Supply Chain Commentary: Out Darn Spot! Out, I Say!
The comic Steven Wright once joked, “I spilled spot remover all over my dog. Now he’s gone.”
For shippers who regularly leverage the spot market, it’s been a buyer’s market the past few years. One shipper I’ve worked with saved more than 9 percent on freight spend simply by moving away from only using brokers to using (temporarily) the spot market for almost all of their loads.
But, like Wright’s dog, is that market about to be gone?
Let’s start by looking at the numbers. DAT puts out a weekly analysis of the spot market from the data they gather. An early September 2017 report showed that the number of loads on the spot market has doubled year-over-year. Rates have increased 11 percent and capacity is essentially flat. Clearly, all the quantitative indicators are pointing in the wrong direction if you are a shipper. Hurricanes Harvey and Irma and the ELD mandate coming in December 2017 are only going to make the market even tougher.
Does that mean companies are going to use the spot market less and less? I doubt it. It plays too important a role for many shippers. Besides, capacity is getting tighter across the board. Some carriers may not be willing to commit capacity in lanes they were previously happy to do so.
What is a shipper to do? Here are a few tips and pointers:
- Stay informed. Benchmark data services from DAT, Truckstop.com, and others help planners make wise decisions and have some negotiating leverage.
- Investigate new innovations. A bevy of new technologies out there leverages the “sharing economy” to help more effectively marry shippers and carriers. Uber isn’t the only one. Companies like Konexial and Lanehub are starting to do some pretty exciting work.
- Invest in proven technologies if you haven’t already. Transportation management systems (TMS) are no longer just for large shippers. They are now more affordable and some can be implemented in days. A good TMS helps shippers more effectively manage capacity and leverage the spot market.
- If your contracts are running up soon (or you are shipping on old rates), re-negotiate now. Lock in capacity and a smaller rate increase while you can.
- Establish good partnerships with a handful of brokers or 3PLs. They are likely to continue to play a role in your network.
Steve Wright also said, “I couldn’t repair your brakes, so I made your horn louder.” Changes are coming to the market. I’m pretty sure braking won’t make a difference, but if we navigate effectively, we shouldn’t have to use that louder horn.