Market Swing: Prepare Now or Lose Later

Market Swing: Prepare Now or Lose Later

Market indicators are pointing to a stronger second half of the year—in carriers’ favor—signaling to prudent shippers that the time is now to reevaluate both short- and long-term plans.

Early planning and a strategic approach are key to staying ahead of the curve and ensuring longevity in the face of changing market conditions. Here are three key ways shippers can prepare.

1. Stick to the plan

Exercise caution when onboarding new service providers solely based on a better spot price. Choosing a carrier based on spot rates alone—without considering their reliability and track record—can expose shippers to potential disruptions, delays, or a decline in service quality.

By honoring volume commitments and maintaining relationships with reliable service providers, shippers can avoid the risks associated with poor service and ensure consistent and reliable service.

Consider the long-term benefits of contractual agreements, such as stable rates, capacity availability, and improved service levels. While spot rates may fluctuate, contractual agreements provide a level of stability and predictability that can support more effective planning and budgeting.

2. Prioritize high-volume lanes and markets

Evaluate current service providers and proactively transition a significant portion of volume from spot to contract markets. Think of it as an 80/20 mix—with 80% of service pre-planned via contracts and 20% open to the spot market’s lower costs.

Prioritizing higher volume lanes—those with one load a week—can help achieve several benefits.

First, shippers can negotiate more favorable rates with carriers due to the higher volume commitment, resulting in potential cost savings.

Second, contractual agreements provide stability and capacity assurance, reducing the risk of service disruptions.
Finally, this strategic shift enables shippers to forge robust partnerships with carriers, fostering improved collaboration and service performance.

Also, consider shifting from spot to contract rates in high-volume markets. The heightened competition among carriers in these markets empowers shippers with increased negotiation leverage. By migrating volume from spot to contract markets, shippers gain enhanced control over transportation costs, secure consistent capacity availability and minimize exposure to market volatility.

3. Measure now and later

While the current market favors shippers, it won’t last forever. Once the pendulum swings back the other way, don’t let carriers skimp on the higher level of service they are delivering today.

Benchmarks help achieve this by holding carriers accountable for everything from tender acceptance to on-time pickup and delivery.

Benchmarks also help maintain service excellence and help shippers in avoiding disruptions, customer dissatisfaction, and potential bottlenecks. If a carrier can’t deliver now, there’s no chance they’ll be able to service when the market gets tough.

Monitoring carrier performance over time shines a spotlight on declining trends or performance gaps and reveals a carrier’s ability to meet delivery commitments consistently, highlighting those that consistently perform well and maintain a high level of service reliability, even as the market shifts.

Now is the time for shippers to start planning and implementing these key tips to stay ahead of the curve and remain competitive in the second half of the year and beyond.