-the-road
Florida-to-New York truck rates.3 Fuel savings (over trucking) in-
crease by $1.17 for each $0.01 increase in per gallon fuel costs. At
$2.00 per gallon, the savings are $233.00, and $350.00 at $3.00 per
gallon fuel costs (see Table 2).
It is misleading, however, to only consider the fronthaul (the out-
bound trip from Florida). If a vehicle cannot secure a full backhaul
(the return trip to Florida), then the real fuel cost of delivery is that
incurred for both the outbound and the return trip. If a TOFC unit
must return empty, then it will effectively use 313 gallons to deliver a
load, 24 gallons more than a truck which returns full. At $1.20 per

2. For TOFC movements, circuitry, or deviations from the most direct
route, average 12 percent. That is, the average rail portion of the TOFC
movement is 112 percent of the shortest possible rail distance (ICC, 1978).
3. Truck rates from Florida to New York generally fluctuate within a
range from $1400 to $2500 (USDA, 1979-1982 (weekly)).







Table 1: Simulated fuel needs for trucks and trailers-on-flatcars (TOFC) from
Florida to New York City (gallons diesel).

Truck Trailer-on-Flatcar

Oneway: loaded
Rail portion NA1 55.6
Over-the-road 288.9 116.7
TOTAL 288.9 172.3
Oneway: empty
Rail portion NA 45.5
Over-the-road 236.4 95.5
TOTAL 236.4 141.0

NOTE: The following assumptions are used.
One-way road or road-equivalent mileage: total 1300
TOFC rail portion 1050


Miles per gallon:
Over-the-road truck
Rail portion of TOFC
Fuel used for refrigeration is not included.
1. NA = not applicable.


loaded
4.5
9.0


empty
5.5
11.0


Table 2: Simulated fuel cost differential between truck and trailer-on-flatcar
from Florida to New York.

Truck Fuel Expenditure Minus TOFC Fuel Expenditure'

Full truck Full truck & Full TOFC & Empty truck
Per Gallon & TOFC empty TOFC empty truck & TOFC
Fuel Cost backhauls backhauls backhauls backhauls

$1.20 $140.00 $-28.94 $423.60 $254.40
1.30 151.67 -31.36 458.90 275.60
1.40 163.33 -33.77 494.20 296.80
1.50 175.00 -36.18 529.50 318.00
1.60 186.67 -38.59 564.80 339.20
1.70 198.33 -41.00 600.10 360.40
1.80 210.00 -43.42 635.40 381.60
1.90 221.66 -45.83 670.70 402.80
2.00 233.33 -48.24 706.00 424.00
2.10 245.00 -50.65 741.30 445.20
2.20 256.67 -53.06 776.60 466.40
2.30 268.33 -55.48 811.90 487.60
2.40 280.00 -57.89 847.20 508.80
2.50 291.67 -60.30 882.50 530.00
2.60 303.33 -62.71 917.80 551.20
2.70 315.00 -65.12 953.10 572.40
2.80 326.67 -67.54 988.40 593.60
2.90 338.33 -69.95 1,023.70 614.80
3.00 350.00 -72.36 1,059.00 636.00

1. Fuel necessary for empty, but not full backhauls, is assigned to fronthaul load.







gallon, the added fuel cost over trucking is $28.94, at $2.00 per gallon
it is $48.24, and at $3.00 per gallon, $72.36 (see Table 2).
When considering performance over several trips or over the life of
the vehicle, it is best to focus on the fuel used in an average trip. One
meaningful measure is the amount of fuel used per revenue or loaded
mile. For example, if on average a vehicle returns empty from New
York half of the time, then on an average trip there are 650 empty
miles (half of 1,300) and 1,950 full miles. The amount of fuel used in
the trip divided by loaded miles (1,950) gives the amount of fuel per
loaded mile. In Table 3 the fuel used per loaded mile for different
percentages of full returns is shown. If, for example, a TOFC unit is
able to secure a full backhaul 10 percent of the time, then the fuel
used per loaded mile is 0.221 gallons (4.5 miles per gallon). This is
roughly equivalent to that for a truck with no empty returns (.222
gallons).
Clearly, the effective relative fuel efficiency of TOFC and trucks is
highly dependent upon the amount of full backhauls which can be
secured. When trucks and TOFC have equal or near equal full back-
haul percentages, the use of TOFC does result in fuel savings. How-
ever, if TOFC gets a lower proportion of full backhauls than trucks,
fuel savings are reduced or eliminated, or even.altered in favor of
trucking.
Produce carriers average about 80 percent full backhauls (Knorr,
1979; Kilmer and Stegelin, 1982; Pavlovic et al., 1980). It is doubtful
that TOFC units could do better, if as well. TOFC is at a disadvantage

Table 3: Estimated fuel expended per loaded or revenue mile for truck and
trailer-on-flatcar shipments between Florida and New York.

Fuel in Gallons Expended
Per Revenue or Loaded Mile
Percentage (Revenue miles per gallon in parentheses)
Full
Return Truck TOFC

0 .404 (2.48) .241 (4.15)
10 .371 (2.70) .221 (4.52)
20 .343 (2.92) .205 (4.88)
30 .320 (3.13) .191 (5.24)
40 .300 (3.33) .179 (5.59)
50 .283 (3.53) .169 (5.92)
60 .268 (3.73) .160 (6.25)
70 .254 (3.94) .152 (6.58)
80 .242 (4.13) .145 (6.90)
90 .232 (4.31) .138 (7.25)
100 .222 (4.50) .132 (7.58)
NOTE: For underlying assumptions, see Table 1.






to trucking when competing for backhauls, since the TOFC unit has
no driver to seek a load and is constrained by rail schedules. An
additional disadvantage is that, because of restricted flatcar lengths,
TOFC trailers are often of somewhat smaller capacity than over-the-
road trailer units. In an examination of TOFC shipments on two
routes, only a 28 percent full return rate was found (Manalytics,
1977, Vol. 5, p. 25). If, however, TOFC were to match the 80 percent
full backhaul rate of trucking, it would be 40 percent more fuel
efficient per loaded mile (given the preceding assumptions). At $1.20
per gallon diesel the per loaded mile savings over trucking would be
$0.12, or about $156 for the fronthaul fuel-related costs (approx-
imately 8 percent of the current trucking rates). If 50 percent TOFC
full backhauls are achieved, the per mile fuel savings drops to $0.09.
Finally, if no full backhauls are achieved, no fuel savings are realized
by employing TOFC rather than trucks.
f Depending upon the level of equipment utilization, TOFC can save
between zero and 40 percent of the per revenue mile fuel costs.
However, given current trucking rates, this translates into only a 0 to
8 percent savings.4
Comparing the total costs of TOFC and truck shipments to New
York from central Florida reveals the insensitivity of the relative
costs of the modes to fairly large changes in fuel costs and the high
degree of sensitivity to changes in TOFC full backhaul percentages.
Assuming that trucks realize 75 percent full backhauls and make 45
roundtrips per year (see Table 4 and Appendix 1 for further details),
it is estimated that, to be cost competitive on a per revenue mile basis,
a TOFC unit which makes 18 roundtrips per year would have to
realize 52 percent full backhauls if the price of fuel were $1.30 per
gallon. If the fuel prices doubled, to $2.60 per gallon, the necessary
percentage of full returns would be 38 percent. Depending upon the
annual number of TOFC roundtrips assumed, a 10 percent increase
(decrease) in the price of fuel results in a 3 to 4 percent decrease
(increase) in the minimum percentages of all trips which must have
a full return for TOFC to be cost competitive with trucking (see Fig-
ure 1).
In summary, fuel costs are an important consideration. Given
reasonable assumptions regarding fuel efficiencies, TOFC can realize
a 40 percent fuel saving over trucking for a typical one way Florida

