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Tender Acceptance: 4 Ways to Keep Backup Carriers Ready and Willing

Estimated reading time: 3 minutes

The laws of supply and demand are always at play when tendering freight, but a confluence of issues have made truckload capacity harder to come by as of late. This puts carriers in the driver’s seat, empowering them to choose shippers deliberately during tendering, making the process costlier and less certain for shippers who budget according to contract bids. For that reason, it’s essential to select backup carriers alongside your primary carriers during the RFP bidding process, and take steps to keep them invested in you.

Seeing Down the Road

Consider the procurement process. Typically, shippers distribute an RFP, or Request for Proposal, which includes essential details about the shipping program, lanes, volume, etc. Interested carriers respond with a bid for each lane, and the shipper follows up by selecting the most attractive bids based on cost, on-time performance, incumbency, etc. Once accepted, the carrier must honor the bid price and volume commitments for the contract term. The carriers are then ranked in order of preference, and this final, ranked list becomes the routing guide shippers use to tender loads to carriers as needed (MIT).[1]   

In the current climate, “putting all your eggs in one basket,” so to speak, is dangerous because carriers follow a selection process of their own during load tendering. Given limited capacity, carriers can and do reject loads in favor of easier or more lucrative tenders from other shippers. When that happens, your rejected load is then offered to the next carrier on your routing guide, who may also reject the load, moving it down the list until a carrier accepts it at their less attractive rates. According to a 2013 study, it took 1.4 tenders on average to get a load covered, and more for distances greater than 100 miles. Each rejection added 15 percent to the cost, and that jumped to 25 percent when the load was rejected more than three times (3Gtms). 

Worse, when no carrier on your routing guide accepts the load, you must find takers on the spot market, negotiating costs and terms according to current conditions, and with much higher rates.

Keeping the Backburner Warm

Let’s say you carefully select backup carriers along with your primary carriers and include them in your routing guide. That’s a smart move, but these carriers may also reject loads due to reallocation of available capacity to other awards. For that reason, carrier selection strategies must extend beyond procurement.  You can’t control supply and demand, but you can take steps to keep non-primary carriers motivated:

  1. Tender More Freight to Them. Gambling with loads is risky. The further the rejected load moves down your routing guide list, the less likely it is that a carrier will pick it up and the more expensive it will be. In fact, one source determined that each rejection costs shippers another 6 cents per mile. Secondary carriers will be more likely to accept your load if you engage them with a reasonable amount of freight on a regular basis, even when their terms are less favorable to you (Enterprise Minnesota).
  1. Allow More Lead Time. The longer the lead time, the greater the chance that a carrier will accept your load because their capacity is more likely to be open. In fact, increasing lead time from two days to three can improve acceptance rates, and lower costs by more than $15 per load (Enterprise Minnesota).  
  1. Set Clear Expectations from the Get-Go. During the RFP phase, make sure to clearly articulate the amount of freight the backup carrier is expected to receive to show that they are not just another carrier in your waterfall.
  1. Give Them Opportunities to Move into the Primary Position. If you repeatedly experience service failures with your primary carriers, consider giving your reliable backup carriers opportunities to take on more business in the next bid cycle. Let them know ahead of time about this possibility so that they’re incentivized to accommodate your needs and gain your trust.

Making Sure You’re Covered

When your primary carriers fail to accept your loads, will your backup carriers be there for you? Taking an honest look at your procurement strategy and considering the backup carrier’s perspective will reveal insights you can use to be sure they’ll have your back.

 


[1] Based on an MIT study: Abramson, M. and Sawant, A. (2012). Impact of Risk Sharing on Competitive Bidding in Truckload Transportation (master’s thesis).