An automated system for motor carrier selection
| Pages | 533-539 |
| DOI | https://doi.org/10.1108/02635570310489223 |
| Published date | 01 October 2003 |
| Date | 01 October 2003 |
| Author | Ching‐Chung Kuo,Frank Soflarsky |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
An automated system for motor carrier selection
Ching-Chung Kuo
Department of Management, College of Business Administration, University of
North Texas, Denton, Texas, USA
Frank Soflarsky
Gas and Fluid Control Group, Harsco Corporation, Harrisburg, Pennsylvania, USA
Introduction
Transportation represents the single most
important element in business logistics for
many corporations. Freight movement
typically accounts for two-thirds of the
logistical dollar and between 9 and 10 per
cent of the gross national product (GNP) in
the US economy (Ballou, 1999). Taking the
year 1984 as an example, the total
expenditures on inter-city freight were $250
billion (Bowersox and Closs, 1996). As for the
future, there has been an upward trend in the
overall rates charged by trucking companies
to deliver goods. In 1995 alone, rates were at
least 3 per cent higher than in 1994 for firms
that carried less than a full truckload (FTL)
(Purchasing, 1995). This followed an even
higher increase of 11.1 per cent in truckload
rates between 1992 and 1993 (Traffic
Management, 1993).
HPGC is a manufacturer of high-pressure
gas containment equipment located in south-
central Pennsylvania serving clients
geographically dispersed across the country.
The company absorbs the costs of delivering
products to its preferred customers, who are
firms that place an order for 100 units or
more. In the past year, the total shipping
expense for prepaid transportation was
approximately $730,000. In order to be more
competitive in the marketplace, HPGC is
making every effort to reduce costs to the
greatest extent possible. As a first step
toward the goal, a close examination of the
current practice in scheduling shipments
seems appropriate.
At present, the trucking companies
delivering orders to the preferred customers
are selected by the traffic manager at HPGC
While most of them carry different types of
loads to various locations, each has its own
predetermined routes and territories to
operate. For example, Star Transportation
was willing to submit to HPGC regional rates
for shipments to Tennessee, Kentucky,
Georgia, North and South Carolinas,
Alabama, and Mississippi last year. On the
other hand, Langley Transportation would
only quote regional rates for deliveries to
Alabama, Arizona, California, Indiana,
Minnesota, and Texas. Owing to his many
years' experience, the manager normally
knows when to use which carriers to obtain
low rates.
Although the major concern in the carrier
selection process is cost minimization, other
factors may also be considered in some
special cases. For instance, the manager is
always extremely busy with both prepaid and
customer-paid shipments at the end of each
month. When swamped with orders to be
transported, he may only contact the trucker
that comes to his mind first instead of calling
around to find the one that offers the best
price. In other situations, a trucking
company is chosen solely on the basis of the
manager's personal preference. Under these
circumstances, the transportation
expenditure may be higher than it should be.
Objectives
Clearly, an efficient method is needed to
assist the traffic manager at HPGC in
choosing the right carriers. The main goal of
this paper is to develop a computerized
procedure, so that customer orders can be
shipped out of the manufacturing facility in
the most cost-effective manner. As a
secondary objective, the potential savings to
be realized by utilizing this automated
system will be determined to assess the
effectiveness of the judgment-based approach
currently followed by the traffic manager.
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[ 533 ]
Industrial Management &
Data Systems
103/7 [2003] 533-539
#MCB UP Limited
[ISSN 0263-5577]
[DOI 10.1108/02635570310489223]
Keywords
Logistics, Freight forwarding,
Cost allocation, Selection,
Decision support systems
Abstract
This paper deals with the
development of an automated
procedure for selecting motor
carriers to minimize transportation
cost prepaid by a shipper. To test
the effectiveness of the decision
support system (DSS), an
empirical study was conducted, in
which the freight carriers actually
chosen by the traffic manager at a
large manufacturing company over
a period of time were compared
with those recommended by the
computer program and the
difference between the two total
transportation costs was
computed. It was found that, while
the human decisions based on
experience and intuition were
generally sound and good,
substantial savings in shipping
expenses were achievable with
the aid of a DSS such as the one
described here, especially when
the logistical operations become
more complex and the time
horizon is longer. Limitations of
the present study are delineated
and directions for future research
are discussed.
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