4. At an 80 percent full return rate for TOFC (i.e., matching that for
trucking) the per revenue mile savings in fuel for TOFC over trucking is
0.097 (0.242 0.145, from Table 3). Over 1300 miles this results in a 126.1
gallon savings or $151.32 at $1.20 per gallon. Assuming a truck rate of
$1,950 (the median of the 1979-1982 truck rates (see footnote 3), the fuel
savings from TOFC represents an 8 percent savings.








Table 4: Basic assumptions of the model.


Item


Assumption


Focus Market Destination = New York City


Origin


FL TX AZ CA
(Orlando) (Loredo) (Nogales) (Barstow)


Distance (miles) Truck' =
TOFC1 =
Revenue miles, if full =
Between pickup or
delivery points =
Truck pickup to
TOFC ramp =
Destination TOFC ramp
to first delivery point =
Number of trips per year
Truck2 =
TOFC =


Pickup:3
Destination3 (if backhaul)
Delivery stops:4


1100
1137
1100


1990
2070
1990


2500
2780
2500


2700
2990
2700


25 25 25 25

25 25 25 25


40 40 40


45 30 25 22
Variable within region


Origin 2
= 2
= 2 per load


r Percentage loaded backhauls: Truck5 = 75 TOFC = variable
Percentage loaded backhauls requiring refrigeration3 = 50


Fuel consumption:






Fuel Prices


Truck, loaded6
Truck, unloaded6
TOFC, load7
TOFC, unloaded7
Refrigeration, precool8
Refrigeration, normal
runnings
Diesel (gal.)


= 4.5 mpg
= 5.2 mpg
= 9.0 mpg
= 10.0 mpg
= 1 gal./hr. (4 hrs.)

= 0.5 gal./hr.
= $1.30 to $2.60


1. Road distances estimated from the "Highway Atlas of the United States" and
railroad distances by "Handy Road Atlas," both by Rand McNally, 1980 and 1973,
respectively.
2. Chosen so as to maintain between 100,000 and 120,000 miles per year, per truck.
This range was considered to represent a reasonable average, and corresponds closely
to previous estimates such as those of Knorr (1979).
3. Boles (1980).
4. Author's estimate.
5. Estimate based on ICC (1977).
6. Averaging of estimates made by Boles (1980) and Batts (1981).
7. Averaging of estimates made by various sources, including conversations with
railroad officials, Paxson (1980), and Reebie (1981).
8. Corresponds to estimates of Klindworth and Brooks (1981) and Knorr (1979).














10TOFC roundtrips per year


60.







18 TOFC roundtrips per year




26 TOFC roundtrips per year

301 i
100 120 140 160 180 200
Percent of current diesel fuel price ($1.30/gallon)

NOTE: Full returns for trucks are held constant at 75 percent, and the annual number of
roundtrips for trucks is held at 45. For additional assumptions, see Table 4.

Figure 1: Minimum fuel cost-percent full TOFC return combinations neces-
sary for TOFC to be cost competitive with trucking on a per
revenue mile basis.

shipment (to New York). Effective or per revenue mile fuel efficien-
cies, however, are highly dependent upon the realized full backhaul
percentages of the two modes. If, for example, a TOFC unit obtains no
full backhauls while trucks obtain an average of 80 percent full
backhauls, then the modes are equally fuel efficient. If TOFC can
match the backhaul performance of trucks, the 40 percent fuel sav-
ings result in a fuel related cost savings equivalent to approximately
8 percent of current truck rates. Therefore, without severalfold in-
creases in fuel prices, it seems doubtful that fuel cost considerations
alone can justify a switch from one mode to another.






Labor Costs
Labor cost considerations are probably of at least equal importance
to fuel costs when comparing trucks and TOFC. Moreover, as with
fuel, the relative labor efficiencies from TOFC are realized over the
rail portion of a movement. The key is that no drivers are needed
while the trailer is atop a flatcar. The amount of the savings varies
depending upon rail and yard crew sizes, train size, and whether the
over-the-road move would have required a one- or a two-man crew.
Per mile labor savings for the rail portion of a TOFC move of 65 to 90
percent over trucks would seem to be a reasonable estimate. In the
preceding South Florida-to-New York example, 80 percent of the trip
(1,050 miles one way) was by rail. If it is assumed that truckers are
compensated at a rate of $0.19 per mile (Boles) and that rail workers
receive similar pay, then labor cost savings of between $130 and $180
for each one-way move ($260 to $360 per roundtrip) can be realized. If
two-man over-the-road truck teams are assumed, the savings are
much greater. As with fuel, effective or per revenue mile savings are
highly dependent upon TOFC backhaul rates.
Total and Rail Distances to Market
The labor savings have been shown to be of potentially greater
magnitude than those for fuel. Of greater significance, however, is
the fact that the relative labor and fuel economies from TOFC over
truck use are both realized in the rail portion of a TOFC movement.
For each mile of the rail portion, a TOFC trailer uses roughly $0.13
less fuel and $0.14 less labor than would be the case for over-the-road
trucking. This double savings underscores the advantages of having
a long rail portion to a TOFC movement with relatively short
drayages.
Figure 2 depicts the importance of total distances-to-market and
drayage length. At the point of origin (0), TOFC and trucks have
similar vehicle positioning and loading costs. The per mile costs of
drayage and trucking would also be similar between the modes, as
represented by the equal slopes across distance for TOFC drayages
and trucking. Lower fuel and labor requirements should result in
lower per mile running costs for the rail portion of TOFC movements
than for trucks; this is represented by the shallower slope of the total
cost curve over the rail portion of a TOFC movement. Jumps or
discontinuities in the cost schedules for TOFC at road-to-rail and
rail-to-road transfer points (A, B, and D) and for both modes at the
unloading points (C and E) represent the costs of these operations.
For a one-way movement between 0 and E, TOFC is less costly than
trucking if the unit can be transported by rail from A to D (Figure 2a).







