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

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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)

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.

Suggested Citation

  • Alex Scott & Chris Parker & Christopher W. Craighead, 2017. "Service Refusals in Supply Chains: Drivers and Deterrents of Freight Rejection," Transportation Science, INFORMS, vol. 51(4), pages 1086-1101, November.
    • Handle: RePEc:inm:ortrsc:v:51:y:2017:i:4:p:1086-1101
    DOI: 10.1287/trsc.2016.0677
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    Cited by:

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    3. Acocella, Angela & Caplice, Chris & Sheffi, Yossi, 2020. "Elephants or goldfish?: An empirical analysis of carrier reciprocity in dynamic freight markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 142(C).
    4. Miller, Jason W. & Phares, Jonathan & Burks, Stephen V., 2023. "Job Creation and Job Destruction Dynamics in the U.S. Truck Transportation Industry, 1995-2019," IZA Discussion Papers 16184, Institute of Labor Economics (IZA).
    5. Miller, Jason W. & Phares, Jonathan & Burks, Stephen V., 2025. "Bring Out the Bulls: Employment Dynamics of Trucking Firms During Highly Expansive Market Conditions," IZA Discussion Papers 17627, Institute of Labor Economics (IZA).
    6. Zolfagharinia, Hossein & Haughton, Michael A., 2017. "Operational flexibility in the truckload trucking industry," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 437-460.
    7. Xinyi Lyu & Tiaojun Xiao & Jingquan Li, 2024. "Evolution of direct network effects: A perspective of market thickness of an online freight platform," Electronic Markets, Springer;IIM University of St. Gallen, vol. 34(1), pages 1-16, December.

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