Smart Tender Automation: Making It WorkPosted December 20, 2017 by
This is the last of three blog articles on Tender Automation.
The first article answered the question: what does smart tendering look like? In brief, smart tendering means tendering that anticipates carrier behaviour, that is aware of going market rates, and tries to optimise the cost-to-serve of all transport jobs holistically instead of just the next in the list.
The second article looked at the sorry state of Tender Automation: how it aspires to nothing more than clerical automation. That piece concluded with the view that the world’s best TMSs are providing dumb tendering.
Today’s article look at how TNX enacts Smart Tender Automation. Together, these three articles explain what’s available today, how TNX thinks it should be better, and our concrete progress towards it.
Putting the Smart Tender Automation concept into practice leads to two decisions that the system answers automatically:
- Given everything we know about the trucking market’s supply & demand, the specifics of all our transport jobs, and carrier’s past behaviour: which carrier should initially be offered each job and at what price?
- Given a rejection or non-response to a tender made to a carrier: which carrier should now be offered each job and at what price?
The first is about the initial offer; the second is how to incorporate new information during the tendering process. In both cases, the objective is to achieve the lowest cost while meeting service expectations, i.e. optimal cost-to-serve for all jobs combined.
This approach differs substantially from the status quo approach because it incorporates new information (carrier behaviour and spot rates), and considers a larger objective (all transport spend instead of one job at a time).
TNX & Tender Automation
The TNX Smart Tender Automation process encompasses spot and contracted rate pricing and acts with a high level of automation and intelligence.
Here is a simplification of the steps behind the scenes:
- For each job, the contracted rates are compared to the spot market rate for a similar shipment. Carriers with contract rates below market levels are given tenders at that rate, which can be accepted immediately. Bids are also accepted up to the (undisclosed) spot market level.
- If enough carriers reject or ignore their tenders, or if past carrier behaviour predicts a high risk of non-acceptance, TNX automatically creates further waves of tenders moving up to all contracted carrier rates plus a spot offer at the going market level.
- If enough carriers reject or ignore their tenders, all carriers are made a spot offer at the highest-carrier contracted rate.
- Anytime tenders are presented to a carrier, TNX optimises their presentation and bundles them to form bigger and multi-stop trips to boost attractiveness according to our understanding of the carrier’s preferences.
The above four-step process is a simplification, of course, but it still paints the picture. Is this better than the leading TMS approach? Absolutely.
First, it blends spot and contract rate dispatching. Second, it incorporates market-based pricing. Third, like a newsfeed, it tries to present tenders by relevance and therefore is better at getting responses. Finally, there is no laborious configuration of rules nor maintaining of them as business needs change. TNX works out of the box.