The SCM capstone Truckload Procurement: From State-of-the-Practice to State-of-the-Art was authored by Maria Lucchi and supervised by Chris Caplice (caplice@mit.edu). For more information on this research, please contact the thesis supervisor.
The U.S. full truckload (FTL) market is uniquely challenging for shippers to navigate because of its high degree of market fragmentation, competitiveness, and magnitude. For these reasons, shippers have adopted various procurement behaviors to contend with the market’s complexities. This study aims to establish “state-of-the-practice” behaviors as well as highlight “state-of-the-art” behaviors in full truckload procurement organizations. Through surveys and semi-structured interviews with shippers of various industries and annual FTL spend sizes, data was collected on shippers’ practices in procurement strategy as well as their practices in the execution of those strategies.
The Framework: Technology, process, and people
Shippers’ practices were separated into three categories: Technology, process, and people. The technology category focused on data availability and accessibility—“Do You Have It?” The process category focused on an organization’s discipline in using data to drive decision-making—“Do You Use It?” Lastly, the people category focused on an organization’s willingness to share information with its business partners (carriers) to enable operational success—“Do You Share It?”
Shippers received a score between 0 and 1 in each category based on the number and type of each practice they demonstrated in that category. The higher the score, the more “state-of-the-art” the shipper was judged to be. Shippers were only scored on the questions they were asked, so no shipper was penalized for behavior they did not have an opportunity to discuss in the interviews. Lastly, the equally weighted sum was taken across the three categories and converted into a shipper’s aggregate score. This aggregate score ultimately classified a shipper as representative of state-of-the-practice or state-of-the-art in the sample.
The threshold between state-of-the-practice and state-of-the-art was 0.8, since this figure represented the third quartile of aggregate scores across all shippers. If a shipper’s aggregate score was less than or equal to 0.8, the shipper was assumed to be representative of the majority, or state-of-the-practice. On average, a single practice impacted a shipper’s score by 0.08–0.13, suggesting that even changes in a few practices could push a shipper into the state-of-the-art category.
Key Insights
Surveys and interviews with shippers revealed details on current and best practices in full truckload (FTL) procurement. Practices were split into three categories: Technology, Process, and People. The Technology category focused on data availability and accessibility – “Do You Have It?” The Process category focused on an organization’s discipline to use its data – “Do You Use It?” Lastly, the People category focused on an organization’s willingness to share information with its carriers – “Do You Share It?”
Shippers can use the Process, Technology, and People framework to benchmark their truckload procurement practices against their peers.
Small changes in the identified shipper truckload procurement practices can have a significant impact on whether a shipper is classified as “state-of-the-practice” vs. “state-of-the-art.”
Food & Beverage shippers outperformed firms from other industries; this is likely due to higher customer service requirements as well as additional consumer health and safety measures.
For more about this capstone project, and to see the full results of this research, visit the Supply Chain Management Review online at SCMR.com.
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