It does not take a university professor to communicate to those in the transportation industry that as Bob Dylan so eloquently said “the times they are a changing.” The acceleration of these changes since the 2008 economic downturn whether it be driver shortages, new regulations on driver time, mounting pressures of fluctuating fuel costs, industry capacity issues, and rising insurance costs that shippers face when designing their transportation network and selecting ground transportation options has only made the utilization of increasingly precious resources all the more important.
As an academic, one of my primary research interests is the models that organizations such as Ryder use to assign and route resources within their transportation network. I am familiar with the algorithms behind most of the software used for assigning and routing transportation resources. This is why it was such a surprise to me when Ryder approached us at the University of Tennessee’s Global Supply Chain Institute (GSCI) with the issue of having to manually intervene the assignment and routing of shipments between dedicated fleets and common carriers they use to supplement capacity.
This gap actually makes sense when one realizes that according to our research 74% of organizations use a combination of private/dedicated assets and common carriers for their outbound shipments. Current models are based on historic, singular cost structures before many of the changes alluded to above had become as impactful in the decision-making process.
The GSCI thus partnered with Ryder to determine the extent of this problem within industry and try and develop a solution that could eventually be used to remove the need to manually intervene what should be an automated process. What we found was eye-opening, as only 28% of organizations we surveyed indicated that they have a fully automated information process for assigning shipments to dedicated/private resources versus common carriers. Some 52% indicated this was still a manual process at their firm (with the remaining 20% a mixture of manual and automated). This represents a meaningful area of opportunity for firms moving forward. Further, this data underlines the current immaturity of the decision-making process at many firms, and represents an opportunity to improve the efficiency and implementation of such hybrid strategies due to the fact that we also found the majority of respondents were not highly satisfied with their current processes.
Why is this occurring? The models that we could find for assigning and routing dedicated resources versus common carriers were based on primarily direct costs. What we found from speaking with industry was that decision factors such as dedicated asset utilization, route length, backhaul potential of the route, and time sensitivity of the shipment could be just as important as cost. Our analysis shows several statistically significant differences between the five factors. Perhaps the most noteworthy result is that time sensitivity is clearly just as important as cost when making the decision on how to assign shipments between dedicated/private and common carrier assets. Additionally, cost and time sensitivity are also statistically significantly more important than the other factors in the decision process.
Additionally, none of the factors were on the unimportant side of the scale, which indicates that there is some importance placed on each of these factors in practice. These results support ancillary evidence that some organizations use the ability to control route length as a strategy to increase driver retention. While not as high as cost and customer service, the results also indicate that asset utilization and route length still need be considered in decision models as resources become more and more scarce as the driver shortage continues to grow.
These results reveal an important gap between what factors practitioners believe are the most important in making the carrier assignment decision and what current analytic models created by academics include in their criteria. These gaps could also potentially explain why a majority of the study respondents reported that their current process was either manual or a hybrid of automated and manual, as the current analytic and information systems tools may not allow organizations to assign shipments based on the factors they value. The discrepancy is important, as the results show that guidance for how to assign shipments to dedicated/private fleet versus common carriers is growing in importance. New insight and guidance from academic research was needed to make this common decision in today’s transportation climate through the development of solutions that incorporate all of the relevant factors that practitioners are incorporating into the assignment process.
We feel a first step in this guidance was accomplished through the model that we developed in partnership with Ryder that has now become Ryder’s TranSync™ tool. This tool will allow transportation providers the ability to obtain an assignment and routing decision between dedicated and common carrier resources in a single step without manual intervention. The velocity of decision-making is only going to increase, and the ability to trust software tools to provide trusted solutions can be an advantage for transportation providers.
To learn more about Ryder TranSync, click here.
Authored by Lance W. Saunders PE, PhD,
Lance Saunders is Assistant Professor of Supply Chain Management at Virginia Commonwealth University School of Business. After completing his PhD at Virginia Tech in 2013 in Industrial and Systems Engineering with a concentration in Management Systems, he spent a year as an Assistant Visiting Professor in the Department of Marketing and Supply Chain Management at the University of Tennessee.
