Root Cause Analysis and Impact of Unplanned Procurement on Truckload Transportation Costs

Abstract

The tender rejection rate by primary carriers for the TMC division of CH Robinson nearly doubled from 2015-16 to 2017-18. An increase in tender rejection rates directly results in an increase in transportation costs for shippers. Increasing demand in the market from 2015 to 2018 was a major cause of the increase in tender rejections. Previous research found that increasing tender lead times leads to a decrease in the tender rejection rates. In this research, we also explored the impact of factors such as lane consistency, lane volatility, corridor volume, carrier type, pickup day of the week, origin-destination characteristics, and tender lead times, on the tender rejection rates and costs. We used three years of customers’(shippers’) tender data from October 2015 to September 2018, which enabled us to capture the differences between soft market and tight market conditions. A linear regression model was built to quantify the impact of each of the above factors on cost per load. Logistic regression models were built to estimate the probability of tender acceptance by a primary carrier as well as the likelihood of a routing guide failure. The research found that shorter lead times have a correlation with higher primary acceptance rates and higher costs. Lane consistency emerged as an important factor in determining tender rejections. Regional sensitivity was also found to be a key determinant of the rate charged by carriers and the likelihood of tender rejection.