The impact of lumper costs, empty miles, and shipment size on the profitability of motor carriers: A case study

Abstract

The passage of landmark deregulatory reforms in the Motor Carrier of Act of 1980 has constantly pressured the U.S. trucking industry to reduce transportation costs. Thanks to such pressure, total logistics costs have declined from 16.5% in 1980 to 10.1% of gross domestic product (GDP) in 2000. In particular, transportation costs have fallen from 7.6% to 5.9% of GDP in 2000. Transportation cost savings definitely benefit shippers, while jeopardizing the viability of carriers. To help transportation carriers cope with enormous cost pressure, this paper examines the impact that “lumper” costs, empty miles, and shipment size have on the very competitive trucking industry. Through an actual case study of a firm based in the Southeast U.S., we illustrate how lumper costs, empty front-haul and backhaul, and shipping weight and pieces can adversely affect the trucking firm’s profitability.