(a)


I







I Ic II
------------






0 A CB DE
Distance to market


(b)







------------------



0 A B C D E
Distance to market


(c)



0 T

LI- ------ ------
-----------




0 A B 'C D E
Distance to market

Key: TOFC----------
Truck

Figure 2: Graphic representation of the relationships of distance to market
and drayage distances to the relative costs of trucks and TOFC.






If, instead, the unit must be drayed from B to E, TOFC is more
expensive than trucking (Figure 2b). If the total distance of the
movement is not great, then it will be difficult for the running cost
advantage of TOFC to overcome the road-to-rail and rail-to-road
transfer cost disadvantages. This is illustrated by the fact that TOFC
is more expensive than trucking, even with very short drayages, for
shipments between 0 and C (Figure 2c).
Employing the methodology used to determine total Central Flor-
ida-to-New York truck and TOFC costs, costs to New York were
estimated from California, Texas, and Arizona (see Table 4 and
Appendix 1). In all cases, the more distant the origin, the greater the
advantage of TOFC relative to trucking on a per revenue mile basis.
Assuming 18 roundtrips from any point of origin and $1.30 per gallon
fuel costs, to be competitive with trucking, a TOFC unit going from
Florida-to-New York would have to maintain 52 percent full back-
hauls, while a unit originating in California would only require 18
percent full backhauls (see Figure 3).
The importance of total distance to market on the competitiveness
of TOFC is reflected by the regional pattern of TOFC usage for
produce in the country between 1978 and 1981 (see Table 5). During
this period the volume of TOFC produce shipments in the United
States increased almost fivefold from 2,924 thousand hundredweight
in 1978 to 13,739 in 1980. However, the entire increase occurred in
the Far West (primarily in California and Washington), where there
are very long distances to Eastern and Midwestern markets. East of
the Mississippi, where distances-to-market are generally shorter,
TOFC shipments actually declined by 15 percent (from 898 thousand
hundredweight in 1978 to 766 in 1981).
A rapid expansion of TOFC produce shipments in the West may
actually retard the growth of TOFC in Florida and the Southeast. As
western shippers shift to TOFC, some of the idled over-the-road
equipment will be transferred to the East. To the extent that the
influx of this equipment lowers vehicle prices and truck rates, it will
be more difficult for TOFC to compete in the East. This phenomenon
would be of limited duration, ending once the displaced vehicles were
retired from service. Nevertheless, for a period of five to ten years,
growth of TOFC produce shipments may continue to be limited, for
the most part, to the Far West.
The length of the drayage relative to the total trip is an important
consideration to those in Florida planning to ship by TOFC. TOFC
ramp facilities are located throughout the state (see Figure 4). There-
fore, reasonably short origin point-to-railhead drayages are avail-
able. At the time of this writing, TOFC rail services from Florida to
Atlanta, Cincinnati, and Alexandria, Virginia, are being offered.














Table 5: Produce shipments by trailer-on-flatcar by point of origin (1,000 hundredweight).

East of Mississippi Far West
Great
Year Florida Other1 Plains2 California Arizona Washington Other3 U.S.

1978 878 20 232 1,643 32 1 118 2,924
1979 866 1 63 2,169 9 141 20 3,269
1980 689 1 26 5,047 43 527 58 6,391
1981 757 9 23 11,462 366 828 294 13,739

SOURCE: USDA, Fresh Fruit and Vegetables Shipments and Unloads, 1978-1980.
1. Georgia and South Carolina.
2. North Dakota, Minnesota, and Colorado.
3. Idaho and Oregon.

















C 60
U

50 10 TOFC roundtrips per year


40'
18 TOFC
30 roundtrips
per year

20'
26 TOFC roundtrips
per year
10-


1100 1500 1900' 2300 2
(Florida) (Texas) (Ariz.) (Calif.)

Distance to market (miles)

NOTE: Full backhauls for trucking are held constant at 75 percent. Annual roundtrips for
trucks are held at 45 for Florida, 30 for Texas, 25 for Arizona, and 22 for California. For
additional assumptions, see Table 4.
Figure 3: Minimum percentages of full TOFC backhauls necessary for
TOFC to be cost competitive with trucking on a per revenue mile
basis, given differing distances to market and trips per year.


Connections are also possible to several Southeast and Midwest
points at which CSX (the principal railroad serving the state) main-
tains intermodal facilities. Included in this system are points in
Georgia, South Carolina, North Carolina, Virginia, Alabama, Ten-
nessee, Kentucky, Ohio, Indiana, and Illinois, allowing for fairly
short drayages throughout the Midwest and Southeast. In the North-
east, however, clearance problems (such as the Baltimore tunnel and
































SOURCE: Pavlovic, et al.


Figure 4: Location of TOFC loading facilities in Florida.

Hudson River bridges) limit penetration by rail of conventional
TOFC into the area. For example, because TOFC units must be
transferred to special low-profile flatcars to negotiate the Baltimore
tunnel, the transit time between Alexandria and Philadelphia is 12
hours. Another limiting factor is the time and costs related to inter-
lining equipment from Southern railroads (primarily CSX) onto Con-
rail.
As a result of these problems, most TOFC service along the East
Coast uses Alexandria, Virginia, as its northern railhead. As pre-
viously suggested, the further the northern destination is from this
railhead or origin, the less advantageous is TOFC, ceteris paribus.
This was reflected in a recent study of the feasibility of produce
shipments from Florida by TOFC (Klindworth and Brooks). It was
found that as the distance from the Alexandria yards increased, the
minimum equipment utilization requirements, with respect to back-
hauls, of the TOFC unit also increased in order to be competitive with
trucking. For deliveries from Florida to Washington (adjacent to






