Strategies for cost reduction in procuring trucking services

Abstract

This thesis analyzed truckload shipment transactions from 2006 to 2008 in order to compare planned procurement activity to actual procurement activity. The research specifically focused on three costs: Primary, Actual and Market. Primary cost is the cost agreed to pay to the primary carrier and is usually contractually fixed in advance. The actual cost is the cost paid to the carrier that hauls the load and the market cost is the average cost for the lane that a shipper should pay. This market cost is a benchmarking cost available to the shippers. The comparison of planned and actual is important because it helps to develop a strategy that decreases transportation costs by identifying overpaid lanes and carriers and it helps to monitor and make corrective decisions. The research suggests that the matching of planning and execution occurred in less than 10% of the lanes and there are under and overpaid lanes. The execution rendered more than 50% of overpaid lanes and the planning showed a commitment to overpay in 45% or more of lanes. Finally this research proposes ideas to improve the truckload procurement strategy because shippers cannot afford to "plan to waste".