MIT SCM Symposium 2024

This study investigates the United States full truckload procurement process and persistent issue of budget overruns faced by shippers during their budgeting. Despite planning through Requests for Proposals (RFPs) that forecast shipping volumes and secure contractual rates with carriers, shippers regularly confront unplanned expenses surpassing their budgets. The key problems addressed are the discrepancy between planned budgets and actual expenditures, accentuated by the dynamics of the spot market and the unpredictability of freight volumes. Utilizing data from 13 shippers’ Transportation Management Systems (TMS), provided by C.H. Robinson's TMC division, this research delves into the factors contributing to budget overruns. The analysis covers 196 transportation procurement events across 13 shipper companies over six years, highlighting a consistent trend of budget overruns, with some instances reaching up to 280%. The methodology employed includes a quantitative model that helps shippers plan their budgets. The findings underscore the necessity for a more sophisticated budgetary framework that integrates spot market factors, enabling shippers to more accurately anticipate and manage transportation costs. This study not only sheds light on the complexities of freight budgeting but also suggests a shift towards incorporating data analytics to enhance forecasting accuracy and budget reliability.