Lead Carrier or Multi-Carrier? How Data Improves the Award Decision

A lead carrier or multiple transport providers? This question is often discussed fundamentally within companies. For the award decision, however, another question is more important: how should the actual shipment portfolio be distributed among the available carriers?

That's because a provider can be economically strong on certain lanes and perform significantly worse on others. At the same time, a multi-carrier structure doesn't automatically have to be cheaper. What matters is how the different allocations affect the total cost of your own transport profile.

ShipCheck therefore enables different allocation models of shipments to carriers to be created and compared with each other. In addition, a best-case award scenario can be calculated across providers and lanes.

The relevant question thus isn't: "Are we fundamentally for a lead carrier or for multi-carrier?" But rather: "Which carrier structure produces the most economically sensible result given our transport data and the offered rates?"

Lead carrier and multi-carrier are two award models

In a concentrated award, a lead carrier takes on a large part of the transport volume. In a multi-carrier structure, transports are distributed across several providers – for example by:

• Lane
• Mode of transport
• Shipment structure
• Other parts of the transport network

Both models can make sense. From a cost perspective, it should therefore not be decided in advance which model is "right". Instead, several variants can be calculated and compared with each other.

The decisive level is the allocation of transports

An offer comparison first shows how individual carriers perform on different parts of the transport network. ShipCheck breaks tender results down by lane, mode of transport and cost component for this. More on this in the article Freight Tender Software.

For the actual award, however, a further question arises: which provider should receive which transports? This is exactly where different award models differ.

One model might, for example, award a large part of the volume to a lead carrier. Another might assign certain lanes to a second provider. Yet another might distribute the network more broadly across several carriers. ShipCheck enables such allocation models to be compared with each other.

Why the cheapest overall provider doesn't automatically produce the cheapest award structure

A carrier can be ahead in the aggregated result of a tender. But that doesn't automatically mean this provider is the cheapest on every relevant lane. That's precisely why ShipCheck shows where individual tender participants perform strongly or weakly by lane and mode of transport. How such a comparison is built is described in the article Comparing Freight Offers.

Different models can emerge from this for the award. For example:

• Model A: Concentration – one provider receives a very large part of the transport volume.
• Model B: Lead carrier plus supplement – the lead provider takes on the largest part, selected lanes go to another carrier.
• Model C: broader multi-carrier structure – several providers each take over the parts of the network where they perform economically better.

The relevant question then is: what does each of these models cost based on our actual shipment data?

What a best-case award scenario shows

In addition to self-defined allocation models, ShipCheck also creates a best-case award scenario. This scenario serves as a calculated reference point. It shows how shipments or parts of the transport network could be distributed as cheaply as possible among the available providers based on the underlying offers.

The value of this result does not lie in automatically dictating the final award. Rather, it shows: how large is the economic gap between our preferred award structure and the mathematically cheapest model?

This makes it possible to compare, for example:

• complete award to one provider
• lead carrier plus additional providers
• broader multi-carrier structure
• calculated best-case scenario

Why the cheapest calculated model doesn't automatically have to be implemented

Tendering software primarily improves the quantitative cost basis. It doesn't automatically decide on every factor of an award. The best-case scenario is therefore primarily a reference.

The company might, for example, find: a broader distribution would be cheaper on paper, but the difference compared to a more concentrated award is small. Or: complete award to a lead carrier is significantly above a combination of two or three providers.

This makes visible what economic price different award structures carry. The final decision remains with the company.

Why real shipment data is decisive for carrier allocation

The economic significance of a rate advantage depends on how often the respective transport structure actually occurs. A provider might be particularly cheap on one lane. If very few transports take place there, the effect on total costs is small. Conversely, even a small price difference on a high-volume lane can have a significant overall effect.

ShipCheck therefore uses real transport data at the shipment level to compare tender offers. How such data is prepared is shown in the article Automatically Evaluating Freight Invoices and Shipment Data.

