From Freight Flow and Cost Patterns to Greater Profitability and Better Service for a Motor Carrier

Two complex motor-carrier problems were solved by Management Science in the past few years by subsidiaries of the ANR Freight System. They involved efforts to improve profitability through an understanding of factors contributing to (a) Less-Than-Truck-Load (LTL) intercity linehaul productivity and (b) Truck-Load (TL) costing. The traditional approach of analyzing one lane at a time proved totally inadequate in a 50-city system with thousands of interdependent freight lanes.Linehaul productivity is sensitive to shifts in freight-flow patterns, such as seasonal variations or the 20% truck tonnage drop caused by the recession. The dangers to be avoided in the TL business are: (1) discouraging potentially profitable business by overestimating variable cost (such as backhaul), or, conversely, (2) soliciting potentially unprofitable freight. Decision aids were developed for both LTL and TL freight.Total profit increase since the study was implemented in May 1980 is estimated at $9 million per year, plus a one-time direct benefit of $3 million from eliminating the need for a new freight reship facility.Indirect benefits included service and market improvements, better management of equipment and drivers, etc. The philosophical impact on management perception and perspective was enormous. More accurate decision-making rules replaced traditional trucking “rules of thumb.”