Alexandria) it was estimated that just over 20 percent full returns
were necessary for TOFC costs to be as low as average trucking rates.
Over 40 percent full returns were estimated to be necessary for
Baltimore (80 miles from Alexandria), about 60 percent full returns
for Philadelphia (125 miles from Alexandria). Finally, for Boston
(420 miles from Alexandria) TOFC was estimated not to be competi-
tive with average trucking rates even with 100 percent full back-
hauls. Until fast and reliable TOFC rail service beyond Alexandria is
available, the labor and fuel economies of TOFC will not be fully
exploited for shipments into the Northeast and most of Eastern
Canada. For this to happen, one or a combination of three develop-
ments would have to occur. First, structural or overhead clearance
bottlenecks (e.g., Baltimore tunnel) could be rebuilt. Second, new
routings around such obstructions could be developed. Third, clear-
ance problems could be eliminated by the development and wide-
spread adoption of special equipment.
Adoption of Roadrailer is one such possibility which would elimi-
nate all TOFC-related overhead problems. Roadrailer is a new sys-
tem which is still undergoing testing. Use of the flatcar is completely
circumvented by including a retractable set of steel wheels on the
trailer unit. This eliminates any overhead problems, with the addi-
tional advantages of reduced equipment needs for transferring a unit
from rail-to-road and greater fuel economies due to the reduced tare
weight realized by the elimination of the flatcar.
Regardless of the physical solution, to facilitate by-rail penetration
of Northeast markets, the problem of more rapid interlining with
Conrail and other Northeast railroads would have to be solved. Cur-
rently the federal government is exploring the possibility of selling
all or parts of the Conrail system to private firms. In addition, there
are moves to merge the majority of the New England based railroads
into one company. Both of these developments could facilitate expe-
dited rail service into the Northeast.
Dependence on Trucking
Over the past 25 years truck transport of Florida produce has risen,
at the expense of rails, from two thirds of total shipments to roughly
99 percent (see Figure 5). While it cannot be denied that this occurred
because trucking has outperformed rails, it should be realized that
just as there are risks involved with cultivating only one crop, there
are dangers associated with dependence on one mode of transport.
Assessment of these risks should be a principal part of any shipper's
longterm transportation planning. The risks of dependence on one
mode may be divided into three categories: the risk of unreasonable
transport rates due to monopolistic pressure, the risk of temporary










E
9-


S90--





0 E








Year












their services. This type of situation may have occurred in the Mid-
















of more concern. Trucking services are susceptible to interruption







due to several causes: fuel shortages, strikes, and severe weather
conditions. While rails are subject to similar problems, it is far less
likely that both truck and rail service would be interrupted at the
same time. Therefore, the development of TOFC or some rail option
could be advantageous to reduce these risks.
The final type of risk involves the danger that trucking service and
availability may deteriorate over time. While this is not seen as
being likely over the next decade, it is nonetheless a distinct possibil-
ity. The long-term integrity of our highway system has been brought
into question by sharp reductions in state and federal commitments
to highway building and maintenance over the last 15 years (Rao and
Larson, 1982). In addition, there is some concern about the continued
viability of owner-operators, an important segment of the produce
trucking fleet. High interest, equipment, and fuel costs are fre-
quently cited as the reasons for these concerns. If a long-run decline
in trucking does take place, those who are least able or willing to
develop alternative delivery modes will be the ones who will suffer
the greater loss.
Transportation Service Considerations
Transportation service requirements for produce are strict. Receiv-
ers expect quick, reliably scheduled deliveries with careful handling
and proper temperature control. If these expectations are not met,
loads will be refused outright, a discount or claim will be filed against
the shipper or carrier, or the receiver will take future business
elsewhere-Trucks have generally offered faster and more reliable
service with better handling and temperature control procedures
than rail or TOFC (Manalytics, 1977; ICC, 1980; Pavlovic et al.,
1980). This has been particularly true for hauls under 2,000 miles,
which is most typical for Florida produce shipments.
If receivers are asked to use a mode which they perceive as being
inferior to trucking, in terms of service, they will require discounts
off the full delivered price of the load relative to that which would be
charged if transported by truck. The size of the discount will be equal
to the value imputed by the receiver to the differences in nonprice or
quality aspects of the services of the modes (Johnson, 1976).
SWhile rail services have improved, it is not likely that TOFC will
be able to match trucking in all respects. Current TOFC delivery
schedules from Florida to the Northeast and Midwest average
roughly one day longer than comparable over-the-road trucking ser-
vice. An extra day in transit means one day less of shelf-life. A
receiver will have to be paid for this loss. In addition, truckers are
usually responsible for unloading their trucks, whereas receivers
must unload TOFC trailers, another necessary reimbursement for






the receivers. The sum of the direct out-of-pocket TOFC costs and the
amount which the receiver demands for accepting a TOFC load
(DISC) may be thought of as the full cost of a TOFC movement:

Full TOFC Costs = (direct TOFC costs + DISC) Truck Rates

If this cost is greater than trucking rates, then trucking is the better
alternative. If that sum is less, then the advantage lies with TOFC.
Without knowledge of the magnitude of the receiver discount, a
shipper might seriously miscalculate the advantages of TOFC. For
example, suppose that a shipper estimates that peppers can be deliv-
ered to receivers in Indianapolis by TOFC for $1,200. If the going rate
for trucking is $1,500, TOFC would appear to be advantageous.
However, if the receiver demands a $350 discount in order to pay for
unloading, slower delivery, and a greater real or perceived uncer-
tainty associated with TOFC's overall service, then the shipper will
make $50 less if TOFC is to be used.
Unfortunately, little is known about the importance or value
which receivers place on transportation service characteristics.
Klindworth and Brooks (1981) and Manalytics (1977) suggest that
reliability or consistency of delivery times is the most important,
followed by speed of delivery, handling, and claims procedures.
Among individual receivers the importance of any given service
characteristic will depend upon the expected losses to be incurred
from reduced performance. Slower service results in an inventory
cost to whichever party owns the produce during transit. The amount
of this cost is equal to the interest cost on the value of the cargo plus
any reduction in the value of the commodity due to the delay (spoil-
age, reduced shelf life, foregone sales opportunities, etc.). Moreover,
the longer the transit time, the larger the average inventory (in-store
and in-transit) which must be carried in order to insure a continuous
stock. Finally, given some desired level of probability of being out of
stock, larger average inventories would also be required the more
variable the delivery times (see Appendix II for a fuller discussion).
The cost of holding larger average inventories would be directly
related to the value and the perishability of the commodity. Damage
and claims problems would also be likely to be related positively to
value and perishability.
I Given that TOFC is or is generally perceived as being slower, less
reliable, and having poorer handling procedures than trucking, the
analysis in the proceeding paragraph suggests that long-lived com-
modities with low per-unit value would be most likely to be shipped
by TOFC. This conclusion is supported by the pattern of Florida
TOFC shipments (Figure 6). In 1981, radish shipments by TOFC







60 "Strawberries

Key:
U 1. TOFC shipments reported in 1979.
S50 2. TOFC shipments reported in 1980.
E 3. Only a very small quantity of tomatoes was shipped by
TOFC (100,000 pounds). This represented less than one hun-
dredth of a percent of all Florida shipments.
40


30-
SSnap beans
o Peppers
Squash
20 Tomatoes2'3 Radishes1,2
O 20-
Cucumbers
0. Sweet corn Lettuce
S10 Celery
Watermelon1 Citrus'2 potatoes' 2
Cabbage
0 1 I I I I I I I I I I
1 2 3 4 5 6 7 8 9 10 11 12
Shelflife after harvesting (weeks)

SOURCES: USDA, 1980; Florida Crop and Livestock Reporting Service, 1980a and 1980b;
and Lutz, 1968.

