Transit Time Variance
Transit time variance is the statistical spread between the fastest and slowest actual delivery times for a given origin-destination pair. While carriers publish service standards, real-world performance varies based on handling events, weather, volume, and network conditions.
Definition
Transit Time Variance measures the consistency (or inconsistency) of freight delivery times. If a lane has a 3-day service standard but actual deliveries range from 2 to 6 days, the variance is 4 days. High variance indicates an unreliable lane; low variance indicates consistent performance.
Why Transit Time Variance Matters
Variance determines how much buffer inventory and lead time businesses need:
- Inventory planning: High-variance lanes require more safety stock to prevent stockouts
- Production scheduling: Manufacturers relying on just-in-time delivery need low-variance inbound freight
- Customer commitments: Retailers making delivery promises to consumers must account for variance in their fulfillment planning
- Cost implications: Expediting late shipments (air freight, premium LTL) is expensive; accurate variance understanding reduces emergency spend
What Drives Transit Time Variance
Handling Touches
Each freight touch adds variability. LTL shipments with 6+ touches have inherently higher variance than direct truckload with 2 touches.
Terminal Congestion
Terminals in high-volume markets like Chicago and Dallas can add 24+ hours during peak periods when throughput exceeds capacity.
Weather Events
Winter weather, hurricanes, and mountain pass closures create significant variance spikes during affected periods.
Seasonal Volume
Q4 peak season increases variance across all modes as networks operate near capacity and spillover between modes occurs.
Network Design
Lanes that route through major hubs tend to have more variance due to the additional sorting and consolidation steps. Direct linehaul routes typically show lower variance.
How to Account for Variance
Rather than treating service standards as guarantees, experienced logistics professionals plan around variance:
- Use the 90th percentile: Plan for the time by which 90% of shipments arrive, not the average or the published standard
- Track actuals by lane: Historical data reveals which specific lanes have high variance, enabling targeted buffer strategies
- Adjust for seasonality: Build additional buffer during known high-variance periods (winter, peak season)
- Consider mode alternatives: For critical shipments, truckload or air may offer lower variance despite higher cost
Common Misconceptions
- "Service standards are guarantees." Published transit times are estimates based on optimal conditions. Service standards are not commitments, and carriers typically exclude weather and other disruptions from performance metrics.
- "Paying more means less variance." Premium services often have priority handling, but they still traverse the same physical network. Variance reduction comes from mode selection (FTL vs. LTL) and lane choice, not just price.
- "Variance is constant across all lanes." Variance differs dramatically by origin-destination pair. A lane from Los Angeles to Dallas may have different variance characteristics than Dallas to Atlanta.