Carrier Mix Decision Under a Capacity Crunch
A shipper moves 850 truckloads per month on three lanes. Lane 1 (60% of volume) is served by Carrier X at $2,150/load with 94% on-time delivery (OTD). Lane 2 (25%) uses Carrier Y at $2,050 with 88% OTD. Lane 3 (15%) uses spot market at an average $2,600 with 79% OTD. Carrier X has told the shipper it can absorb at most 10% more volume before peak season, then will cap allocation. The shipper's customers impose a 2% late-delivery penalty on contract value for loads arriving late, and OTD below 90% triggers a quarterly review. Peak season adds 20% volume for three months. The logistics manager proposes shifting 15% of Lane 1 volume to Carrier Y to relieve X, and moving Lane 3 to contract carriage.
1. Assess the proposed shift of 15% of Lane 1 volume from Carrier X to Carrier Y, weighing cost and service against the penalty and review thresholds.
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Volume math: Lane 1 = 60% × 850 = 510 loads/month. Shifting 15% moves ~76.5 loads to Carrier Y.
Cost: Y is $100 cheaper per load ($2,050 vs $2,150), so the shift saves ~$7,650/month. Cost is favorable.
Service: X OTD is 94%, Y is 88%. Moving 76.5 loads from a 94% carrier to an 88% carrier adds roughly 76.5 × (0.94 − 0.88) ≈ 4.6 additional late loads per month. Whether that is acceptable depends on the penalty exposure and whether Y's blended performance crosses the 90% review threshold.
Threshold check: Lane 2 (Y's lane) is already at 88%, below the 90% review trigger. Adding Lane 1 volume to Y does not improve Y's OTD and may worsen it if Y is capacity-strained. The shipper risks a quarterly review on a larger share of volume.
Judgment: the cost saving is small relative to service risk. A better move is to shift only enough to keep X within its 10% headroom (X can absorb ~51 more loads) and use Y selectively for non-critical loads, not a blanket 15%. Quantify penalty exposure before committing.
2. Quantify the late-delivery exposure across the current carrier mix and determine whether any lane breaches the 90% OTD review threshold.
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Loads by lane: Lane 1 = 510; Lane 2 = 212.5; Lane 3 = 127.5.
Expected late loads:
- Lane 1: 510 × (1 − 0.94) = 30.6 late.
- Lane 2: 212.5 × (1 − 0.88) = 25.5 late.
- Lane 3: 127.5 × (1 − 0.79) = 26.8 late.
- Total ≈ 82.9 late loads/month out of 850 (≈9.75% blended lateness, ≈90.25% blended OTD).
Threshold check: Lane 2 (88%) and Lane 3 (79%) are both below the 90% OTD review trigger. Lane 1 (94%) is compliant. So two of three lanes already breach the threshold - the review risk is concentrated on Y and spot, not X.
Penalty exposure: each late load carries a 2% contract-value penalty. The highest late-load count is on spot (26.8) despite being only 15% of volume, because its OTD is worst. This reframes the priority: fixing Lane 3 service matters more than relieving X.
3. Given peak season adds 20% volume for three months and Carrier X caps at 10% growth, recommend a carrier-mix plan and justify it against the data.
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Peak volume: 850 × 1.20 = 1,020 loads/month, +170 loads.
Carrier X headroom: X can take 10% more than its current 510 = up to 561 loads, i.e., +51 loads. That leaves ~119 peak loads needing other capacity.
Recommended plan:
- Fill X to its cap (+51 loads). X is the best-performing carrier (94% OTD) and cheapest of the reliable options; use its headroom fully.
- Convert Lane 3 spot to contract carriage. Spot is the worst on service (79%) and the most expensive ($2,600). Contracting it stabilizes both cost and OTD and absorbs peak volume. Target a contract carrier with demonstrated OTD ≥ 92%; even at a modest premium over spot's average, the service gain reduces penalty exposure.
- Use Carrier Y for residual peak, not base shift. Y at 88% is below threshold; give it peak overflow only where load criticality is low, and set an OTD improvement requirement as a condition.
- Avoid the 15% Lane 1→Y shift proposed by the manager; it moves volume to the weaker carrier and adds late loads without solving the peak gap.
Justification: this plan uses the best carrier to its limit, fixes the worst lane, and adds capacity where service risk is lowest, while protecting the 90% OTD threshold.