Figure 6: Selected Florida fresh fruits and vegetables by value and shelflife.


accounted for 56 percent of all Florida produce TOFC shipments, and
45 percent of all Florida radish shipments. Potatoes accounted for
another 34 percent of Florida TOFC shipments, or roughly 5 percent
of the crop. Moreover, all of the TOFC potato shipments were from
the spring or Hastings crop, which normally is much lower in value
per unit than the winter or South Florida crop. The remaining 10
percent of Florida TOFC produce shipments were small amounts of
mixed citrus, celery, sweet corn, lettuce, and tomatoesLess than 1
percent of each of these crops were transported by this means (USDA,
1981).
In Figure 6 the major Florida vegetable and fruit crops are arrayed
according to their 1980 average per pound value (Florida Agricul-
tural Statistics 1981a and 1981b) and their approximate length of
storage (Lutz and Hardenburg, 1968)?As argued previously, those
products with lower per unit values and longer storage periods would
be best suited to slower, less reliable transit (radishes, potatoes,
celery, citrus, cabbage, and watermelons). As long as TOFC is, or is






viewed as being, slower and less reliable, these commodities will be
this mode's most likely cargoes.

Financial and Organizational Considerations
In almost all respects shipping produce by TOFC is more compli-
cated than by over-the-road trucking. Shippers contemplating the
use of TOFC should carefully assess the various options available.
Some firms offer complete door-to-door TOFC services. However, it is
common for shippers and/or receivers to assume a more active role in
the transportation process. This may involve TOFC trailer own-
ership or lease by the shipper/receiver and participation in routing
and backhaul arrangements. In the remainder of this study, the
options for TOFC use and their advantages and disadvantages will be
discussed.
Trailer-on-Flatcar Plans
There are five basic arrangements or plans which are typically
referred to when describing TOFC service. They differ with respect to
who provides the door-to-TOFC ramp services and who owns the
equipment (Table 6). Plan III appears to be the dominant arrange-
ment for produce shipments in the United States. One of the primary
reasons for this is a reluctance on the part of railroads to maintain
refrigerated TOFC equipment. Between 1972 and 1980 the fleet of
refrigerated trailers owned, leased, or controlled by railroads fell
from 9,141 to 1,094 (Klindworth and Brooks, 1981). Assuming 10
trips per trailer per year and 40,000 pound loads, the rail-owned
refrigerated trailer fleet was only large enough to carry 32 percent of
the 1981 U.S. shipments. As the railroad's stock of refrigerated
trailers continues to decline, shippers wishing to ship produce by
TOFC will find it necessary to use nonrailroad equipment. This will
be especially true if relatively new equipment is desired.
Full Service Firms
Nonrailroad companies offering full door-to-door service have
come into being over the last few years. Several of these firms have
established refrigerated equipment divisions to handle processed and
unprocessed foods. Examples of such operations are Gelco (California
based), Intermodal Transportation Service, Inc. (Ohio based), and
Transamerica Distribution Services, Inc. (Illinois based). As might
be expected, private firms have tended to concentrate on longer-haul
runs out of Arizona, California, and Washington. In the past few
years, however, some firms have expressed interest in and/or initi-
ated limited service out of Florida. Given the opportunities for













Table 6: Trailer-on-flatcar shipping plans.


Overall
Lease oi Lease or Billing
Trailer Flatcar Ramp-to-Door and Rate
Plan Ownership Ownership Responsibility Responsibility1

I Motor carrier Railroad Motor carrier Motor carrier
II Railroad Railroad Railroad Railroad
IIV2 Railroad Railroad Shipper/receiver Joint
III Shipper/receiver Railroad Shipper/receiver Joint
IV Shipper/receiver Shipper/receiver Shipper/receiver Joint
V Motor carrier Railroad Railroad Railroad
Other

1. Plans, I, II, and IV are complete services with one bill of lading for the entire trip.







switching trailers between California and Florida to take advantage
of their staggered peak seasons (Figure 7), it is anticipated that
interest in Florida traffic, especially during April, May, and June,
will continue to grow.
The principal advantages of utilizing these firms is that the shipper
does not have to make long-term commitments or become involved
with backhaul, maintenance, and other problems. In this regard, the
service is essentially equivalent to for-hire truck service.

Individual Shipper or Receiver Ownership
In an earlier section, it was shown that high levels of TOFC equip-
ment utilization are needed for the mode to be competitive with
trucking. Few individual shippers have the necessary volumes. This
is particularly true for Florida produce shippers because of the sea-
sonal nature of production. Moreover, few firms have the necessary
expertise to arrange favorable contracts with railroads and drayage
companies, and secure backhaul loads.
Receivers of produce may be in better position than shippers to
assume control of TOFC trailer units. This is particularly true for
large, national or regional grocery chains. Such firms have estab-
lished transportation departments and receive produce and other
refrigerated products year around. However, even for the largest
wholesale or retail receiver, the tasks of arranging backhauls and
coordinating movements can be burdensome.

24'

20--
California





S8-y s s of fh f s a v f Florida a






California (1980).
0 I I I I I i .-". f. I I I
Month

SOURCE: USDA, 1980.
Figure 7: Monthly shipments of fresh fruits and vegetables from Florida and
California (1980).






Despite these management problems and financial obligations,
some firms may elect to own or lease TOFC trailers in order to
rationalize costs and to ensure a ready supply of transport capacity.
Purchased or leased TOFC units can be designed to the shipper's
specifications. Moreover, control over maintenance affords a greater
degree of quality control.
While trailer ownership or leasing may assure availability of car-
rying capacity, shippers are still dependent upon the railroads and/
or contract and common carriers for the power unit. Shortages in
drayage vehicles and/or TOFC flatcars can create serious bot-
tlenecks. Therefore, if additional certainty of transportation service
supply is one goal of trailer acquisition, the adequacy of drayage and
flatcar services should be assessed.
Control over all or part of the equipment employed in a movement
can moderate fluctuations in out-of-pocket expenses per trip. This can
be important, since transportation rates can vary by several hundred
dollars per load over a few weeks as demand for and supplies of
transportation services ebb and flow (Figure 8). These fluctuations
can create serious short term planning problems for firms. Reduced
rate or out-of-pocket cost variations achieved by direct control of
equipment do not eliminate variations in actual transportation costs,
particularly for exempt agricultural goods. Rather, with ownership,
rate variations are translated into opportunity cost variations. While
these variations may be ignored by the firm, they are no less real.
Suppose that, before transportation costs are subtracted, a firm
grosses $2200 (over production costs) on a load of tomatoes. The firm
owns its transportation equipment, and estimates that the cost of
delivery is $1500 per trip. Therefore, a delivery in which the firm's
own equipment is used nets $700 per load, regardless of the going
market rate for transport. If, however, for-hire rates are lower, say
$1300, then the firm foregoes $200 in profits by using its own equip-
ment. If the going rate is $1800, the firm saves $300 because it can
avoid paying this rate.
If on average rates are higher than the cost of operating owned or
leased equipment, then savings can be realized. Savings can also be
realized, given low enough fixed costs, even if average for-hire rates
are below owned-equipment running costs. This can occur if the firm
takes care to utilize its own equipment only during weeks when the
for-hire transport rates exceed the variable costs of using the owned
equipment.
Shipper Associations and Cooperatives
Broadly based shipper associations are, and will most likely con-
tinue to be, the most used organizational arrangement for TOFC






