Build Your Best Truckload Strategy

The best laid truckload strategies all contain some inherent variability in executional performance that is frustrating to shippers and service providers alike.

University research sponsored by C.H. Robinson has garnered insights into the truckload market construct and the preferences of participants that are correlated to outcomes. These insights have been built into our strategies, processes, and technologies. This guide offers a summary of our research, method, and tools to develop a more capable truckload strategy.

Because it illustrates the contribution and limitations of the truckload market, as well as the interplay of shippers’ freight portfolio with the market, our latest academic research has been additive to a more traditional approach to truckload procurement and route guide construction. In short, the market can offer benefits to improve the attractiveness of some lanes while offering no benefit or additional challenge to others. With these insights, awarded and spot capacity strategies can be developed with results that are closer to plan.

A truckload transportation plan based on researched strategies and experience supports budgeting and strives to limit the impact of increasing market volatility, while delivering the best possible service any market can offer.

The best truckload plans leverage:

• Load level data
• Shipper lane attributes
• Market lane attributes
• Contract/awarded volumes
• Spot market strategy
• Rationalized supplier base of top performers
• Predictable procurement cadence
• Maintenance

This guide will offer an introduction to

• Research based strategies
• Influence and value of the broader market and shipper lane segments
• Value of an integrated contract and spot strategy
• Capacity strategies
• Budget creation for planned and unplanned freight

Data preparation

Scrub and segment your historical truckload data at the shipment level. Lanes with actual freight, segmented by demand predictability are the key to beginning your procurement event process.

It is no secret that good preparation is central to any project’s success. In the case of truckload procurement and route guide strategies, shipment level historical data creates the opportunity for the best results. Our research with universities has found a portfolio of insights that can be leveraged in a procurement strategy, and we offer two important ones here.

Cleansing data

Cleansing data for inaccuracies, closed facilities, and discontinued supplier and consignee relationships is key to procurement event success and route guide performance. Of the cleansing opportunities, ghost lanes is a top focus area. We commissioned research¹ to look at the impact of lanes included in procurement events and route guides that do not result in tenders to the awarded service provider.

• 65–80% of lanes contracted during the procurement event become ghost lanes.
• Every 10-percentage point increase in ghosted lanes to a service provider in a given year leads to 1% higher contract prices across all lanes from that service provider the following year, as compared to a potential bid at the lower ghosting rate pattern.

While shippers tend to include all possible lanes in a procurement event and seek to award them for the purposes of supporting load tender and payment, these unlikely awards can result in an increase in the total pricing paid to an individual service provider. Presumably, the service provider is buffering costs for unplannable loads and work from unfamiliar lanes.

Demand patterns

Research² suggests that there is a direct correlation between predictability of the demand pattern of loads and the likelihood that the primary provider will accept the tender. First tender acceptance is the plan and leads to expected costs and performance. Shipment level data affords for understanding not only annual volume, but the weekly and daily pattern and volatility.

When shipment tenders can be anticipated, capacity plans can be made by the service provider and a route guide performs at its best. When shipment tenders are more difficult to predict, scarce truck capacity (especially in a tight truck market) leaves some providers forced to decline tenders, leaving shippers to experience cost over runs from backup providers and the spot market.

Having accurate data and the most likely lanes and shipment activity offered in a procurement event will yield the most capable route guide and lowest plannable cost.

Segmentation analysis

Segment your freight by primary market corridors. Leverage the strengths of specific corridors with contracts. Build strategies for the limitations of the others in the spot market.

Marketplace view of shipper portfolio

Truckload transportation is a market-based engagement and despite how attractive a shipper's freight may appear, the broader market influences truckload strategy. Creating a segmented view of how your freight overlays with the market is the first step solving for the influence of trade corridors. Trade corridors are able to support a shipper where they are well balanced in both directions or have heavy consistent volumes in one direction. Where the inbound freight flows are imbalanced or very sporadic, capacity and pricing is more problematic. Our Procure IQ tool and experience will offer data visualization and dynamic analysis to aid your procurement strategy.

Shipper freight portfolio segmentation

C.H. Robinson sponsored academic research³ further increases the value of looking at the broader market segments by overlaying shipper freight directional flows and balance. The summary finding suggests that shipper inbound lanes and sparsely occurring lanes can benefit from two of the broader market's strongest segments, affording increased commitment and strategy than a traditional, responsive spot market approach.

Recommendations: From this segmentation analysis, lanes are guided into one of four high level capacity strategies:

• Contract dedicated possibility: the lanes in this segment have attributes where a dedicated strategy is a possibility, where that level of service is desired. Where dedicated is not desired or not the perfect fit, a hierarchical award-based route guide will perform very well.
• Contract: these lanes have the attributes for a hierarchical award-based route guide and will perform very well.
• Structured spot market: These lanes, while not the best lanes in a portfolio for route guide strategies, benefit from being found in strong opportunity market segments. A digitally enabled dynamic capacity approach with more assurances than a traditional spot market strategy can be constructed.
• Transactional Spot Market: A digitally enabled spot market strategy for those lanes with low attractiveness and aligned with less capable market corridors.

This figure presents broad recommendations for contract or spot capacity strategies as a result of overlaying segments of the shipper freight portfolio and the broader market.

This approach was developed as a result of our academic research examining shipper route guide strategies and historical performance. The net result is capacity strategy that respects the market attributes and the shipper's freight and lane attributes. This approach will produce results that offer best performance and pricing any market has to offer.

"Demand pattern of shipment tenders is the leading factor in your supply chain tied to first tender acceptance"

Demand pattern analysis

Building an effective truckload capacity strategy begins with identifying freight demand patterns. Understanding demand is foundational to planning your truckload capacity.

