INSTRUCTIONS AND NOTES FOR RESPONDENTS

CONTEXT

The freight procurement spot market, often referred to simply as the "spot market," is a sector of the freight industry where transportation services are bought and sold for immediate needs rather than through pre$-$arranged contracts. This market operates on an as$-$needed basis, where shippers $($those needing to move goods$)$ connect with carriers $($those providing transportation services$)$ to fulfill immediate or short$-$term shipping requirements. Here's a detailed explanation of its key characteristics and how it functions:

Key Characteristics

Immediate or Short$-$Term Needs: The spot market caters to immediate or unforeseen transportation needs. For example, a company might require urgent delivery of additional inventory due to a sudden increase in demand or need to replace a carrier that fell through at the last minute.

Fluctuating Prices: Prices in the spot market can vary significantly based on supply and demand dynamics. When carrier capacity is scarce, and demand is high, prices tend to increase. Conversely, when there is excess capacity, prices may fall. This makes the spot market prices more volatile compared to contract rates, which are negotiated in advance and generally fixed for the contract's duration.

Transactional Nature: Transactions in the spot market are typically one$-$off deals. A shipper and carrier might agree on a price for a single shipment without any ongoing commitment for future business. This transactional approach provides flexibility but can also introduce variability in costs and service quality.

Over a two$-$day period, there are $10$ loads $($a$.$k$.$a$.$ shipments$)$ to be delivered by trucks: $5$ loads for delivery on Day $1($blue lines$)$ and $5$ loads for delivery on Day $2($orange lines$).$ You are one of the truckers located in southern Ontario $($in the circled region$).$ Like the other truckers, your truck can handle no more than one load each day, and you are seeking to maximize your profit over the two$-$day period. You are an independent trucker who bids on and transports goods depicted in Figure $1.$

You are in charge to procure a freight service for your single available truck. Your work involves bidding $,$specifying the revenue you wish to receive on any delivery option of your interest during Day $1$ and Day $2.$ Because other truckers might bid a lower price, there is no guarantee that the shipper$($s$)$ will say yes to you for your most desired option $($or for any option you bid on$).$

Figure $1.$ The map of shipments and the region of truckers.

A SHORT PRACTICE ABOUT YOUR UNDERSTANDING OF THE INSTRUCTIONS

You operate with some degree of uncertainty because you don't know exactly what other truckers will actually bid $($they don't know yours either$).$

The first column are the routes from the origins to the destinations on Day $1.$

The Column $2($Transportation cost$)$: Your transportation cost $($e$.$g$.,$ fuel cost$)$ to deliver when you start driving from your initial location on Day $1.$

The Column $3$ is Average Historical winning price$($AHWP$).$

The fourth column is an estimation of your profit if you bid the exact amount AHWP and win the shipment. Therefore, your profit will be AHWP minus your delivery cost.

Table $1.$ Some decision supports on Day $1$

For the second day, the situation is more complex. Since your truck may travel to a new location on Day $1,$ your possible cost$/$profit will depend on your location at the end of Day $1.$ Therefore, we have different profit$/$cost options for each load. Table $2$ is your analytics for Day $2.$ The first column will represent the routes. The next columns are AHWP and other columns represent the conditional profits $($D$2$PSF$).$

D$2$PSF means "Day $2$ Profit Starting From" : It is the estimated profit on the second day conditioning your location at the end of Day $1.$ Still D$2$PSF formula is AHWP minus your cost $($depending on your city that most probably you will win on Day $1).$

For example, your truck has won load $($Ottawa$->$Montreal$)$ on Day $1$ and load $($New York $->$ Montreal$)$ on day $2.$ If you bid $$1100$ for Ottawa $->$ Montreal, your profit for Day $1$ will $($$$1100-$ $$850=$ $$250).$ For Day $2,$ if your winning bid is $$2250($$$250$ lower than AHWP$),$ your profit will be $"$D$2$PSF Montreal"$-$$$250=$ $$750.$

Hint: Although there is a negative D$2$PSF in the table, you can still make profit by increasing your bid amount.

Table $2.$ Some decision supports on Day $2$

Now, test your knowledge by answering True or False to the following questions. Please select the True or False by scrolling below to the left.

$6.$ Based on the given table, if you win at the exact amount of historical bidding prices, what would be your ideal choice to gain maximum overall profit for Day $1$ and Day $2.$ For instance, a high profitable load on Day $1$ might lead you to a location far from Day $2$ loads. So$,$ you may encounter loss or a modest profit.

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