Dollars
2100 -


2 ='GO '0 ,"] 0


1900 sweet corn i _-


1800 Sweet corn


1 \ I M



I4
STomatoes

Tomatoes --

1GO3 0 / /ll \ -

1/--' / --
1300 Grapefruit r-, Grapefruit


1200


1100 -

,, .................................... .................................. ...........
Oct. 1979 June 1980 Oct. 1980 June 1981

Figure 8: Weekly truck rates from Florida to New York City for sweet corn,
tomatoes, and grapefruit-October 1979 to June 1980 and October
1980 to June 1981.


produce shipments. A shipper association is a nonprofit organization
which acts as a freight forwarder for its members. An association is
like an agricultural transportation cooperative, in that transporta-
tion of goods owned by the members is unregulated and it operates
for, by, and at the risk of its members. Unlike an agricultural coop-
erative, however, it must use common carriers to actually transport






freight, and it is not limited to having farmers for members. This last
difference is crucial, as it allows for coordination between city-based
nonagricultural shippers and those wishing to transport agricultural
commodities to the consumption areas.
The Pacific Northwest Perishable Shippers Association (PNPS),
which operates primarily between the Pacific Northwest and Chi-
cago, is an excellent example of how a broadly based membership
may be used to generate a balanced transportation operation. The
association ships fresh or frozen vegetables and seafood east and
processed foods, drugs, and manufactured goods west. A Plan III
TOFC arrangement is employed, with the association holding long-
term leases on the trailer units (Jones, 1979).
For Florida a similar arrangement generally would be necessary as
the state, like the Pacific Northwest, has a net inflow of processed
goods and outflow of agricultural goods. Under the membership and
freight restrictions of an agricultural cooperative it would be difficult
to secure or to legally carry sufficient backhaul traffic. Transporta-
tion cooperatives are restricted to an all-farmer membership and to
shipping less than 25 percent by volume of nonmember, nonfarm, not
exempt products." However, with a shipper's association, nonfarm
and farm members have equal rights to ship their products. There-
fore, as with the PNPS, the membership of a Florida-based associa-
tion could include a sufficient number and variety of shippers in the
consumption areas to provide for full return hauls.
Shipper associations can have memberships which include grower-
shippers in different regions which have staggered peak production
seasons. Trailers can be shifted to those regions for which the need is
greatest. This relieves producers in any given region from the bur-
dens of financing and managing units during their slack season. Such
an arrangement is important to Florida because of the extreme
seasonal nature of the state's production. The staggered pattern of
California's produce production (Figure 7) offers a particularly good
opportunity for interregional cooperation. Currently there is at least
one shippers' association which includes grower-shippers in both
Florida and California. The Florida members of this association hold
long-term leases on the TOFC units they employ. However, responsi-
bility for payment and use is transferred to West Coast members
during the months of July, August, September, and October.
Pricing to members of an association can be a difficult problem.
Two basic pricing strategies appear to be most used. The first is to
charge members rates which are cost based and do not vary over

5. These regulations are part of Subchapter II of the I.C.C. Act U.S.C.
10526(a)(5).






fairly long periods of time. This approach has the advantages of being
easy to administer at the association level and by individual users, as
costs are stable. The major problem, however, is that the users are
either subsidized or penalized by the rest of the association's mem-
bership, depending upon whether for-hire rates exceed or are ex-
ceeded by association rates. As an example, suppose that receivers
will accept TOFC shipments if the full delivered cost (product plus
transport costs) is at least $200 less than for-hire trucking. If truck
rates are $500 more than the association's rates, then those members
fortunate (or influential) enough to secure equipment can realize
$300 more per load ($500 $200). If truck rates fall below the associa-
tion rate plus $200, then any member generous enough to utilize
association equipment must, in effect, subsidize the association by
absorbing losses relative to the earnings possible if for-hire trucks
had been utilized.
Recognizing these problems, some shipper associations have
allowed their rates to float at a specified amount below for-hire
trucking rates. The surplus gathered during months when associa-
tion rates exceed costs is used to subsidize months when rates might
fall below costs. While this system does present greater administra-
tive problems, it tends to alleviate equity and utilization problems
associated with the fluctuating opportunity costs of using association
equipment.

Summary and Conclusions
(The relative cost of truck and TOFC for shipping Florida produce
has been shown to depend upon a wide range of factors, including fuel
and labor efficiencies, trip length, drayage length, backhauling
rates, and commodity characteristics. In particular TOFC usage was
found to be most suited to long hauls for which short drayages were
possible. Estimates of costs for trucks and TOFC from Florida, Texas,
Arizona, and California revealed that as the distance to market
increases, the minimum utilization requirements for TOFC to be
competitive with trucking declines (see Figure 3). This is reflected in
the pattern of TOFC usage in the United States between 1978 and
1980. During this time TOFC usage in the Far West increased almost
800 percent, while east of the Mississippi it declined by 15 percent.
Exacerbating the "problem" of nearness-to-market for TOFC use
in Florida is the fact that penetration into the Northeast from the
South is difficult because of the existence of several physical obstruc-
tions that prevent or impede the use of TOFC. The Baltimore Tunnel
is the most significant of these. The use of low profile flatcars or
innovations such as Roadrailer could alleviate this problem. How-






