Sourcing truckload capacity in the transportation spot market: A framework for third party providers

Due to uncertainty in supply chains and carrier networks stretched thin by demand, it is sometimes necessary for shippers to procure capacity for shipments on the transportation spot market. The transportation spot market is a mechanism by which unfulfilled and urgent demand is satisfied. Shipments are tendered one at a time on a load-by-load basis. Because of the often severe shortage of spot market capacity and its relatively high and volatile prices, shippers must actively as opposed to passively seek carrier capacity. Often, they turn to third parties. This research considers third party brokers (3PL, or non-asset carriers) operating in the spot market. On behalf of shippers, these brokers take responsibility for shipments and secure capacity for them. The paper proposes a behaviourally-based conceptual framework that uses 3PL broker data to improve the search for capacity on the spot market. It seeks to improve the effectiveness of the search process by combining (1) broker data on the availability of carrier capacity, (2) a priori information on a particular carrier's likely response to various prices to service a load (the reservation price), and (3) the ability to source multiple loads simultaneously (bundling). These components are incorporated into a framework that enables brokers to better prioritize the carriers they contact, thereby improving outcomes in terms of lower carrier costs and reduced search effort.