Examining Carrier selection with situational choice models

Carrier selection is one of the most important decisions in logistics and supply chain management. Academic researchers have suggested that carrier selection is best explained by choice modeling research methods. This research study puts forth a new approach to choice modeling that is better aligned with how shippers actually select carriers. The results suggest that the shipping situation has a significant impact on customer preferences and carrier selection and thus should be included into choice models and the resulting market simulations. Simulating marketplace reactions to different proposed offerings is helpful for practitioners. Demonstrated in this article, market simulations using data from this choice model estimate what percentage of the customer base will opt for a faster transit time at a large price premium and what percentage of their customer base will opt for a slower transit time for a small price discount. As a result, the carrier can prepare their network to handle the changes in demand for different transit times, along with optimizing financial performance.