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As an industry leader in spot freight shipping, sennder has extensive experience. That's why we have compiled this comprehensive guide for you. Below you'll find everything you need to know to help you understand and navigate the spot market and make the best decisions for your business, including:
What is Spot Shipping?
What are the Trends in Spot Shipping?
Is Spot Freight in Truckload Shipping the Same as Other Transportation Modes?
What Influences Spot Rates in Trucking?
How Can I Get the Best Spot Rates?
How to Choose the Best Spot Shipping Provider
What is spot shipping?
Spot shipping refers to a one-off and short-term shipping contract or order. It's typically the price that a carrier or a third-party logistics company (3PL) offers a shipper at a particular time to ship freight from one place to another. Prices can vary each time depending on several factors we'll cover later.
The alternative standard method of shipping freight is through contracted lanes, where the freight volumes and price have been agreed upon in advance. Contracts can have an average duration of between three months to two years.
Is Spot Different Than Contract Freight?
Yes, spot and contract freight are different types of freight shipping. While spot is a one-time, short-term order, contract freight refers to a freight agreement that has a fixed price and volume over a set period of time. While both large and small companies use spot freight (or spot-buy freight as it is also known), there are some cases where spot freight may be the best strategy:
Exceptions/unplanned shipments: Shippers will rely on one-off spot buy orders to move freight shipments that fall outside of their contracted orders or to fill delivery gaps that have occurred unexpectedly.
Expedited Shipments: when a customer urgently needs a freight shipment, the spot ship method is the obvious choice, regardless of the extra costs involved.
Lower volume freight: This is often relevant for small shippers who don't command the larger freight volumes to secure lane contracts.
For more prominent companies that regularly transport large volumes of freight, it is not feasible or economical to ship ad hoc. They will instead negotiate longer-term contracts of one to two years with logistic service providers (LSPs). These contracts form part of its overall procurement strategy.
There are pros and cons to both: Spot shipping has the advantage of flexibility, but rates are volatile, and quality and reliability can be an issue. Therefore, ensuring you get the best rates and choosing a reliable provider is essential.
Spot market halved in January 2023 versus 2022, finding new equilibrium closer to 2021 levels.
What Are the Trends and Statistics for Spot Freight Loads?
Spot market halved in January 2023 versus 2022, finding a new equilibrium closer to 2021 levels.
The sennder spot opportunities index, as presented in our recent European road freight market report, reveals that the spot market had a particularly active first half of the year in 2022.
Historically tight market conditions and spiking spot rates led carriers across the market to reject contracted loads in favour of more profitable spot loads. This self-reinforcing cycle meant that more shippers were forced to turn to the spot market, stoking spot opportunities by 7 percent in May 2022 compared to January 2022.
As the market loosened in the second half of the year, spot opportunities declined by more than 50 percent and prices reached parity with contract rates in November. While this trend continues in the beginning of 2023, it is hard to predict the outlook given the intrinsic link to the wider economy.
Is Spot Freight in Truckload Shipping the Same as Other Transport Modes?
Truckload spot freight operates the same way as other modes of transport, such as international air and ocean transport.
It will usually belong to one of the scenarios mentioned above. Often the freight is only filling part of the truck, known as Less than Truckload (LTL), instead of a Full Truckload (FTL) shipment.
An LTL shipment will typically be transported on several different trailers through various logistical relay points throughout its journey. An FTL, on the other hand, is usually an entire contracted trailer load and is the fastest form of truckload shipping because it is sent directly to its destination with less transit time.
A company looking to road ship spot freight will collect multiple quotes from LSPs. Here, the rates can fluctuate depending on market conditions.
What Influences Spot Rates in Trucking?
Trucking spot rates can vary across equipment types such as flatbeds, refrigerated or semi trailers. However, they are primarily influenced by the supply of carrier trucks and the demand for the number of loads to be shipped.
Fuel costs, driver availability, inflation and geopolitical issues play a role, in addition to supply and demand (load-to-truck ratios). Timing is another factor. The earlier you book the shipment, the lower the rates tend to be.
The spot-buy market is a volatile one, and rates are unpredictable. However, rates will be lower in times of general stability and when there is a capacity to meet demand.
Where Do You Find Spot Rates for Loads?
A company wishing to find the best truckload spot rates has several options:
Freight Brokers - Based on the information provided by the client, they will source the market to provide the best available spot ship offers.
Load Boards (or Freight Boards) - A company can also visit an online marketplace where shippers and carriers post information regarding freight shipment needs and truck availability. They can quickly secure on-the-spot rates for transportation services. There are also load boards that specialize just in LTL shipments.
Consult a reliable freight rate index to get an insight into current rates for your particular need. It is generally best to shop around multiple LSPs to compare quotes. We also have some tips below on how to get the best rates when you are spot shipping.
How Can I Get the Best Spot Rates?
Getting the best spot rates requires following these best practices:
Provide detailed and accurate shipping information. Correct documentation and paperwork will prevent delays, extra fees, and warehousing charges.
Clarify any special handling requirements. If the shipment involves special requirements such as multiple stops or additional handling, communicate these clearly when you confirm the rate with your provider. Special requirements may increase a spot rate upfront but will ensure you avoid additional expenses or service disruptions later.
Arrange spot rates as early as possible. As mentioned above, spot rates tend to follow one pattern: they typically increase as the shipping date approaches. Therefore, securing spot rates as soon as possible is the best practice.
Avoid shipping outside of regular business hours. If possible, schedule all pickup and drop-off times during regular business hours. Rates tend to be higher during off-peak hours or on weekends.
Consider the quality of the service provider. The lowest price and best value do not always go together. Securing a cheap rate may seem like the best deal at the time, but if it later means missing a pickup or delayed delivery, it isn't worth the cost. Make sure you choose a reputable carrier with a proven record and the expertise to handle your order.
How to Choose the Best Spot Shipping Provider
While there are many advantages to spot freight shipping – especially for smaller businesses that need flexibility and ease of transactions – it also comes with challenges and risks.
Spot rates are subject to the economics of supply and demand and unpredictable market conditions. There may be unforeseen extra charges on the shipments or more risks of delays and damage. These factors can affect a business's bottom line and customer reputation.
Shippers need to know the market in which they operate to get the most benefit from spot freight. In addition, they must be able to manage and analyze large amounts of complex and changing data. Therefore, engaging a reliable provider on your behalf is vitally important. What should you look for in a spot freight provider?
A fleet of trucks that are ready to roll for quick connection
A dedicated team to give you expert support and assist with finding competitive rates
A digital platform that provides visibility, order management, statuses and regular updates
Contact us now to get your freight shipped.
When you've got last-minute or unexpected freight to ship in Europe, sennder has a solution. Get in touch today to see how sennder can help streamline your spot shipping process.
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