MULTI-STOP TRUCKING: HOW IT AFFECTS LOAD ACCEPTANCE … · more attractive to carriers and improve acceptance levels.2 We found that carriers do reject multi-stop loads more often

MULTI-STOP TRUCKING: HOW IT AFFECTS LOAD ACCEPTANCE AND PRICING AND WHAT YOU CAN DO ABOUT IT

WHITE PAPER

2

IN BRIEF

If you suspect that carriers reject multi-stop truckloads more often

than single-stop loads, you’re only partially right. While there are

specific factors about multi-stop that carriers dislike, there are

also strategies you can employ to make multi-stop freight more

attractive to carriers and better control your costs.

CONTENTS

The findings: what increases the price for multi-stop truckloads? 4

The findings: what lowers the price for multi-stop truckloads? 6

4 ways shippers can reduce rates and increase acceptance

of multi-stop loads 9

3C.H. ROBINSON | Multi-Stop Trucking: How It Affects Load Acceptance and Pricing

Like most shippers, you probably use multi-stop truckload as part of your freight portfolio. But while multi-stop may bring greater efficiency to your operation, it adds complexity for your transportation providers—and that can mean higher rates or an impact on service for you.

Look at multi-stop from the carrier’s point of view. Between initial

origin and final destination, there are extra pickups and/or deliveries.

Transit times tend to be longer, with loading and unloading delays

at each stop. Using technology, more carriers today can see what

multi-stop means for their drivers’ hours of service (HOS), revenue

generating miles, and cash-to-cash cycle, by customer. All variables

considered, it’s more difficult to manage multi-stop effectively and

make a profit on those shipments.

Shippers often ask us, do carriers actually reject multi-stop truckload

tenders more often than single-stop truckloads, or does it only seem

that way? When carriers reject multi-stop loads, it impacts your overall

transportation budget; previous research showed that each rejection

sends you deeper into your routing guide to more expensive carriers.1

We decided to go beyond the anecdotes to answer these questions.

Working with graduate students from MIT’s Center for Transportation

& Logistics, we’ve learned more about exactly why carriers reject

multi-stop truckloads, and what you can do to make these shipments

more attractive to carriers and improve acceptance levels.2

We found that carriers do reject multi-stop loads more often than

single-stop, but they do not reject them automatically. There are

approaches you can take to make multi-stop more attractive to

carriers as a business proposition. So, if your strategy relies on multi-

stop truckload, you owe it to yourself to know how you can work more

effectively with your carriers to increase acceptance levels and better

manage your costs.

How multi-stop pricing works

Multi-stop pricing starts with a line haul rate per mile (RPM) that is drawn from the truckload pricing contract between you and your carriers. Added to the RPM are stop-off charges, which cover the increased dwell time at extra stops. While truckload contracts stipulate rates, they also allow carriers to refuse loads. When it’s time to move a load, you tender the shipment to the first carrier in the routing guide; if they reject the tender, it is offered to the second carrier. This continues until a carrier accepts the tender. Typically, the deeper into the route guide you must go before a carrier accepts the load tender, the higher your costs will be.


THE FINDINGS: WHAT INCREASES THE PRICE

FOR MULTI-STOP TRUCKLOADS?

More additional stops

Adding extra stops simultaneously decreases the acceptance rate

and increases the price. You pay the most—an average of $300 over

market rate—for the first extra stop you make. Carriers seem to

view the move from a single-stop to a two-stop load as a material

change in the destination pattern and consumed time, and they

charge accordingly.

As you add a third or fourth stop, the incremental price increase is

not as dramatic. That is likely because transportation companies

know up front these are multi-stop truckloads. And, at more than

3 additional stops, there is stronger tender acceptance. Further

analyzing the data shows that carriers were either advised about

these as multi-stop loads during the procurement event, or else

received consistently tendered loads after the event from the

shipper. The conclusion: when carriers can plan for these loads,

they can price appropriately for them up front and are more likely to

accept the tenders.

FIGURE 1: Performance by stop number

How extra stops impact on time delivery

□ On single-stop truckload shipments, 80 percent of loads that picked up late still delivered on time.3 Multi-stop loads are different. As the graphic (left) shows, the more stops there are, the worse the on time delivery percentage if one of the early pickups is delayed or late.

□ In the graphic, the dark blue line shows on time delivery if the load picked up on time. The light blue line shows what happens to a load that leaves its origin late. Trucks that picked up late on a three-stop load, for example, averaged on time delivery only 71 percent of the time.4

Avg

. OTD

%

Stops

100%

90%

80%

70%

60%

50%1

OTD % for

loads, if picked

up ontime.

OTD % for loads, if

picked up late.

2 3 4


More out-of-route miles

When comparing a single and multi-stop load, carriers look at total

miles, time, and revenue. The more out-of-route miles there are, the

higher the price and the lower the acceptance level. On average,

you pay $0.20 for every out-of-route mile, on top of the RPM.

If there is a four-stop load of 900 miles, carriers see it as a two-day

run. Adding two extra stops to that route also adds miles and time.

