FreightPerformance

&CarrierStrategy

CarolineBleggiFrederickZhou

Overview

1.Problem

2.Data

3.Metrics

4.InitialFindings

5.CarrierClusteringFindings

6.ShipperProfiles

7.Implications

1.Problem Determinegroupingsofattributesthatinfluencecarrierstrategyandshipperprofileperformance.

Whyisthisimportant?

Transportationefficiencyisincreasinglybecomingacriticalcomponentofbusinessstrategyforshippers.

Shippersandcarriersinthefreightindustryareseekingtoimprovetheirefficiencyandprofitabilityinthiscompetitivemarket.

2.DataAnalysiswascompletedondatasetspanningJanuary2014– December2016includingTenderLevelandStopLeveldatafromoursponsorcompany

OriginsandDestinations

3.Metrics• OnTimeDelivery(OTD)• OnTimePickUp(OTP)• 1st TenderAcceptanceRate(AR)• PerfectShipment

MetricsoverTime

Measure 2014 2015 2016 OverallOTD 84% 88% 87% 87%

Price/Mile $2.47 $2.28 $2.10 $2.19OTP 78% 80% 79% 80%

1st TenderAR 71% 76% 85% 80%

4.InitialFindings

BinaryLogisticRegressionsOTD,OTP,1st TenderAcceptance,PerfectShipment

HighPerformingProfileRegressionComparison

1st TenderAcceptance OTD OTP PerfectShipment

CarrierType AssetCarrier NotSignificant AssetCarrier AssetCarrier

TenderedOn Weekday NotSignificant Weekday Weekday

ShipperIndustry Manufacturing Paper&Packaging Manufacturing Manufacturing

BidType Non-Spot Spot Spot Non-Spot

LengthofHaul >706miles >723miles NotSignificant >716miles

TenderLeadTime >1.3days NotSignificant NotSignificant >2.4days

PriceAge <152days <151days <152days <148days

5.CarrierClusteringFindings

Hierarchicalclusteringforcarriersbasedon:§ FleetSize(howmanytrucks)§ GeographicCoverage(numberofstatescovered)§ NumberofLanesserved§ NumberofCustomersserved§ IndustryCoverage§ LaneFocus(numberofloadsperlane)§ CustomerFocus(loaddensitypercustomer)§ TotalNumberofLoads

ClusteringforCarrierProfilesConstellationChartConstellationChart

1Leaders

2MajorPlayers

3Laggards

Assetbasedcarriersandnon-assetbasedcarrierswereclustered

separately

DendrogramConstellationChart

ClusteringforCarrierProfiles– Profilingforassetbasedcarriers

BestPerformer(110)- LeaderPerfectShipmentRate76%

q Mid-sizedCarriersq Serverelativelylargenumberof

customersq Lowlaneandcustomerfocus

LowPerformer(182)- LaggardPerfectShipmentRate31%

q Mid-sizedCarriersq Focusonlimitednumberof

customerswithinasingleindustryq Focusoncertainlanesand

geographicalregionsasnichemarkets

Mediocre(103)– MajorPlayerPerfectShipmentRate56.3%

q LargeCarriers(1000+)q Widegeographicalservicecoverageq Servemanycustomersacrossdifferent

industries.

ClusteringforCarrierProfiles– Profilingfornon-assetbasedcarriers

BestPerformer(110)- LeaderPerfectshipmentrate86%

Notice:

q Lanecoveragesmallerfornon-assetcarrierbasethanforassetbasedcarrierbase

q Tomaximizeclusteringeffects,numberofcustomersandnumberoflanesservedreplacedcustomerandlanefocus

LowPerformer(182)- LaggardPerfectshipmentrate43%

Mediocre(103)– MajorPlayersPerfectshipmentrate66%

NonAssetCarrierCharacteristics:

q Leadingcarriersalsoshowfocusintermsofcustomersandlanesq Loadspercarriersfornon-assetleadersismuchsmallerthanfor

theassetbasedcarrierleaders,thiscouldreflectcapacitylimitormorefocusedstrategy

q Themajorplayerclustertakes80%ofthetotalloadsofnon-assetcategory,reflectingamoreconcentratedcapacity

ClusteringforCarrierProfiles– ConsistencyofPerformanceAssetbasedCarriersOTDandAcceptanceRateSpread

Bothassetandnon-assetbasedcarriersshowthesamepattern:q Leader groupismoreconsistentthanLaggardgroupintermsofstandarddeviationof

performanceonbothOTDand1st OrderAcceptance

q ThespreadofLaggardgroupofOTDandARiswideandpolarizedi.e.goodOTDbutpoorARandviceversa

Non-AssetbasedCarriersOTDandAcceptanceRateSpread

1st Hypothesis:Acarrierwillperformbetterifithasmoreconsistentloads

Carrier2Carrier1

PeriodDensity:Loadsperas%oftotalloadsina 2yeartimeframeforacarrier.

ClusteringforCarrierProfiles

Accordingtothehypothesis,Carrier1shouldhavebetterperformancethanCarrier2

Nullhypothesisisrejected forMajorPlayers

WithintheMajorPlayersgrouptherewasastrongnegativecorrelationbetweenStdDeviationofPeriodDensityandPerfectshipment.

