Service Refusals in Supply Chains: Drivers and Deterrents of Freight Rejection

Alex Scott (), Chris Parker () and Christopher W. Craighead ()
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Alex Scott: D’Amore–McKim School of Business, Northeastern University, Boston, Massachusetts 02115
Chris Parker: Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania 16801
Christopher W. Craighead: Haslam College of Business, University of Tennessee, Knoxville, Tennessee 37996

Transportation Science, 2017, vol. 51, issue 4, 1086-1101

Abstract: Contracts in the for-hire trucking industry are unusual in that, although they establish prices for different services, there is typically no legally binding obligation or penalty for either party to offer or accept a load. When a load is rejected by all contract carriers, shippers must turn to the spot market, which can significantly increase supply chain costs. Because these transactions occur between private parties, data on load acceptances/rejections and contract/spot prices have not been available to academic researchers, leaving the freight rejection problem largely unexplored. We are able to examine this problem using a detailed transactional data set of a large national shipper. We estimate that spot prices for truckload services average about 62% higher than contract rates. We find key operational and economic factors to be drivers of freight rejection and the shipper-carrier relationship to be a deterrent to freight rejection. We also find that primary and secondary carriers respond differently to these operational and economic factors. We discuss how these insights could be used by a shipper to get better performance and lower cost from their carrier base.

Keywords: freight rejection; truckload contracting; empirical transportation research (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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