The encyclopedia · Strategy & Leadership · Strategic decision · 1993–2002
Sears Logistics saved 13% by auctioning trucking as bundles, not lanes
Sears Logistics Services ran the first combined-value auction for trucking — carriers bid on packages of lanes — and saved 13% versus past procurement.
Sears Logistics Services (SLS)
the move
Procuring trucking lane by lane forces carriers to price each route as if it stood alone, even though their real costs — empty backhauls, driver networks, depot coverage — depend on the whole package they win.
Sears Logistics Services ran the first combined-value auction for transportation: carriers could submit one bid for a collection of lanes, letting them price synergies across the bundle. The design was developed and tested using experimental economics before it went live.
In 1993 the auction saved SLS 13 percent over its past procurement practices. The Interfaces paper reports the experiment, the sale of the concept to management, and the first implementation.
why it works
- Bundle bidding revealed synergies single-lane pricing could not express.
- Experimental economics tested the design before real money was at stake.
- 13% savings came from letting carriers tell the buyer what fits them.
- The paper documents the first implementation, not just the theory.
what transfers
When a carrier's cost depends on the set of lanes it wins, auction the set: bundle bidding reveals synergies single-lane auctions hide, and experimental testing made it sellable.
what came after
The CVA saved SLS 13 percent in its first year and became a documented proof that package bidding works in procurement; the Interfaces paper by the designers is the standard citation for the first combined-value auction in transportation.
references
- The First Use of a Combined-Value Auction for Transportation Services
- The First Use of a Combined-Value Auction for Transportation Services
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