En route multi-stop loads typically have a greater chance of delivery

time issues for two reasons: the distance between drops and the

delays that occur at delivery. Coordinating delivery appointments

often leaves drivers waiting overnight for deliveries. Therefore,

as multi-stop loads add time, carriers need revenue that reflects

the time required, not just the actual miles. If the carrier does not

receive the additional day of revenue to cover their costs, they are

likely to reject the tender.

More market demand for trucks

Multi-stop truckload takes longer than single-stop, and typically

contributes less value to the fleet yield. Extra pickups and/or

deliveries for multi-stop loads lead to longer transit times and

loading or unloading delays. This impacts the driver’s HOS, as well

as revenue generating miles overall.

Given the choice, carriers choose single-stop loads over multi-

stop. Shipments with one origin and one destination offer higher

profit margins, and carriers can more easily plan to reposition the

equipment and maximize the driver’s HOS. It should also be noted

that drivers prefer single-stop over multi-stop loads for a simple

reason: drivers like to drive. While the money certainly matters, they

are most engaged in their jobs when they are driving rather than

waiting at unloading points.


THE FINDINGS: WHAT LOWERS THE PRICE FOR

MULTI-STOP TRUCKLOADS?

Planning ahead for multi-stop loads5

When carriers can plan predictability into their networks, their

goals for fleet yield become more attainable.

When you take the additional stops into consideration in the

negotiation process, you can save an average of $30 per load.6

Employing continuous moves

Continuous multi-stop moves save carriers money by reducing

empty miles; carriers also receive more revenue generating

miles. On average, continuous moves are more than $200

cheaper than multi-stop loads that are not continuous.7

You can see the best results if you present these moves to

carriers as planned routes during the procurement event. That

allows carriers to price them appropriately to cover all (or

almost all) of the miles to get their drivers home.

Clustering stops

Clustering stops within a 30-square-mile area saves shippers

about $80 per drop. Clustering drops also increases

acceptance odds by about 30 percent.

Risk of delay is a key consideration for carriers, especially with

multi-stop loads. If the driver is delayed in picking up at one

of the early stops, it is less likely they can make up that time

and deliver on time. Because clustered stops are planned,

there is less risk of these loads being delayed en route, and

less risk that the driver will be delayed for the next load.

The key to clustered stops is to make it possible for the driver

to pick up and deliver at all of the stops during business hours

on a single day.8

4. Drop

FIGURE 2: Continuous moves

1. Pick 2. Drop

3. Drop

4. Drop


Paying higher stop-off charges

Paying $100 per stop on multi-stop loads with three or more stops

resulted in higher acceptance rates than paying $50 or $75 per

stop. In fact, you are better off paying a higher stop-off charge,

because doing so decreases the line haul rate—sometimes beyond

the cost of the stop-off charge.

Conversely, paying a higher stop charge for the first additional stop

charge did not lower the line haul rate. But paying a higher stop-off

charge at subsequent stops does increase load tender acceptance,

and decreases in RPM appear at $100 per stop.

You may also consider paying a higher rate per mile; in the research,

shippers who paid a higher rate per mile saw a 19 percent average

increase in load tender acceptance for every 10 cent increase in

RPM. This suggests that carriers know the total revenue they need

for a load, and strive to earn that.

Line-haul $ # of stops

SOC/Additional Stop 2 3 4

$50 $1.98 $2.01 $2.02

$100 $1.98 $1.99 $1.91

FIGURE 3: Multi-stop loads with higher stop-off charges have lower price

8C.H. ROBINSON | Inbound Transportation: Is it the Missing Link in Your Supply Chain?

ABOUT THE STUDY

The research9 analyzed historical data for more than 5 million

truckload and multi-stop truckload tender records collected over a

2.5 year period by TMC, a division of C.H. Robinson. The records

included tender and shipment information for more than 4,000

carriers and 190 origins. The scope was limited to dry van loads in

the continental U.S. traveling more than 250 miles.

The factors tested for impact on costs and/or acceptance included:

□ The effect of additional stops, depending on whether they were

pickups or drop-offs

□ Location of additional stops

□ The regularity with which the multi-stop loads occurred

□ Stop-off accessorial charges and their affect on pricing and

acceptance

Other research has noted factors that affect truckload prices—such

as distance traveled, lead time, corridor volume, regional origin and

destination dynamics, and seasonality. Building on those findings,

the same factors were tested to see whether they differed for multi-

stop truckload.

The research and modeling found destination to be more influential

to price than origin. Multi-picks were found to cost less than

multiple drops because in this dataset, inbound vendors tended to

be clustered more closely together.


1. Plan ahead. Where possible, include multi-stop lanes in

the procurement event, minimizing the introduction at

time of shipment tender.

2. Use a cluster stop strategy. Clustered stops loads yield

lower prices over loads with stops along the route. The

key to clustered stops is to make it possible for the driver

to pick up and deliver at all of the stops during business

hours on a single day.

