It’s another Monday and the SONAR team is ready for another “SONAR Indexes & Insights”. Each Monday, you’ll learn about another index found within the freight forecasting platform from FreightWaves, SONAR. This week we’ll focus on tender rejections by defining “What is the Outbound Tender Reject Index (OTRI)” and by concluding what historic freight tender rejections in correlation with historic freight volumes mean for shippers, carriers, brokers, and other freight market participants.
In summary, Tender Reject Indices are measurements of carriers’ willingness to accept the loads that are tendered to them by shippers under contract terms. It is expressed as a percentage of loads rejected to total loads tendered. TRI is organized in terms of outbound, inbound, trailer type and length of haul. i.e. a carrier rejecting 2 of the 4 loads tendered would have a 50% TRI. See below for further descriptions of TRI by type.
Anyone that has an interest in freight movement patterns. i.e. Shippers, freight brokers, fleet managers, executives in a transportation company, owner operators.
The TRI is an indicator of carrier activity. The higher the TRI percentage the less carrier availability to move the freight at the contracted rate in the market. The reasons for a carrier to reject the load tender are 1) lack of capacity and 2) too low of a rate. Fast movements up or down in a market indicate potential spot market activity as well as freight volume surges and network imbalances.
The Tender Reject Index show tender rejections by origin and destination, outbound and inbound directions:
OTRI – Outbound tender rejection index
ITRI – Inbound tender rejection index
The outbound tender reject index are tender rejection percentages organized by the origin market.
Inbound TRI are tender rejection percentages organized by the destination market.
In SONAR these are geographical markets labelled by the larger cities. i.e. the Atlanta (ATL) market covers central and northern Georgia. The OTRI.ATL would be the percentage of loads rejected versus the total loads tendered originating in the Atlanta market. The ITRI.ATL would be the percentage of loads rejected that deliver in the Atlanta market.
Outbound tender rejections will tell you about carrier behavior in the origin market. The point of origin in trucking is the easiest to relate to as it is telling of the capacity in that market. The reasons carriers are more apt to reject loads from an origin perspective are when 1) capacity is low and 2) they can get a better rate moving other freight in the area.
Users of SONAR can view the Outbound Tender Reject Index by trailer type as well in the following types:
and the index will provide percentages in the following time frames:
Those freight indices will begin with OTRI with the addition of the trailer type and time frame, with indices that have the following symbols:
Trailer type rejection rates will tell you about the types of freight that require specialized trailer usage. Freight that requires temperature controlled trailers like produce and alcohol will have an impact on the RTRI. For instance, when the produce harvests occur RTRI percentages will increase. A change in reefer trailer capacity can also help explain why capacity in general has changed, as those reefer trailers are not available for other types of freight. Dry van freight movement patterns will have an impact on the VTRI. Van freight is the largest trailer type represented as most freight can be carried in a van. Flatbed or open sided trailer activity will be represented by the FTRI.
Length of haul tender rejection rates allow you to see the load rejections by total distance traveled on the load. The mileage bands are listed below:
CTRI – City (local) loads that have a <100 mile length of haul, (CTRI is now a legacy index)
STRI – Short haul. Loads that have a 100-250 mile length of haul (STRI is now a legacy index)
MTRI – Mid length of haul. Loads that have a 250-450 mile length of haul (MTRI is now a legacy index)
TTRI – Tweener length of haul. Loads that are 450-800 mile length of haul (TTRI is now a legacy index)
LTRI – Longhaul length of haul. Loads that are 800+ mile length of haul (LTRI is now a legacy index)
LOTRI and TOTRI are also offered in market granularity where volume allows. Example LOTRI.LAX = longhaul tender rejection index for the outbound Los Angeles market
Length of haul tells you what carriers are more willing to accept in each mileage break. They are more indicative of the general market itself as it will describe what kind of hauls are available and desirable. If carriers are rejecting generally desirable regional freight with more frequency it is a sign that market capacity is tightening. It can also indicate the volume of freight available in each range is changing.
The TRI Deltas are 3 indices that measure the difference between the outbound tender rejection index for today and 1 week (OTRIW), 2 weeks (OTRIF), and monthly (OTRIM). i.e. the OTRIW.ATL = 1.5% today with the OTRI.ATL = 30.5% today. That means 1 week ago the OTRI.ATL = 29%. These variations of the TRIs are also available for the equipment type TRIs. i.e. National Reefer TRI weekly change = RTRIW.USA.
TRI lanes are tender rejection rates organized by an origin and destination lane pair. Lanes with enough volume will have a TRI lane. The ticker format is OTRI.3 digit origin market 3 digit destination market. Lanes are also offered in tri-delta format, showing weekly, bi-weekly, and monthly changes.
Example of a lane: If a user wanted to see the Los Angeles to Dallas tender rejection index, they would type OTRI.LAXDAL
Example of lane TRI-delta: If a user wanted to see the weekly change for the Los Angeles to Dallas TRI, they would type OTRIW.LAXDAL.
The Outbound Tender Volume Index (OTVI) climbed another 7.4% this week to a new all-time high of 15,329. OTVI has posted a string of consecutive all-time highs for many weeks now. It is important to note that our outbound tender volume index does include rejected contract load tenders, so the true organic growth of load volumes is slightly lower than the indexed reading. However, this does not mean the index is not directionally accurate or not indicative of the overall strength in the freight market. Freight volumes as measured by OTVI (including tender rejects) are now 45% above 2019 and 55% above 2018.
After a slight lull early last week, tender rejections began to climb and the trend has continued this week as well. The Outbound Tender Reject Index (OTRI) climbed again this week and currently sits at just under 24%, meaning nearly one in every four tendered loads is being rejected at contracted prices.
The index continued exhibiting stickiness at a high level for a seventh week in a row. OTRI is now well above its Fourth of July peak and sits comfortably above its March panic-buying-induced peak. The next milestone for the index would be crossing over the 2018 summer peak level of roughly 26%. We have heard for weeks now that large, asset-based carriers are rejecting more freight than they have in a very long time.
The supply-demand dynamic of May, June and July has been much different than March and April. During March we saw volumes and rejections rise in stepwise fashion to all-time highs in a matter of weeks. This time around the rise in freight volumes and tender rejections has been slower but consistently upward and gradual.
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