C.H. Robinson sponsored academic research⁴ found that second only to the market cycle of loose/oversupplied or tight/undersupplied, demand pattern of a lane is at the top of most influential lane attributes that correlated to first tender acceptance in a route guide and paying the planned rate.

Research⁵ suggests that first tender acceptance of load tenders by primary service providers is correlated to the predictability of demand patterns with low volume volatility. Procurement and capacity award strategies as a result can be tailored to leverage predictable patterns and more effectively attend to those that are less predictable.

Lanes with low volume don't lend themselves well to contract awards, but research⁶ has found that aggregating compatible low volume lanes together or low volume lanes with high volume, same corridor lanes, can smooth out demand and raise them to plannable and contractable lane bundles more attractive to service providers. Compatible lanes have origins and destinations located where carriers see them as nearly the same geographical location and will accept them as a one price operational bundle.

Following lane aggregation and attempts to amend business processes to smooth load tenders, lanes with known demand pattern limitations should be pulled out of the traditional contract strategy and work to create a strategy respecting the lane attributes. An interesting example of contractability but not a great candidate for a traditional route guide is seasonal products that have high volume, predictable demand within a finite shipping window and defined lanes. A situation like this might lend itself to establish an outsource relationship or a very limited capacity pool designed to address the seasonal surge.

Procurement event

Focus your procurement event on a regular cadence with your core capacity providers to build a more successful route guide.

With a go to market strategy set, the formal procurement event is the process to engage preferred transportation suppliers, working with them to discern what lanes work best for their networks and portfolio of services in the upcoming year. The following are researched insights that are correlated to transportation plan performance.

Rationalized supplier base is correlated to route guide performance

C.H. Robinson sponsored research⁷ found that shippers who used a small portfolio of transportation suppliers who perform well across a portfolio of shippers tend to have higher first tender acceptance, leading to best price paid. Strategies using a large portfolio of suppliers and/or using suppliers with a history of low performance across the shipper community tend to experience greater first tender rejection, requiring the use of more expensive back up providers.

Procurement events on a predictable cadence is correlated to higher first tender acceptance and lower price paid

Research⁸ found that shippers with annual procurement events saw their route guides outperform shippers who either did not do a formal procurement event or did not follow a predictable cadence. The working hypothesis is that when a transportation supplier can anticipate the renewal event, the tolerance to accept shipment tenders on aging pricing is higher. Annual cadence was the most common predictable strategy.

Offer the procurement event with freight segmented by capacity strategy

The most basic segmentation of a freight portfolio is

1. Dedicated capacity
2. Awarded hierarchical route guide
3. Spot market

As previously cited, lanes with predictable load tender patterns are best suited for awarded hierarchical route guides. When building a procurement event, consider engaging suppliers intentionally by the service sought for each segment. Also consider segmenting the spot market segment by those lanes that are in well placed market corridors from those in less capable market corridors. This enables strategic engagement for both structured and transactional spot market capacity proposals.

Budget Planning

Fine-tune your budget by accounting for more than just what your primary provider quoted your procured lanes.

Research¹¹ has revealed that Shippers consistently grapple with budget overruns, which can range from a manageable 6% to a staggering 180%. A significant amount of unplanned and volatile spot market spending, particularly within small-to-medium sized shippers, combined with inadequate forecasts from traditional budgeting methods are driving the overruns. The results of this research also emphasize the importance of lane consistency, beyond just sheer volume, finding that lanes active for more than 12 weeks have a significantly higher probability of repeating again the following year. This insight can help shippers better anticipate volume and cost changes, leading to more accurate financial planning.

Introducing a New Budgeting Framework

To address these challenges, the research team created a new budgeting framework, designed to improve accuracy and reliability. The framework proposes an 80/20 split approach: 80% of the budget should be allocated based on high-consistency lanes—those with over 100 loads and active for more than 12 weeks annually—while the remaining 20% accounts for low-consistency lanes. This method allows shippers to create more precise budget forecasts by factoring in both planned and unplanned expenditures. This framework also includes budgeting for inevitable unplanned expenditures from new loads. The amount of unplanned freight is a substantial portion of transportation spend, meaning it should be a critical focus for budgets.

Inputting shipper-specific figures into the framework above increases the accuracy of the budget, but utilizing averages from the study is still advantageous.

Why the Framework Works 

The benefits of adopting this new budgeting framework are substantial. By shifting to a more data-driven approach, shippers can achieve several key improvements: 

Enhanced Predictability: The new model provides a more reliable basis for forecasting by incorporating spending patterns with historical lane activity.

Reduced Overruns: Shippers can significantly decrease the frequency and severity of budget overruns by delineating between high-consistency and low-consistency lanes, as well as factoring in the inevitability of unplanned freight. 

Improved Financial Planning: With a clearer understanding of lane behaviors and spending trends, shippers can make more informed decisions, optimize procurement strategies, and adjust budgets dynamically in response to market conditions. 

Greater Accuracy: The framework's predictive strength, demonstrated by its success in forecasting budgetary outcomes within a 3% margin for 69% of cases, highlights its effectiveness in real-world applications. 

Concluding the more capable truck load strategy

Today's truckload economy is comprised of sophisticated carriers, 3PL’s, shippers, and consignees. Companies are increasingly focused on yield, efficiency, effectiveness, and reliability.

Technology is enabling an ever-increasing capability to design and operate a truckload strategy that embraces the breadth of capacity markets and available services. The ideas presented here are part of C.H. Robinson’s academic research and capacity portfolios. These ideas can be used as discrete improvement tasks or as an entire approach with a consultative C.H. Robinson engagement. Please engage your C.H. Robinson representative for more information and collaboration.