There are many ways to check the pulse of a transportation network. One of these vital signs is depth of tender, which, with the right analytics, can reveal much about the wellbeing of your network.
Some leading transportation management systems (TMS) support the routing guide on several levels. Take, for example a situation where for some reason your primary providers are unable to accept a load. A TMS-based spot bid tool will send out a notification to a preset carrier base that the business is available, and that you are requesting rates for the load. Another example is the need to locate capacity for a short-lead shipment. The usual approach to finding a provider by cascading the tender through the carriers in your routing guide is often too limiting in these situations. The TMS helps you to secure capacity quickly by alerting all carriers that an urgent shipment is up for grabs.
Advanced TMS suites can also report the average number of tenders needed to find carriers for your freight – an extremely valuable routing guide metric. An average of, say, 1.8 shows that for every 10 loads it took 18 tenders to achieve carrier acceptance. The ratio between loads and tenders can tell you much about how well your network is performing.
A ratio that increases steadily over a protracted period indicates that you are going deeper into the route guide to find service providers. This might be a function of a tightening market where capacity is in short supply.
Another possibility is that your network is drifting out of alignment. A telltale sign of misalignment is when the tender average is significantly above that of your historical norms. It’s also useful to compare the changes to the performance of other shippers. While all shippers don’t share the same tender depth, such a comparison helps to determine whether you are trending the same way as the wider marketplace.
A cautionary note: not every TMS is capable of making this critical comparison, because it requires vast amounts of data on depths of tender across the market.
The graphs below contrast the performance of a shipper with other players. Figure 1 represents the depth of tender by month for one TMC shipper. Figure 2 represents the depth of tender for one TMC shipper divided by the average depth of tender for all TMC shippers.
As can be seen in Figure 1, the depth of tender for this company started moving up in April 2010 above their historic norms. Although the metric showed improvement in 2011, it was still significantly above the shipper’s historic rate. However, looking solely at depth of tender doesn’t tell the whole story. Comparing the company’s average tender depth to the average for all TMC customers reveals new insights. In Figure 2, it becomes evident that the increase in depth of tender in the first part of 2010 reflects a tightening market rather that a routing guide problem. In addition, this shipper made changes to their routing guide in January, and quickly brought the depth of tender back into the normal range when compared to other TMC shippers.
Freight managers who observe a divergence of this magnitude should ask some searching questions. How long is it since the last procurement exercise? The more time that elapses since the last round of bids the more likely it is that the network is out of synch. Maybe it is time to institute regular procurement events (see Truckload Procurement Exercises, March 10, 2010). Have service providers’ business models changed? If so, they may no longer be active in certain key lanes and there is a need to explore other options. Has your network changed? Again, if this has happened then a review of current freight operations is overdue.
Keep in mind that as mentioned above, depth of tender varies according to the lane and shipper involved. Lanes where shipment volumes are low or demand is volatile or seasonal, generally exhibit a high tender depth. On the lower end of the scale are lanes where volumes are consistently high. By extension the type of business influences this metric. Shippers with seasonal freight and lumpy demand typically have high tender depths, while those with relatively stable, inbound freight flows are associated with low numbers.
Knowing where you are positioned on the curve, and, even more importantly, why and when mismatches occur, helps you to maintain the health of your network and capture savings. For instance, if the depth of tender on high-volume/inconsistent lanes is too low, chances are that you are wasting money using carriers with rates that are too high because their charges reflect an excessive amount of deadhead miles.
Are you making full use of the tender depth metric?