Routing Guides Are Going Digital

Routing guides are always going to fail. The basic reason is that forecast is linear, but demand fluctuates, so they are not always in perfect alignment — especially when taking lead time into account. The end result is tender rejection, a failed routing guide and a need to source capacity in the spot market. 

Let’s take a moment to contemplate a routing guide that never fails. Let’s talk about one that incorporates a version of the spot market into being a digital part of it rather than an alternative source. MercuryGate is strategically partnered with Surge Transportation to offer this integration free to shippers and with easy implementation.

Rejection Rates Drive Change in Shippers’ Routing Guides Approach

During the past few years, we’ve seen a range of record tender rejection rates — on the high end almost 50% at times last year. Current rejection rates are close to 5%. The expectation is that this large fluctuation in what you can expect from your carrier base is not going to change anytime soon.

As a result, there is a fundamental strategic shift in the way shippers are embracing technology to source capacity. Shippers are aligning with reliable, digital real-time API providers. The API providers – through application programming interface (API) — give them a fair market price, so shippers can send their freight directly to their real-time bucket while scrapping the routing guide altogether.

What is interesting to watch is that the real-time bucket is getting bigger and the routing guide is getting smaller. It is eroding. Shippers are carefully curating a community that welcomes only their best carriers and brokers to participate in an API environment – this is where strategic partners play. 

Reasons for Routing Guide Erosion

There are many ways the routing guide is eroding from all sides.
Some shippers are designating certain types of their freight to tender only to a real-time environment — take a little off the left. Some are getting rid of published backup rates and relying only on real time — trim a little off the right. Some are not publishing as many carriers per lane — not going as deep on the guide — cut a little off the bottom.
The value of getting a fair market rate from an established reliable provider and sourcing capacity faster than before is making this a preferred practice. The traditional method is slower when you are tending freight to four or five carriers that each have two hours to decide. Meanwhile, you just lost the truck in those 10 hours you spent waiting.

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API Accelerates Routing Guide Refinement

Also accelerating adoption of this new approach is MercuryGate’s development of this API capability on behalf of their shipper customers — and giving it to them. Many shippers do not even need a substantial technology investment — they just have to say yes and give it a shot.
When you do that, you begin to see the value, and the routing guide gets smaller. Also, real-time rates are now being returned when the load is planned — before the waterfall, not just after the waterfall.

“Eroding” works in this case because routing guides are diminishing in size. It is not likely that routing guides are going to become extinct, but they will be smaller, more shallow and very much digital.

The responsible thing to do will always be to hold an RFP event and award contracts to primary providers. However, there will be fewer lanes on the RFP, fewer providers per lane — perhaps two instead of five — and a heavy reliance on a digital fair market rate and rapid sourcing of capacity beyond that.

Learn more about how Surge Transportation offers MercuryGate customers easy access to real-time pricing on full truckload capacity when it is needed most. Attend our MercuryGate user conference Velocity 2022 in Scottsdale, Nov. 7-9.

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Omar Singh
President & Founder
Surge Transportation
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