Leveraging the Spot Market
When your contracted carrier can’t meet your shipping needs, consider the spot market. Using one-time spot rates typically requires a commitment from the customer to ship within a specific time period. Spot pricing fluctuates depending on multiple factors, so shippers often don’t have a lot of control over the spot market rates quoted. Here are 10 ways to make the spot market work for you.
1. Develop strong carrier relationships. Carrier lanes and markets fluctuate over time as their businesses evolve. Working with spot market carriers for exceptional shipping needs might yield a strategic carrier partner for the future.
2. Drive down transport costs. Spot market rates are driven by supply and demand. Consider using the spot market as a financial lever to reduce your transportation costs in down markets.
3. Create supplemental capacity. When outbound shipment volume exceeds your dedicated carrier capacity, turn to the spot market to source additional truck capacity and keep your shipments moving.
4. Understand the size of the project. Not all shipment profiles are the same. As a shipper who may be sending a delivery to a job site or a one-off shipment, you may be able to source a better cost and carrier on the spot market rather than use your core carrier capacity.
5. Ship freight consistently. All shippers are not created equal. If your shipping profile is inconsistent and the destination of the next load is unknown until the time the order is placed, it is important to take advantage of the backhaul spot market rather than attempt to work within existing blanket contract rates.
6. Know market conditions. It is important for shippers to keep a pulse on transportation market conditions. Events such as weather, natural disasters, and produce seasons can cause disruptions in load-to-truck ratios. Strategically utilizing the spot market will allow you to successfully navigate these disruptions.
7. Maximize carrier backhauls. Carriers use backhaul freight as a strategic piece of their cost structure and relocation of trucks. Utilizing spot market backhaul demand increases your chances of your shipments moving below headhaul market prices.
8. Utilize different equipment. Most shippers send out shipments that have similar profiles and equipment needs. When there is an exception—such as an over-sized load or one that requires a flatbed when all others require a van—then the spot market is the answer. Take advantage of all equipment types that are ready to move your load.
9. Expedite shipments to meet expectations. There are times when a shipment needs to move within hours. There is no need to wait for a company driver to arrive later in the day or your dedicated carrier to tell you they don’t have enough service hours left to deliver. The answer may be sourcing an expedited carrier on the spot market to meet delivery expectations.
10. Adjust for distribution center constraints. Dock door space for an additional drop trailer is never a sure thing. If the shipper’s infrastructure prevents drop trailer usage, then exploring spot market live load carriers to haul the freight will prevent congestion and keep the dock flowing.
SOURCE: Brian Karwisch, Vice President-Procurement, ODW Logistics.