Modeling Carrier Truckload Freight Rates in Spot Markets

Christopher Lindsey, Andreas Frei, Hamed Alibabai, Hani S Mahmassani, Young Woong Park, Diego Klabjan, Michael Reed, Gregory Langheim, Todd Keating

Research output: Book/ReportOther report

Abstract

Most transportation research related to motor carrier rates has focused on the cost determinants of long-term carrier contracts for specific lanes. However, with the emergence of third-party logistics (3PL) providers in the U.S. following deregulation in the 1980s, a significant amount of capacity for shipments is secured via spot market transactions. Carrier rates for shipments with even the same origin and destination can vary widely between transactions in this scenario. This research investigates the factors behind this occurrence and identifies the major determinants of carrier costs in spot market transactions at both the individual shipment and the more aggregate lane level. Additionally, it also explores a tactical planning scenario in which a 3PL provider addresses chronic fiscal underperformance on certain lanes. The research has found that factors such as distance, characteristics of the shipping lane and the required truck type are among the most important determinants of motor carrier rates at both the shipment and lane level. Also, seasonality and overall market conditions play a major role in determining rates for truckload shipments. The study then goes on to show that the results of the cost determinant analysis may be used to set better baseline prices on underperforming lanes.
Original languageEnglish (US)
Number of pages21
StatePublished - 2013

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