Why tracking tender reject rate is important

Perhaps most importantly, it is vital to track capacity because it is one of the best leading indicators in trucking and tells us how much money the trucking industry is likely to be making (or losing). This is because capacity tends to move almost perfectly inversely to spot rates. As capacity tightens and tender rejections increase, spot rates tend to move up and vice versa.

Generally, but not always, tender rejections will be rising due to rising demand and volumes. However, for example, this is not true in the event of a supply disruption, such as a snowstorm or a hurricane where demand does not rise as fast as supply exits. Also, there are times when tender rejections and capacity can tighten in a flat market for volumes if supply exits the industry due to bankruptcies, rising insurance premiums or new Class 8 truck orders running below replacement demand.

In terms of percentage ranges for demarcating a tight, balanced and loose market, as a rough rule, a loose market is defined by tender rejections in the low- to mid-single-digit range, a balanced market by tender rejections in the high single digits, and a tight market by tender rejections above 10%.

As of late March 2020, national outbound tender rejections stand at nearly 18%, roughly three times higher than the 6% tender rejections at this time last year. Tender rejections have risen sharply in early March (from 5% to 18% in a matter of weeks) as panic-buying due to COVID-19 has caused a dramatic increase in outbound tender volumes (SONAR: OTVI.USA) of 29% as grocery stores scurry to restock empty shelves. Accordingly, spot rates have risen by roughly 10% nationally to $1.42 per mile to compensate for the tightening capacity and rising demand.

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