ever, even if the physical problems are solved, speedier interlining
with Conrail, or its successor, will be necessary. Until practical
by-rail penetration of the Northeast beyond the Alexandria, Vir-
ginia, railyards is possible, TOFC will not operate to its full advan-
tage. This was demonstrated in the study by Klindworth and Brooks.
They found that TOFC minimum equipment utilization require-
ments rose with the distance that the destination was from Alexan-
dria. TOFC shipments of produce, even with 100 percent full back-
hauls, were estimated to not be feasible north of New York City.
Risks associated with Florida's near total dependence on trucking
to move perishables was cited as a major consideration in develop-
ment of TOFC. Truck service is subject to temporary interruptions
due to strikes, weather, etc. Moreover, there are those who fear that
trucking may undergo a long-run decline. Without the existence of an
alternative mode, the perishables industry is fully exposed to these
risks.
Service considerations are vital when comparing modes. This is
particularly true for perishables which require rapid, climate con-
trolled transit with careful handling. In the past, railroads have not
been able to compete with trucking in these regards. The added
flexibility of TOFC and recent regulatory freedoms granted to rail-
roads provide the potential for improvements. However, it is doubtful
if TOFC will ever be able to match the personalized load-by-load
service provided by over-the-road trucking. It is important for those
considering TOFC to understand the nature of the costs associated
with poorer service. It was shown that, in general, these costs are
higher the more perishable and the higher valued the commodity.
The concentration of Florida perishables TOFC shipments into two
relatively low valued and long-lived commodities (radishes and pota-
toes) underscores this relationship.
Finally, organizational and financial considerations for TOFC
were examined. Given the low and declining level of rail-owned
TOFC refrigerated equipment, it was concluded that expansion into
TOFC would likely require the use of nonrail equipment. Broadly
based shipper associations are seen as the most likely arrangement.
These allow for fuller fronthaul and backhaul utilization, as there are
no limitations on the types of businesses (farmer, nonfarmer, etc.)
which may participate. Moreover, association ownership spreads the
financial risks over several firms. Shipper associations have proved
successful in the West, and at least one is currently operating in
Florida.









Appendix I
Total Truck and Trailer-on-Flatcar Costing Model
Estimated cost comparisons for truck and trailer-on-flatcar are
generated by the use of modified versions of two existing models. For
trucking, the model presented by Boles (1980) is employed. The
costing approach developed by the Interstate Commerce Commission
based on Rail Form A is used for rails. The modifications made are to
update the models (to 1981) and to account for nonrail ownership of
TOFC trailer units. Drayage costs are handled as modified trucking
costs.
Over-the-Road Truck Costing Routine
The following modifications were made in the truck costing routine
presented by Boles (1980):
Cost Items Boles Beilock
Tractor $63,000 $74,500
Trailer 27,000 28,000
Telephone (standard charge) 180 200
Office rental allowance 825 900
Bookkeeping and legal services 610 700
Dues and charities 170 200
Travel (business) 360 400
Miscellaneous (office) 740 750
Insurance on equipment 6,860 7,450
Base pay driver (per mile) .16 .19
Per diem on road (per day) 15 18
Motel, if layover (per night) 25 30
Diesel fuel (per gallon) 1.02 1.3-2.6
Scale fees (per trip) 4 5
Market fees (per trip) 12 15
Other Items
Interest rate (percentage) 13.5 19
Miles per gallon empty 5.1 5.5
Miles per gallon full 4.4 4.5
Gallons of refrigeration fuel (per hour) .62 1 for precool and
.5 otherwise
Lifetime tractor mileage 650,000 700,000 -
Lifetime trailer mileage 750,000 700,000

Trailer-on-Flatcar Costing Routine

Rail Portion
The rail portion of TOFC costs is based on methodology developed
by the ICC and presented in Rail Carload Cost Scales, 1977 (pp.








147-153). Update ratios for January 1981 are employed. The ratios
were 1.345 for the Official Region (Northeast and Midwest), 1.367 for
the Southern Region, and 1.386 for the Western Region. The use of
these ratios is documented in Explanation ofRail Cost Update Proce-
dures. The estimated region-specific through rail miles (express) and
way (local) rail miles are in Table 1A.
Fixed costs per trip (TRLFIX) for the TOFC trailer unit were
specified by assuming a 10-year trailer life with a 20 percent salvage
value and initial cost (P) of $28,000. With an interest rate of 19
percent and N trips per year, the average trip fixed costs would be:
TRLFIX = (OVER + P [(0.6)(0.19) + 0.1])/N
where: OVER is the sum of trailer management, insurance and
maintenance fees estimated as follows:
Insurance $ 840
Maintenance 1,200
Management 1,200
$3,400

Note: 0.6 P is the average value of the trailer
0.1 P is the annual depreciation cost
This method of fixed cost calculation follows the approach used by
Klindworth and Brooks (1980).


Table 1A: Estimated rail mileage for trailer-on-flatcar.1
Southern2 Western2 Official2
Region Region Region

Florida-to-New York
Way miles3 150 100
Through miles4 637 250
Texas-to-New York
Way miles3 10 120
Through miles4 1,040 900
Arizona-to-New York
Way miles3 10 120
Through miles4 1,800 850
California-to-New York
Way miles3 10 120
Through miles4 2,010 850

1. Mileages estimated from "Handy Road Atlas" by Rand McNally.
2. Costs vary depending upon the region. See ICC (1978a & b) for a full explanation.
3. Way miles are those over which frequent switching and stops occur.
4. Through miles are those for which few stops and switching occur.







Drayage Costs
Drayage costs are calculated as modified truck costs. Nondeprecia-
tion annual fixed costs were assumed to equal those for over-the-road
trucks, less, of course, the interest costs for the trailer unit. As with
the TOFC trailer, annual depreciation on the tractor was treated as a
fixed cost equal to 10 percent of the original value. Drivers were
assumed to make an annual wage of $15,000. Each vehicle was
assumed to make 600 trips per year. Accordingly, 1/600 of the annual
wage and fixed costs was charged against each trip for each drayage
required. Per mile tire, maintenance, and fuel costs were calculated
as in the truck costing model.








