Chart of the Week: Outbound Tender Lead Time, USA SONAR: OTLT.USA
Tender lead times — the time between the initial request for truckload capability and the requested pickup date — have remained 10-15% above pre-pandemic norms throughout 2023. This has been the one transportation management trend that has stuck and never regressed because the end of the shipping boom. It is usually a trend that advantages each shipper and carrier.
Lead times have an optimal range depending on the origin. Generally speaking, a three- to five-day lead time gives a carrier loads of time to arrange and adjust its networks to make a pickup, even in a few of the more distant areas.
Lead times spike in front of holidays as shippers push orders for the long run before they leave the office.
When lead times shrink rapidly, it could possibly be a sign that shippers have had unexpected demand spikes. Gradual moves in lead times are more depending on shipper expectations of capability availability. This current pattern doesn’t fit historical patterns.
National lead times (OTLT) averaged around 2.6 days in 2019, which was the shortest period of time of the past five years.
Up to now in 2023, the OTLT has averaged just below three days. A half day may not look like much, but give it some thought by way of potential miles a truck drives in that point. The 0.4 days is roughly 200 miles or barely longer than the gap from Chicago to Indianapolis for a truck.
Shippers typically average shorter lead times in soft markets because they know capability will probably be available.
That is supported by the proven fact that lead times fell 3.3% from 2018 (a comparatively tight market) to 2019 (a really loose market). They subsequently increased in 2020-22 and have remained elevated in 2023 at the same time as the market loosens.
The National Outbound Tender Reject Index (OTRI), which measures the speed at which carriers turn down requests for truckload capability, shows capability was significantly harder to secure in 2018 than in 2019 (purple) and this past yr (white). Higher rejection rates equal tighter capability.
One would expect this yr’s lead times to be just like 2019, except they’re 8% higher than 2018. So why has this trend stuck?
It is almost not possible to pin down, but shippers can have realized the advantages of giving more time for carriers to arrange after two years of struggling. Service levels were abysmal in 2020-21, but some corporations probably noticed their odds improved with more days to arrange.
This is also a byproduct of shippers own internal processes changing. Inventory management has been a primary focus over the past few years. Shippers can have improved their planning and warehouse management practices, leading to higher visibility on when to ship.
Shippers might also lack the sense of urgency as a result of having relatively elevated inventory levels. This implies they will ship at their leisure as a result of an absence of urgency.
Greater than likely it’s a mixture of all of those and possibly more. The excellent news for carriers is that it appears to be sticking no matter market conditions. This practice will certainly help shippers when the market inevitably turns the opposite direction.
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