Logistics Budget Getting Hammered on the Spot Market?

The spot market is a necessary evil for shippers and when capacity gets tight, shippers more frequently find themselves making deals with the spot market devil.  After all, when it has to be there on time and lead time is already short, simply finding a carrier willing to move the freight at any price can seem like a win.  But, it needn’t be that way.  While you can’t completely avoid premium pricing when shipping via the spot market, you can certainly take steps to ensure you’re paying the lowest premium the market will bear.  Want to know how to avoid getting hammered on the spot market?

The secret to superior cost control when entering the spot market is: provide a competitive bid environment for carriers to bids on loads transmitted electronically through your TMS.  In the same span of time it would take you to call and email individual carriers in a desperate search for capacity, you can instead transmit the spot quote request and watch the numerous bids come in from available carriers.  This affords you the opportunity to choose from a group of respondents and to make your decision based on your own considerations.


Does your TMS solution provide a competitive bid spot bid management tool?  If not, you’re almost definitely getting hammered in the spot market.


Whether you select the lowest cost quote, the carrier with the best on-time delivery performance or any other metric, you’re making an informed decision; not a panicked one.  Moreover, watching an array of carriers compete in real time, offering spot bids for a load in any given lane, provides insight into the true market rate is for movement in a given lane which can be highly variable given current capacity constraints plaguing the market.  When carriers compete for the shipment, the competition effectively drives down the rate, much like a reverse auction.

Shippers utilizing a competitive bidding system for spot market activity exert significantly more control over their spot market spend versus those that view spot market as an emergency measure of last resort.  In fact, data indicates that the savings captured by high volume shippers by leveraging competitive bidding in the spot market can be significant enough to cover the cost of subscription fees for their full TMS solution on a yearly basis.

It is not unusual for a shipper to easily shave 5% off their spot market spend.  If they’re spending $1.5 million a year on spot freight that’s $75,000 in annual savings.  Many are achieving even more than 5% on their spot market activity.  With capacity tight, it simply does not make sense to engage the spot market without visibility and controls in place to ensure the most efficient utilization of a mode that is by definition, less efficient.

Does your TMS solution provide a competitive bid spot bid management tool?  If not, you’re almost definitely getting hammered in the spot market.