Development and Evaluation of Market - Based Routing Guide Strategy

Abstract

The truckload market in the United States is large, fragmented, and highly competitive. Shippers utilize routing guides to manage and tender shipments to carriers. This research examines how the macro market characteristics and micro shipper characteristics affect routing guide performance. Specifically, each key market area to key market area lane is classified into one of four characteristics based on the annual number of loads at both the macro market level and micro shipper level: Balanced, Headhaul, Backhaul, and Sparse. This capstone project addresses three main questions: Are the macro market characteristics stable over time? How does routing guide performance vary by macro market characteristics and micro shipper characteristics? What specific strategies improve routing guide performance? Our research shows that the macro market characteristics are stable over time. There are significant differences in the routing guide performance by micro shipper characteristics, but not macromarket characteristics. We find that the routing guide strategy is a function mainly of what a shipper experiences, not what the entirety of the market experiences. When shippers develop a routing guide strategy, the micro shipper characteristics trump macro market characteristics. Hence, there is an opportunity to leverage the macro market characteristics for those lanes that are low-volume for a shipper but are in high-volume in macro market lanes, which represent about 53% total number of unique key market area to key market area lanes that shippers managed and 9% in total number of loads. The procurement framework we developed takes a portfolio approach by assigning specific strategies based on micro shipper characteristics and macro market characteristics. Our framework helps shippers leverage both micro shipper characteristics and macro market characteristics not only to reduce the efforts in managing transportation lanes but also to improve routing guide performance.