Cost allocation pricing (cap) in the motor carrier industry

Author

Gregory Michael Kellar

Date of Award

8-1996

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Business Administration

Major Professor

Ray A. Mundy

Committee Members

E. P. Patton, Hamparsum Bozdogan, James Reeve

Abstract

Profitable price negotiation in the irregular route truckload motor carrier industry is difficult due to the complexity of the interrelationships among the many distinct geographic market segments and because of the several components or dimensions of price that must be properly harmonized. Concurrently, economic forces and competitive pressures are driv- ing down profits, forcing management to become more concerned about understanding the multiple influencers of price. Further complicating the problem of profitable price negotiation is the dynamic nature of the industry. Decisions must be made quickly. There is little time for analyses. This forces decisions to be made with inadequate preparation. Decisions that often are determined, after the fact, to have been unprofitable and undesirable.

This research provides a solution to the problem of making dynamic pricing decisions with inadequate analyses or preparation in the irregular route truckload motor carrier industry. A dynamic pricing system is developed and operationalized through the creation of a software prototype. It suggests prices based upon market segment specific historical data, variable and fixed costs, competitive pressures, non-revenue activity, capital costs, tax costs, variation in historical data, and corporate objectives. It further provides information regarding the profitability of linked market segments so that profitable pricing can be balanced when necessary.

All analyses are done in real time using real-time data. The software typically takes less than five seconds to provide management with the information mentioned above.

The value of the dynamic pricing decision support tool to industry was measured by placing the software prototype on-site with industry partners. The tool was found to enhance the decision making process. It also changed management's perception of the profitability of selected, existing market segments currently being served.

Recommended Citation

Kellar, Gregory Michael, "Cost allocation pricing (cap) in the motor carrier industry. " PhD diss., University of Tennessee, 1996.
https://trace.tennessee.edu/utk_graddiss/9774