Spot rates, such as those offered through FreightSideKick, are on-the-spot, short-term contracts based on carrier capacity conditions (how many trucks are available at the origin to go to a certain area). The freight spot market serves customers who often need their product delivered in short order or do not have access to adequate carriers to satisfy their shipping requirements.
Reasons for Shippers to Use the Freight Spot Market
There are many reasons a shipper will use brokers to get their freight moved in the spot market, including:
Because there will always be unexpected needs that arise in the course of shippers’ operations, it is vital for them to have a means of contracting a carrier through the spot market.
Spot Market Freight vs. Contracted Freight
A spot rate or a spot quote is a one-time quote that a shipper receives from a carrier or broker for moving their product from origin to destination. The distinguishing characteristic of spot market freight is that it reflects the availability of carriers in a particular lane, fuel costs, and other market factors. The availability of carriers in a particular lane is usually referred to as “capacity”; the amount of freight that needs to be shipped is referred to as “volume.” The principal advantage of shipping in the spot market is the flexibility it affords: just about anything can be shipped with a short turnaround time if you know where to look and how to contract with spot market carriers. This is often exactly the value that freight brokers and intermediaries provide.
Contract freight occurs when agreements are made (contract) with carriers in order to move freight in designated lanes for a set period of time with agreed-upon terms. These lanes are called dedicated lanes. In order to contract freight, shippers must have enough predictable freight to be able to guarantee that the carriers with whom they contract will have enough product to haul. Shippers often like contracted freight because they can avoid the fluctuations in capacity. Carriers like contracted freight because it guarantees that they will have freight for their trucks to haul.
How to Secure an Accurate Spot Market Quote
1. The More Precise Your Request, the More Accurate the Quote
Carriers and logistics providers create spot quotes based on the information that you provide. If you leave out key information, the quote may not accurately reflect the true cost of shipping your product. Before requesting the quote, gather as much detailed information concerning the shipment as possible: origin (zip code), destination (zip code), pickup date, whether pickup and delivery require appointments, trailer type, commodity type, weight of the product, and special loading or unloading requirements or special equipment needed for shipment (tarps requirements, straps, refrigeration, forklift for loading or unloading, etc.).
Special equipment requirements will necessitate that the carrier assess additional fees to the spot quote, which are called “accessorials.” Ask to see your logistics provider’s accessorial schedule. Many accessorials are standardized, for example, most carriers will allow for at least two hours for loading or unloading without figuring in additional costs for driver waiting time. But it is important that you know the schedule of accessorial fees that you may be charged by your logistics provider if delays are caused by the shipper or consignee.
When a shipment requires a precise pickup or delivery time, be sure to include required appointment times in your quote request.
Note that once you have an agreement with a carrier or broker for a rate, the agreed-upon rate will not change unless there is important information that you did not provide concerning the load, which would then require the provider to adjust the rate, which could end up costing you more money. Given the volatility of the spot market (see below), this is another reason for you to be as precise as possible when requesting your spot market quote.
2. Request Pickup and Delivery During Standard Hours
Logistics providers employ standard business hours just like everyone else, so be mindful of requesting pickup and delivery during business hours if possible. After-hours, weekend, and holiday pickups or deliveries introduce scheduling difficulties and, inevitably, higher rates.
3. Get Spot Market Quotes as Early as Possible
The very nature of the spot market means that you will never be able to request a spot market quote as early as you would like; yet try to request a quote as soon as you possibly can, remembering to provide your logistics partner with as much specific information.
It is standard for shippers to request spot freight quotes a day or two before the shipping date. Day-of-quotes and next-day quotes happen all the time, but generally speaking, the more lead time you are able to provide, the greater your chance of cost savings.
4. Spot Market Quotes Are Short-term
The spot market is a function of the continuously alternating availability of volume and capacity; therefore, spot market quotes are only accurate for a short period of time. With changes in freight demand and truck capacity – sometimes by the day – spot market quotes age quickly.
This is one of the most distinguishing differences between quotes generated for contracted, or dedicated, lanes and spot quotes. Of course, the potential instability of spot market quotes can work to a shipper’s advantage as well. Quotes can (and do) also go down in price.
In short, when dealing with spot market rates, it is best to expect change.
Therefore, when you do obtain a quote, it is best to try to secure the order as soon as possible; any delay may mean that the quote (or truck availablility) will no longer be good.
5. Understand the Scope of Your Spot Market Quote
Be sure to understand the scope of your spot market quote when you request it: is the quote what is considered an “all-in” quote, which includes the carrier’s cost of fuel and other expenses, or is the quote a “linehaul” quote, which is usually a price per mile without fuels costs factored into the quote.
6. Shop Around
To the extent that your shipping demands permit you to obtain multiple quotes, do so. Different logistics providers will have different factors and resources contributing to their quotes and some who provide cheap quotes may introduce delays or other inefficiencies into the shipping process. If you acquire multiple quotes, you will broaden your options, which is advantageous when moving your freight in the spot market.