3. Use continuous moves. When you can plan continuous

moves, carriers are more likely to accept them at a lower

cost than multi-stop loads that are not continuous.

4. Pay a higher stop-off charge. Paying $100 per stop if

there will be two or more drops can reduce the line haul

rate.

4 ways shippers can reduce rates and increase acceptance of multi-stop loads


END NOTES

1. Bobby Martens, Yoshiriori Suzuki, Kevin McCarthy, Chris Brady, and Steve Raetz, “Stale Rates Research: Benefits of Frequent Transportation Bids,” Iowa State University, C.H. Robinson, and TMC.

2. Xiaojia (Amy) Chen and Shang lin (Peter) Tsai Yang, “Multi-Stop Trucking: A Study on Cost and Carrier Acceptance,” MIT CTL, June 2016. http://ctl.mit.edu/pub/thesis/multi-stop-trucking- study-cost-and-carrier-acceptance.

3. Nane Amiryan, Sharmistha Bhattacharjee, Kevin McCarthy, Steve Raetz, and Glenn Koepke, “Do Higher Truckload Rates Bring Better Carrier Performance?” C.H. Robinson, 2016.


5. Kevin McCarthy, Chris Brady, Erik Caldwell, and Bryan Fisher, “Increase Lead Time, Decrease Costs,” 2010. As this white paper explains, same-day load tenders are always more expensive than next-day tenders. Shippers who provide carriers with more than 16 hours of lead time obtain more savings.

6. Planned loads were defined as loads that occurred at least once every other week and were compared to similar corridor loads that were unplanned.

7. Continuous moves are single loads with multiple legs that were part of the procurement event and awarded to a service provider. These were compared to three discrete loads in similar corridors.

8. Clustered stop loads were compared to mathematical market loads built from the shipment data to represent inline multi-stop loads based on the same origin and destination markets.


11C.H. ROBINSON | Inbound Transportation: Is it the Missing Link in Your Supply Chain?

Xiaojia (Amy) Chen graduated from University of

Toronto with a Bachelor’s Degree in Business. She

worked at Target Canada as a business analyst in

inventory management and demand forecasting before

joining Deloitte Consulting.

Shang lin (Peter) Tsai Yang graduated from the London

School of Economics with a degree in Accounting and

Finance. He worked in strategic marketing at Samsung

Electronics’ mobile division before joining Amazon’s Last

Mile Technology group.

Steve Raetz, director of research and market

intelligence, has been employed with C.H. Robinson

since 1989. He holds a B.S. in Mathematics and Teaching

from Minnesota State University, Mankato, and serves on

three university supply chain advisory boards.

Glenn Koepke, director of operations for TMC, a

division of C.H. Robinson, has worked globally with

shippers in Europe, the Middle East, and Africa (EMEA),

responsible for both operational excellence and supply

chain engineering. A graduate of the University of South

Carolina in Columbia, Glenn also opened TMC’s EMEA

global Control Tower® in Amsterdam.

Kevin McCarthy works for C.H. Robinson as a director

of consulting services. Kevin has over 27 years of

experience in the logistics industry. Kevin has an MBA

from the University of Minnesota Carlson School of

Business with an emphasis in Management Information

Systems and an undergraduate business degree with an

emphasis in Marketing.

14701 Charlson Road, Eden Prairie, MN 55347 | 800.323.7587 | www.chrobinson.com©2017 C.H. Robinson Worldwide, Inc. All Rights Reserved.

ABOUT TMC

Global supply chains are growing increasingly complex. Businesses

need the latest technology and industry expertise to advance and

stay ahead of the competition. At TMC, a division of C.H. Robinson,

we understand what makes supply chains faster, stronger, and more

efficient. As a leader in global logistics management, we combine

industry expertise with our global technology platform, Navisphere®,

to support the world’s most complex supply chains. Our logistics

experts are located in six Control Tower® locations around the world:

Amsterdam, Chicago, Mumbai, São Paulo, Shanghai, and Wrocław.

This Control Tower network, supported by our technology platform,

connects our customers to their suppliers and supply chain partners.

Our customers leverage these capabilities to manage their logistics

in over 170 countries across all modes of transportation. For more

information, visit www.mytmc.com.

ABOUT C.H. ROBINSON

At C.H. Robinson, we see things differently. We believe in

accelerating global trade to drive the world’s economy. Using

the strengths of our people, processes, and technology, we help

our customers work smarter, not harder. As one of the world’s

largest third party logistics providers (3PL), we provide a broad

portfolio of logistics services, fresh produce sourcing, and managed

services through our global network. In addition, the company, our

Foundation, and our employees contribute annually to a variety of

organizations.

For more information, resources, and our blogs,

visit www.chrobinson.com.

https://www.chrobinson.com/en-US/Resources/Videos/See-Things-Differently/

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MULTI-STOP TRUCKING: HOW IT AFFECTS LOAD ACCEPTANCE … · more attractive to carriers and improve acceptance levels.2 We found that carriers do reject multi-stop loads more often