Part 1: Reaching the Best Carriers
The days when freight managers relied solely on spreadsheets to tender their loads are long gone. In the age of transportation management system (TMS) technology and deep-dive analytics, load tendering has become much more scientific.
These changes have taken place in response to market demands. Increasingly complex supply chains require more sophisticated approaches to selecting service providers. And the approaches have become embedded in the high-level TMS solutions that companies have adopted.
The challenge now is not how to manually pick the cheapest carrier from a list of candidates, but how to select the best mix of automated tendering options that delivers on your cost and service goals.
To help shippers make the right choice, this two-part series of posts presents five TMS-based methods for tendering loads. In this post we describe three options that focus on making the best use of your carrier base.
1. Selection by Percentage
In this option the TMS is set to allocate a certain percentage of the loads on specific lanes over a predetermined time period to selected service providers. Carrier A might be allotted 50% of the business, Carrier B gets 25%, and Carriers C & D are earmarked for 15% and 10% respectively.
Spreading the loads in this way ensures that a number of carriers – and not just your most favored operators – win some business. This avoids a situation where top-ranked providers attract most of the cargo leaving lower-tier players with few or no loads. Underused carriers may not be available when you need them. Seasonal shippers, for example, often need a broad spread of carriers to cover demand peaks.
Another advantage of this option is that by allocating freight to multiple providers, you are not over-committing to a single carrier. If that provider’s network changes or their performance drops below acceptable levels, you still have others in the route guide that have historically serviced that lane or group of lanes.
2. Recursive Tendering
This method is basically a refinement of the selection by percentage feature. It gives top-choice providers a chance when they have been skipped in the first round of the tender.
As described above, the TMS progresses through your route guide allocating a certain percentage of the loads by lane to top carriers. If some of the providers decline the business, then the system will continue scanning and award cargo to lower-tier providers.
The recursive feature tells the system to return to the top of the route guide and canvas high-ranked carriers again before giving the business to bottom-tier providers.
Revisiting the upper reaches of the route guide in this way increases your chances of meeting the original targets for allocating loads. This capability also makes it more likely that cargo will be moved by preferred carriers.
Recursive tendering is particularly useful during demand peaks when freight networks and the availability of capacity are changing fast. The feature can be turned on and off as needed.
3. Deferred Acceptance
Have you ever wished you could go back in time and correct a mistake? The Deferred Acceptance method waves that magic wand for high-ranked carriers during the tendering process.
In this case, the error is declining business when it is first tendered even though the carrier occupies a top spot in the route guide. Perhaps they rejected the cargo by mistake, or were unable to respond before the preset acceptance window closed. Maybe capacity was unavailable during the first pass, and in the meantime trucks have become available and the carrier is now in a position to take the loads.
With the Deferred Acceptance option in place, once the first pass is complete the system displays all the allocated loads. Top carriers then have the opportunity to raise their hands, own up to an erroneous rejection, and make a late bid for a portion of the business that they originally declined.
Again, this is a feature that maximizes your chances of using top-choice carriers. Also, shippers that require relatively quick responses during bids appreciate Deferred Acceptance because it re-canvases players that failed to meet the initial deadline and slipped through the net.
These options improve the tendering process by ensuring that as much volume as possible goes to providers that rank highly in the route guide. Next week we’ll look at two options that look beyond the route guide to find the best transportation choices for your freight network.