Effects of truckload freight assignment methods on carrier capacity and pricing

Abstract

The analysis is based on one year of transactional data from a major beverage company and interviews with asset based and non-asset based truckload carriers. Throughout our research we investigate the use of asset based carriers and brokers as unique sources of capacity on low volume and medium haul lanes. We examine price escalation issues in the context of load tender rejections and daily shipment volumes on a given lane. Our study revealed that as the shipment volume goes up on a lane, prices could escalate as much as 30-40% over rates originally contracted with primary carriers. In the case of rejections though, as prices go up, the probability of not covering a load comes down. Additionally, we propose a lane aggregation methodology, which decreases variability and simplifies freight procurement for long and short haul shipments. Finally, through a carrier proximity study we demonstrate that distance from carrier domicile to pick up location has an impact on pricing for short haul shipments. Based on our findings, we identified building network robustness and creating available carrier capacity as critical factors to sustainable pricing, while still being able to maintain a high service level.