Themoreinconsistentloadsareacrossperiods,thelowertheperfectshipmentrateis.

CorrelationAnalysis

ClusteringforCarrierProfiles

2nd Hypothesis:Acarrierwillperformbetterinitshighdensitylanesthanlowdensitylanes

Docarriershavehighandlowdensitylanes?

OnlyasmallnumberofCarriershavelaneswithhighLoaddensity(>3%).Thoseareabout9%ofthetotalLoadsinMajorPlayercluster.

Highdensitylane,9%oftotalloads

LoadConcentration

ClusteringforCarrierProfiles

NullhypothesisisrejectedforMajorPlayers

Cluster3:1.8%oflane-carriercombination,lanedensityat10%with82%perfectshipment,outperformotherswithlowdensity

ClusteringforCarrierProfiles

ShipperPerformance Perfect ShipmentRate LaneDensity

Cluster149% 0.9%

Cluster257% 0.2%

Cluster382% 10%

6.ShipperProfiles

Analysisofshipper’sportfoliosofcarriersviewedbycarrierstrategyandcarrierassetbaseofferedinsightsonstrong-performingportfoliomixestohelpinformfutureroutingguidedecisions.

ShipperPerformanceBreakdownbyPortfolioofCarrierClusters

ShipperPerspective- CarrierDeploymentbyShippersHigh ServiceLevelShippers

ShipperPerspective- CarrierDeploymentbyShippersLow ServiceLevelShippers

ShipperPerspective- CarrierDeploymentConclusion

Insight1:Non-assetcarrierscanbetherightstrategicchoiceforashipper

Thereisnosignificantserviceperformancedifferencefromsolelyfavoringassetbasedcarriers.

ShipperPerformance

PerfectShipment

Rate

ProportionofAssetBasedCarriers

ProportionofNon-AssetBased

Carriers

HighPerformanceProfile1

82% 70% 30%

HighPerformanceProfile2

81% 33% 67%

LowPerformance 46% 79% 21%

ShipperPerspective- CarrierDeploymentConclusion

Insight2:Leadercarriersimproveshipper’soverallservicereceived.

Highperformingshippersusesignificantlymorefocusedcarriers.

ShipperPerformance

PerfectShipment

Rate

ProportionofLeaderCarriers(asset&non-asset)

ProportionofLoadsbyLeaderCarriers(asset&

non-asset)

HighPerformanceProfile1

82% 42% 51%

HighPerformanceProfile2

81% 51% 82%

LowPerformance 46% 5% 7%

ShipperPerspective- CarrierDeploymentConclusion

Insight3:Majorcarriersofferthemostcapacitytothemarket.

AllshippersuseMajorPlayerstocovertheirloadsbutneedtoconsiderwhichMajorPlayersareregionalleaders.

ShipperPerformance

PerfectShipment

Rate

ProportionofMajor Player

Carriers(asset&non-asset)

ProportionofLoadsbyMajorPlayerCarriers(asset&non-

asset)High

PerformanceProfile1

82% 31% 31%

HighPerformanceProfile2

81% 44% 16%

LowPerformance 46% 42% 6%

7.Implications

Differingcarrierstrategiesandrolesresultindifferentserviceperformance.

Somegroupsofattributesworktogethertoimprovefreightperformance.Theseincludelongerleadtimes,consistencyofloadvolume,geographicandlanefocus,youngerpriceages,andcertainmixesoftypesofbothassetandnon-assetcarriers withinashipper’sportfolio.

Diversifiedshipperportfolioswithahigherproportionofmorefocusedcarriers havestrongerperformance.

ImplicationsforCarrierProcurementandDeployment

ThePeckingOrderofcarrierselection:

1. IdentifyLeader(morelaneandcustomerfocused)carriersinthelanesforwhichashipperneedstruckloadserviceandmaximizeleadercarrier’savailablecapacity.Developrelationshipstobuildthisgroup.

2. IdentifycarriersinMajorPlayersgroup,maximizetheircapacityinthelanesinwhichtheyare“regionalleaders.”

3. ComplementtheremainingloadsusingcarriersintheMajorPlayersgroup.

BalanceServiceCapacityandServiceLevel

BroaderResearchImplicationsCarriersareratedonageneralscorecardwhichallowsthemtobenchmarkandgivesshipperssomeguidanceondevelopingtheirroutingguides.However,wefoundcleardistinctionsin

marketplaceroleandsubsequentstrategyforcarriers,whichhaddirectimplicationsfortheirserviceperformance.Suggeststhattheuniform

scorecardsusedtoevaluateshipperperformancemaynotbethemostappropriatewaytoratecarriers.

Whatdoesthismean?

Developingstrategyspecific keyperformancemetricsandcorrespondingscorecardswouldgiveshippersabetterunderstandingofcarrierperformancerelativetotheirspecificmarketneeds.

Thiswouldalsoallowbettervisibilityforshipperstobuildstrategicrelationshipswiththerightcarriersforthem.

Thankyou!

Thisresearchwouldnothavebeenpossiblewithoutthegeneroustimeandhelpfrom…ChrisCapliceSteveRaetzKevinMccarthyGlennKoepkeAndrewWelchGauravKarker

Questions? ?