MIT: The cost of routing-guide failure

+9–12%

backup-carrier premium over contract; spot market +23–35%

MIT research found that average backup-carrier prices were approximately 9–12% above contract prices, depending on routing-guide depth, while average spot rates were approximately 23–35% above contract rates, depending on market conditions. A carrier’s contracted rate means less if the freight frequently gets rejected and moved deeper into the routing guide.

Research credentials

Study: Root Cause Analysis and Impact of Unplanned Procurement on Truckload Transportation Costs
Researchers: Nishitha Reddy Aemireddy and Xiyang Yuan
Institution: MIT Center for Transportation & Logistics
Year: 2019
Academic advisor: Chris Caplice, PhD
Research type: MIT supply-chain master’s capstone / thesis
Data context: Transportation-management data involving C.H. Robinson’s TMC division; tender rejection, routing-guide behavior and the cost of unplanned procurement. Listed by MIT FreightLab among its freight-rate research publications.

Research sourceAemireddy, N. R. & Yuan, X. (2019)Root Cause Analysis and Impact of Unplanned Procurement on Truckload Transportation CostsMIT Center for Transportation & Logistics · Advisor: Chris Caplice, PhDMIT graduate capstone research · findings also cited by Acocella, Caplice & Sheffi, Transportation Research Part E (2020)View original

Additional academic support: these findings are specifically cited in Acocella, A., Caplice, C. & Sheffi, Y. (2020), Elephants or Goldfish? An Empirical Analysis of Carrier Reciprocity in Dynamic Freight Markets, Transportation Research Part E: Logistics and Transportation Review, Volume 142, Article 102073, a peer-reviewed paper that reports the 9–12% backup and 23–35% spot premiums.

What it found

The contract rate isn't always the actual cost

Primary carrier

Contracted transportation cost

Backup carrier

+9–12%

Spot market

+23–35%

Other research and case studies

All research →

Independent academic researchMIT: Asset carriers vs. non-asset providers Peer-reviewed journal articleHershey: Carrier relationships and capacity commitment Carrier-published customer case studyNational retailer moves from non-asset providers to an asset-based model Consultant-published client case study · ocean freightDrewry: Moving part of a network direct to carriers Independent academic researchMIT FreightLab: Where brokers have the advantage

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