Appendix II

Costs Associated With Transit Speed,
Reliability, and Handling
If freight rates are equal between modes, a shipper would be ex-
pected to select that mode which offers the best service as measured
by transit time, reliability, and product handling. This is true be-
cause poor service imposes costs on the shipper. Therefore, the full
transport costs (FTC) of a move should be considered when deciding
between modes. FTC is the sum of direct costs (DC) (freight bills,
loading and unloading charges, etc.), stockout costs (S), inventory
costs (IC), and product deterioration costs (D):
FTC =DC + S +IC+D.
Failure to account for all of these costs can lead to serious miscalcula-
tions regarding the actual relative costs of different modes. Indeed,
there is a general consensus that the railroad's decline in produce
traffic was due primarily to a failure to match the service levels
provided by trucking (Manalytics, Vol. 5, 1977; and ICC, 1980, and
Pavlovic et al., 1980).
Examination of the determinants of indirect or service costs is of
value in estimating an FTC for each mode for shippers of specific
products. Those shippers for whom the costs of poorer service are
greatest (least) will require the greatest (smallest) direct cost dis-
count to compensate them for using a mode with inferior services. If
demand per unit time is assumed to be constant and delivery times
are invariant, then inventory and procurement strategies are fairly
straightforward. In Figure 1A such a situation is depicted. As a
simplifying assumption only one shipment quantity (Q) has been
assumed. The demand per unit of time is 1/8 Q and the transit time is
2. The average warehouse stock is 1/2 Q and the average amount of
stock in transit is 1/4 Q, making the total average stock equal to 3/4
Q. If, for another mode, the transit time is 4, then the average stock
level would be Q (see Figure 1A). The slower mode would have
additional IC associated with the higher inventory levels. In addi-
tion, if the product deteriorates over time (as would be expected with
a perishable), then the slower mode would impose added D costs, as
there would be a longer average time from initial shipment to final
sale. D would also be larger or smaller for each mode depending upon
the amount of rough handling and the fragility of the product.
If transit times are variable, then procurement scheduling be-
comes more complicated, depending upon the relative importance of
IC and D on one hand and S on the other hand. In Figure 2A variable










L ----- -- ----- --- -------- -- -
4 6 8 12 14 16 20 22 24
Time
Where: Demand rate = 1/8 Q per unit of time
Slower mode transit time = 4 (orders placed at 4, 12, and 20)
Faster mode transit time = 2 (orders placed at 6, 14, and 22)

Figure lA: Inventory model assuming constant demand rates and invariant
delivery times.









a b q ;
L--CC
l Probability of stockout

Time

Figure 2A: Inventory model assuming constant demand rates and varying
delivery times.

delivery times have been assumed, as represented by the distribution
drawn about the expected or mean delivery time. If reorders are made
at time b so that the mean delivery time occurs when in-store inven-
tories run out (as was done in Figure 1A), then half of the time at least
some orders will not be immediately filled; that is, there will be
stockout. The importance of this depends upon marketing conditions.
If all customers are readily willing to return the next day, then the
costs (S) are minimal. If customers are lost and/or bad will results,
then S will be large. To reduce S, orders can be placed earlier, say at
a. The reduced shaded area under the distribution curve correspond-
ing to an order placed at a (as opposed to b) reflects the reduced
probability of stockout. As the average delivery time will be at c, the
average in-store inventory level will increase to (1/2 Q) + q. In effect,
q will become the buffer stock to ensure against stockout.
The costs, in terms of IC andD, of holding larger stocks, either as a
buffer stock or due to slower transit, depends upon the value of the







commodity and the rapidity of deterioration, i.e., the degree of
perishability. The higher the value and the more perishable, the
greater the costs of using slower, less reliable modes. Also, the higher
the value of the commodity, the greater the losses from rough han-
dling or poor temperature control, ceteris paribus.









References


Batts, L., "Truck/Rail Relative Energy Efficiency-Revisited," Transporta-
tion Research Forum Proceedings (1981): 149-155.
Beilock, R., "Toward a Balanced Delivery System for Fresh Fruits and
Vegetables," Transportation Journal 21, 2(1981): 28-36.
Beilock, R., and S. Shonkwiler, "An Analysis of Rate Variations Across Time
for Identical Hauls of Unregulated Commodities," Transportation Re-
search Forum Proceedings (1982) forthcoming.
Boles, P., Owner-Operator Costs of Hauling Fresh Fruits and Vegetables in
Refrigerated Trucks, USDA Report No. 82, 1980.
Florida Agricultural Statistics, "Citrus Summary 1980," Florida Crop and
Livestock Reporting Service, Orlando, Florida, 1981a.
Florida Agricultural Statistics, "Vegetable Summary," Florida Crop and
Livestock Reporting Service, Orlando, Florida, 1981b.
Interstate Commerce Commission, Empty/Loaded Truck Miles on Interstate
Highways During 1976, Bureau of Economics, 1977.
Interstate Commerce Commission, Exempt Rail Transportation of Fresh
Fruits and Vegetables Initial Impacts, ICC Office of Policy and Analysis,
1980.
Interstate Commerce Commission, Rail Carload Cost Scales, 1977, ICC
Bureau of Accounts, Statement No. ICI-77, 1978b.
Johnson, M., "Estimating the Influence of Service Quality on Transportation
Demand," AJAE 58, 3(1976): 496-503.
Jones, D., "Intermodal Transportation-A Shipper Association's Point of
View," 31st International Conference on HandlingPerishableAgricultural
Commodities, Proceedings (1979), 29-32.
Kilmer, R., and F. Stegelin, The Impact of Empty Backhauls in the Truck
Transportation of Florida Fresh Fruit and Vegetables, University of Flor-
ida, Agricultural Experiment Station Bulletin 833, 1983.
Klindworth, K., and E. Brooks, Shipping Alternatives for Moving Florida
Fruits and Vegetables to Eastern and Midwestern Markets, USDA, Office of
Transportation, 1981.
Knorr, R., "A Projection and Analysis of Refrigerated Truck Stocks and
Energy Consumption to the Year 2000," U.S. Department of Energy,
Transportation Systems Report, 1979.
Lieb, R., Transportation: The Domestic System, Reston Press, 1978.
Lutz, K., and R. Hardenburg, "The Commercial Storage of Fruits, Vegetables
and Florist and Nursery Stock," Agricultural Handbook No. 66, Agricul-
tural Research Service, USDA, 1968.
Manalytics, A Long-Term Study of Produce Transportation, U.S. Dept. of
Transportation, Federal Rail Administration, 1977.
Pavlovic, K., et al., Domestic Transportation for Florida Perishable Produce,
Transportation Research Center, University of Florida, 1980.
Paxson, D., "The Energy Crisis and Intermodal Competition," presented to
the Transportation Research Board of the National Academy of Sciences,
1980.
Rao, K., and T. Larson, "Capital Investment, Performance, and Pricing in
Highways," Transportation Journal, 21, 3(1982): 22-23.
Reebie, R., "Comparison of Intermodal Equipment," presented to the Trans-
portation Research Board of the National Academy of Sciences, 1981.







United States Congressional Budget Office, Energy Use in Freight Trans-
portation, staff working paper, February, 1982.
USDA, Fresh Fruit and Vegetable Shipments: by Commodities, States, and
Months, USDA, AMS, 1956-1981.
USDA, "Fruit and Vegetable Truck Rate Report," USDA, AMS, 1979-1982
(weekly).
U.S. Department of Transportation, Intermodal Freight Program Phase II,
Demonstration Management, U.S. Department of Transportation, Federal
Railroad Administration, July, 1980.














































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I UNIVERSITY OF FLORIDA I









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