C.H. Robinson, the largest trucking brokerage firm in the country, procures billions of truckload freight for its customers each year. While distance determines the majority of costs for a trucking move, C.H. Robinson wanted to know how other factors influence carrier rates. Specifically, they wondered how the amount of lead time a shipper provides a carrier would impact that carrier’s rates.

How did CTL address the problem?

After analyzing several years of transactional data, two masters' students, Eric and Brian, constructed an econometric cost model that isolated the impact of providing shorter lead time to a carrier in terms of the cost per load. They found that while the contracted rates do not increase with shorter lead times, the carrier turndown or refusal rate does increase. This means that for shipments that need to move within a day or a matter of hours, the probability that the primary carrier will reject the load increases. Generally, alternate carriers charge higher rates; thus on shipments with shorter lead times, the cost per shipment will increase.

What were the results and impact to the company?

C.H. Robinson was able to explain to its customers the impact that good tendering practice has on rates. They also advised their customers to pay particular attention to the assignment of alternate carriers on specific lanes as the price differential can be critical.

“Eric and Brian did an outstanding job with our project. From their research, we created a white paper that explains the cost of waiting to tender loads. We continue to share this information with our customers and the public. Our collaboration with MIT has resulted in research that can positively impact both the shipping and carrier communities.” Kevin McCarthy, Director of Logistics Services.