The DAT network of load boards released information this week revealing that spot rates for van, flatbed and refer trucks continues to sit at a two-year high. With the potential for additional capacity constraints driven by the exit of smaller carriers ahead of the ELD mandate (and other factors), it seems worthwhile to examine what shippers can do to help minimize the bottom line pain associated with moving freight via the spot market. Here’s what experts recommend.
UltraShipTMS implementation manager, Chris Noble offers the following wisdom on mitigating exposure to historically high spot market rates. “This is where the relative strength of the reporting capabilities of shippers’ TMS solutions makes the difference” said Noble. Noble says he has been urging planners in the programs he manages to “make use of the spot quote data they’re already capturing in their TMS”.
“I can’t speak to the capabilities of other TMS platforms” said Chris, “but I know UltraShipTMS offers an array of reports dealing with spot market use and utilization. What I have been suggesting is that planners run reports analyzing spot quote by lane and look for any noticeable patterns that emerge. These reporting tools help planners and managers clearly identify which lanes are frequently and chronically ending up in the spot market.” According to Noble, once identified, the planner can take swift steps to avoid allowing freight in these lanes go to spot bid.
“There are a number of ways a planner can act to minimize the utilization of the spot market in lanes identified as high-frequency spot market users” says Noble. The shipper can reach out to contracted carriers already servicing the lanes in question and renegotiate rates in an attempt to improve tender acceptance. This may cost a little more than the originally contracted lane, but if it improves tender acceptance, the freight is still being moved at rates likely well below the spot market. Noble also suggests shippers add additional carriers to these problematic lanes, building more depth into the routing guide for these lanes. This increases the chance that tenders will be accepted by a contracted carrier in a given lane instead of going to spot quote.
Another best practice involves setting rate benchmarks in all lanes, and in particular, those that are identified via reporting as high frequency utilizers of the spot market. Identifying a more appropriate benchmark in these lanes should result in fewer tender rejections and will also help ensure rates don’t creep up beyond what is appropriate for the lane in question.
For more strategies on mitigating spot market costs, reach out to UltraShipTMS today.