If your freight gets rejected by carriers, this probably means extra work and additional costs because you have to make alterations and go deeper into your route guide to get your freight shipped. Does this sound at all familiar? It probably does, since the average tender rejection rate is around 20%.
To understand a question that plagues many shippers, “why was my tender rejected?” C.H. Robinson challenged Massachusetts Institute of Technology’s Center for Transportation and Logistics (MIT-CTL) student, Yoo Joon Kim, to determine just how influential distance and volatility are on carrier rejection rates on high volume lanes.
We hoped to answer: To what degree do distance and volatility of tenders affect carriers accept/reject decisions? The hypothesis was that distance and volatility are both meaningful influencers.
How Distance and Volatility Impacts Truckload Rejection Rates
In the course of his research, Kim found that neither distance nor variability was a strong determinate for rejection, any correlation was of relatively minor consequence. When it came to shorter and less consistent shipments (irregular patterns of load volume), rejection rates did increase slightly, and longer lanes (over 100 miles), even with consistent volumes, had higher tender rejection rates. However, any correlation was minimal. Neither distance, nor volatility sufficiently explained the tender rejection rates for any given lane.
What does this mean? Simply put, other factors aside from distance and volatility play a greater role in influencing carrier rejection.
Key Influences on Truckload Rejection Rates
Many aspects of supply chains, business processes, and policies can influence the attractiveness of truckload shipments. Namely, the following three:
A Limited Set of Carriers
As the expression goes, “putting all of your eggs in one basket” can be risky. Carriers have limited capacity, so sometime they will reject challenging loads in favor of easier, quicker, or more lucrative tenders from other shippers.
If you only work with a limited set of carriers, there’s a better chance that none of them will want to deliver your shipment, especially if warrants a difficult delivery process. On the other hand, having a diverse portfolio of carriers you work with can increase the chances that one will accept the shipment. Form and maintain good relationships with your carriers to boost their willingness to work with you.
Short Lead Times
It’s proven that lead-time of shipment tenders shows a direct correlation of short lead-time and higher rejections. This is because carriers like to pre-book their next load and even another one or two after that where possible so they can guarantee business. If you put your shipment into the market with a short lead-time, it does not allow carriers to do this, and they may reject your shipment for a guaranteed one in the future. If you can, having multiple-day lead times can significantly improve the chances your shipment will be accepted at the price you are seeking.
Requests for proposal (RFPs) detail the shipment program, lanes, volume, and more. The goal is to tell carriers exactly what to expect when they accept freight for delivery. If your RFPs are unclear, carriers will not have a good picture of what is required of them to move your shipment, so they may reject it. By clearly stating every necessary detail in your RFP, you increase the chances of your shipment being accepted.
While the above factors certainly impact truckload acceptance/rejection rates, most of what influences rates are general, overarching factors that affect all areas of the industry, such as market fluctuations, driver availability, seasonality, governmental actions, weather, and social factors.
Kim’s research also found that, when a truckload shipment is rejected, the price increases by an average of 14.8%. This is because shippers must turn their rejected freight over to the spot market, which tends to be costlier. Thus, lowering your rejection rates is integral to keeping your costs down.
While the strategies above are just a few ways to lower truckload rejection rates, you should also consider utilizing a 3PL to help optimize your unique processes and increase your truckload acceptance.
Learn more about improving your truckload shipping operations – keep costs low and efficiency high.