The calculation thus doesn't just ask: "Who has the cheapest rate on lane X?" But rather: "What effect does this rate have given our actual transport volume?"

Historical data is the basis – but the award concerns the future

An award decision is made for future transports. The previous shipment profile is an important starting point for this, but doesn't have to exactly match the upcoming contract period. What can change, for example:

• Volumes
• Lanes
• Transport structures
• Carrier mixes

ShipCheck therefore enables what-if scenarios with different volume and route combinations. In addition, sales forecasts can be taken into account. This also allows checking: does our preferred carrier structure remain sensible if the transport profile changes?

How a forecast can change the best carrier allocation

Suppose a lane had only a small share of the total volume in the past year. For the coming year, however, significant growth is expected there. A provider that is particularly cheap on this lane may have had only minor significance in the historical aggregate evaluation. With the future volume, that can change.

That's exactly why ShipCheck enables applying sales forecasts to tender results and calculating offered rates against planned quantities. The carrier allocation can thus be tested against different assumptions.

Multi-carrier doesn't mean as many carriers as possible

A multi-carrier strategy shouldn't be confused with maximum fragmentation. The question isn't: "How many providers can we use?" But rather: "Which carrier structure produces the most economically sensible result given the chosen transport data and rates?"

In the end, that could well be a highly concentrated structure. Or a lead carrier plus one or two additional providers. Or a broader award. ShipCheck doesn't predetermine this structure but enables the comparison of different allocation models.

Three award models that can be compared with each other

For the analysis, it can be helpful to deliberately calculate different structures.

1. Concentration model

A lead carrier receives the largest or entire considered share. This makes visible what a highly simplified award structure would cost.

2. Selective multi-carrier model

A lead carrier remains dominant, but individual lanes or transport areas are assigned to other providers. This makes it possible to check how much economic advantage results from targeted exceptions.

3. Cost-optimized award model

Shipments or lanes are distributed as cheaply as possible based on the underlying offers. ShipCheck's best-case scenario provides a calculated reference point for this.

Comparing these models shows considerably more than a general discussion about "single carrier vs. multi-carrier". It shows the cost difference between concrete award options.

Which questions a good carrier allocation analysis should answer

Before the award, a data-driven analysis should at least be able to answer the following questions.

• Which providers are strong on which lanes? ShipCheck can break tender results down by lane and mode of transport.
• How relevant are these lanes to our actual volume? Real shipment data is included in the calculation for this.
• What does a concentrated award cost? This creates a reference for the lead carrier model.
• What do alternative carrier mixes cost? ShipCheck enables different allocation models and their comparison.
• What does the calculated best-case scenario look like? This makes visible what result would theoretically be achievable under the underlying rates.
• How do forecasts change the award? Changed volumes or lanes can lead to a different carrier allocation performing economically better.

How ShipCheck calculates different carrier structures

The process can be broken down into five simplified steps.

• 1. Real shipment data forms the basis: the actual transport structure is used for the offer comparison.
• 2. Tender offers are applied to these transports: this makes visible how the individual providers perform within the concrete transport network.
• 3. Different carrier allocations are built: shipments or parts of the transport network can be assigned to different providers.
• 4. The award models are compared with each other: this makes visible the cost difference between concentrated and more distributed structures.
• 5. Forecasts and scenarios can be added: this makes it possible to check how the carrier structure develops under other future transport assumptions.

This turns the question "lead carrier or multi-carrier?" into a concrete calculation of different award models.

Conclusion: the number of carriers shouldn't be decided first

A lead carrier can be economically sensible. So can a multi-carrier structure. But the better award cannot be derived from a general rule. What matters is:

• the actual shipment data
• the offered rates
• the differences between lanes
• the possible carrier allocations
• future changes to the transport profile

ShipCheck enables different award models to be compared with each other and additionally allows a calculated best-case scenario to be created. The decision should therefore not begin with the question: "How many carriers do we want?" But rather: "What do the different carrier structures cost for our actual and expected transport profile?"