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Multi-Stop Truckload:Cost and Carrier Behavior
MIT SCM Research FEST
May 19, 2016
Authors: Amy Chen, Peter TsaiAdvisor: Chris Caplice
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CONTENTS
1. Introduction2. Problem & Methodology3. Results4. Takeaways
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Introduction
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380.9% of Nation’s Freight Bill
2011 American Trucking Association Report
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Step 1. Bidding & Contracts
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Step 2.
Routing Guide
How Truckload
Priority Carrier Name Price ($/mile)
1 Carrier A 1.80$
2 Carrier B 1.85$
3 Carrier C 1.90$
4 Carrier D 2.00$
5 Carrier E 2.20$
New York- Washington DC
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Step 3. Tendering Loads
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Full Truckloads & Contracts
Priority Carrier Name Price ($/mile)
1 Carrier A 1.80$
2 Carrier B 1.85$
3 Carrier C 1.90$
4 Carrier D 2.00$
5 Carrier E 2.20$
New York- Washington DC
Known as the Routing Guide
Depth
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Problem & Methodology
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Multi-Stop
How does having additional stops affect acceptance and price?
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Past Research
Priority Carrier Name Price ($/mile)
1 Carrier A 1.80$
2 Carrier B 1.85$
3 Carrier C 1.90$
4 Carrier D 2.00$
5 Carrier E 2.20$
New York- Washington DC
- Distance traveled
- Lead Time
- Seasonality
- Volume
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Methodology
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Database with 5M tender records over 2.5 years
Over 4K carriers, large and small
Collaborated with a 4PL company
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Pricing
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Methodology
Price = 𝛽0 + 𝛽1 ∗ 𝑥1 + 𝛽2 ∗ 𝑥2 +⋯+ 𝛽𝑘 ∗ 𝑥𝑘 + 𝑒
Carrier Behavior
Acceptance = 𝛽0 + 𝛽1 ∗ 𝑥1 + 𝛽2 ∗ 𝑥2 +⋯+ 𝛽𝑘 ∗ 𝑥𝑘 + 𝑒
Looking at final prices
Using tender information
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Results
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Impact of Additional Stops
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Additional stops increase rejections and lead to higher prices. The magnitude depends on whether it’s a pick or a drop
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+1 = $172+2 = $174
Picks Drops
Illustrative example
+1 = $304+2 = $334
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Impact of Additional Stops
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Multi-stop loads with higher stop-off charges have higher acceptance rates and might be potentially cheaper
+100$ x 2+172$ x 2-280$
Strategy 1
+172$ x 2
Strategy 2
Stop-Off
Extra Stop
Discount
Illustrative example
-80$+40%
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Clustering
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Clustering stops together improves price
-80$ -113$
Clustering Drops Clustering Picks
Illustrative example
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Continuous Moves
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Continuous moves are cheaper -270$
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Geographic Effects
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There is significant regional sensitivity to multiple stops in both price and acceptance
Illustrative example
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Performance Effects
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Delivery performance deteriorates
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Tender acceptance time increases
Time to Accept
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0 1 2 3 4 5 6 7
2
3
4
5
ADDITIONAL TIME TO ACCEPT (HOURS)
# O
F ST
OP
S
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Conclusion
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Autonomous Vehicles, Electronic Logs, Environmental Regulation, Hours of Service, Onboard Computers, On-Demand Economy…
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Summary Findings
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1. Multi-stop Truckload shares some characteristics with Full
Truckload, but with significant differences.
2. Beware of black box software promising risk-free cost savings
3. Communication and information sharing is key: clustering,
continuous moves, planned moves…
4. Data is power: analysis, prediction
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Questions, Comments,
Suggestions?
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