Analyst Insight: Most TMS systems share many of the same features, making it hard for companies to decide which is best for their business. The tendering algorithm can set a TMS apart. Most tenders will close to carriers after a certain amount of time. Some algorithms today, however, keep the bid open, giving carriers the opportunity to accept the load.
Tenders are offered to carriers for a certain amount of time, during which, carriers can accept or reject it. A TMS closes the bid to carriers that rejected it, sending additional tenders out until a carrier accepts the load. There are numerous tendering methods and strategies that a TMS uses to meet a shipper’s requirements, including:
- Least-cost: Offer each load to the carrier(s) with the lowest rate on the lane first and expand the offer to additional carriers on a configurable timeline.
- Auto-award: Assign shipments to specific carriers or your fleet.
- Allocations: Award volume on a contractually-committed percentage (e.g., 60% to Carrier A and 40% to Carrier B) or by the number of loads (e.g., 10 loads per day to Carrier A, five loads to Carrier B).
- Service-based: Award loads based on carrier service KPIs calculated through TMS carrier scorecards.
- Customer-based: Award loads based on customer preference for carriers (e.g., all loads to Customer X must use Carrier C).
- Spot bids: Allow carriers who do not have a rate on the lane to provide a bid to take the load.
- Spot networks: Post loads to freight-matching load boards like DAT.
But if the TMS has an ever-expanding tendering algorithm that keeps the bid open past the time limit, it will still allow carriers to accept the load and help shippers find the best carrier for their load. An ever-expanding tendering algorithm gives load visibility to an ever-expanding set of carriers in a structured, defined order, to optimize coverage and cost. Continuous expansion of visibility to carriers means lower-cost carriers can still accept a load, even when a higher-cost carrier has visibility to it. It also allows more carriers to see your freight in markets when loads are difficult to cover.
Carriers initially exposed to the load don’t lose the opportunity to bid, even when they are past the time limit to respond. This method offers substantial savings compared to other transportation management systems that remove the load from each carrier after their time to review has expired. With an ever-expanding tender, the average cost of carriers that took a load was $110 lower than the highest-cost carrier that could currently see that load.
More modern TMSs exchange APIs with carriers, allowing them to access the TMS directly in order to respond to a bid. Digitizing this process means you don’t have to have people manually entering information into a system, or on the phones all day trying to find carriers to accept or reject loads. Plus, with the digitized process, KPIs can be developed, such as how efficiently contracted carriers respond to loads. This can help when renegotiating rates with contracted carriers, as you can see whether the carrier only responded to half of your tenders.
Outlook: As capacity tightens with the continued rise in demand, digitizing tendering processes within transportation management systems will grow in popularity among shippers extending their reach for additional carriers to respond to their freight needs. With many freight brokers and carriers going out of business, the more carriers that see the bid, the better for shippers to find the right carrier that meets customer service requirements.
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- Source: https://www.supplychainbrain.com/articles/38747-how-automated-tendering-improves-transportation-management
