Negotiating is a huge part of any logistics professional’s job. Though this takes many forms, you probably negotiate most when tendering shipments to carriers.
Your job is to secure transportation service at a rate that makes sense for your company, customers and bottom line — freight tendering is when this balance is struck.
However, while it’s important to lock down service at a competitive rate, doing so efficiently is also a top priority. Struggling to lock in a sound price (one that will get the job done), can lead to shipping delays and failures.
With this in mind, you’re open to weighing your options, making adjustments and optimizing your tendering processes further.
Anderson Trucking Service (ATS) has been accepting freight tenders since 1955. We’ve seen this process evolve substantially over the decades (particularly in the digital age) and today, the shippers we work with tender freight in a variety of ways.
When it comes to it, there is no “best” way to tender freight; each method has pros and cons.
In this article, we’ve listed the five most prominent and effective freight-tendering methods used by companies across industries. In the right situation, each of these procedures can make sense, but, at other times, shippers may want to tender freight in another way. It all depends on your situation: budget, manpower, timelines, carrier pool, freight volumes, etc.
To help you make this discernment, here are five common ways to tender freight plus the pros and cons of each of them:
Your method for tendering freight is an important piece of your logistics as repeat tender rejections can become a serious expense. So, here’s what you need to know about these five strategies...
Over the past couple of decades, 3PLs have become increasingly utilized by companies around the world. These providers handle various aspects of each customer supply chain, with their involvement dictated by the needs of that customer.
It’s not uncommon for a 3PL to oversee everything from carrier vetting and monitoring to budgeting, paying freight bills and even creating packaging for products.
Among the list of things a 3PL can handle for your business is hosting RFQs and, in turn, tendering your freight.
Broadcast tendering is another method many shippers use to cover their transportation needs.
In a nutshell, broadcast tendering is the process of posting/offering loads at rates predetermined by the shipper (based on what they’re willing to pay) and tendering them to the first carrier that agrees to haul them at that price.
If no carriers agree to haul their freight at the rate they’ve set, shippers can field adjusted offers from their network, selecting the closest carrier to their “broadcasted” rate.
This first-come-first-serve system is centered around efficiency and can be really effective — particularly in capacity-rich markets.
Waterfall tendering systems have become increasingly common in recent history. To administer a waterfall bid, shippers offer loads to carriers and attach a target rate-per-mile to them (to set a baseline price they’re looking to pay). With this information, each carrier weighs its capabilities and submits a rate to the shipper. From here, carriers are ordered sequentially, from least expensive to most expensive (based on the rate they quoted for that shipment).
Once ordered, the first carrier is given a set time to either accept or reject that load’s tender at the rate they originally submitted. If a shipment’s tender is rejected by its first carrier, it trickles down to the second carrier listed and so on.
Shippers that use a waterfall tendering system are focused, primarily, on receiving a certain price, allowing little room for significant negotiation.
Perhaps the most popular method on this list, tendering out your loads by fielding individual spot rates is also the most effective in one-off scenarios. With this tactic, shippers secure capacity by reaching out to transportation providers via email, by phone or by hosting a bid using a portal/TMS and requesting quotes for a shipment.
After receiving relevant load details, carriers then respond with their best price and are tendered the shipment, or aren’t, at the shipper’s discretion.
Related: How Long Are Spot Freight Rates Good For?
The final tactic on this list is also worth considering. You see, many shippers decide to enter contractual agreements with their carriers. In doing so, shippers agree to provide tendering opportunities, at a pre-set rate, to a specific carrier to haul freight over a certain lane or set of lanes. These contracts have an expiration date set by the shipper and typically last 3-12 months.
Related: The Pros and Cons of Spot Vs. Contract Rates
Although it’s difficult for us to point you toward the best freight-tendering strategy for your business (without any information), now you understand the pros and cons of the most common methods our customers use.
Your job is hard enough without having to worry about whether you’re leaving time and money on the table each time your tender a shipment. So, make sure to take these insights into account going forward. If you’re a high-volume shipper with tight deadlines, consider broadcast tendering, if you’re heading into a peak season, give contract rates or the waterfall system a try.
Regardless of how your company chooses to handle this process in the future, it’s important that your carrier network is dependable. Without a great group of providers, it doesn’t matter how effective your tendering strategy is if they can’t follow through.
As such, your next step is to check out this article covering transportation provider key performance indicators and how to assess the performance of your carriers.
You deserve to work with carriers you can rely on — fill your network with great companies using those KPIs.
Finally, if you’d like to learn more about ATS’ transportation services and the steps we take to help companies like yours deliver on their customer commitments, check out our services page here. We are proud to consistently rank among the best transportation companies in the U.S. and would love to show you what a great transportation partnership looks like.