Freight market volatility derives from numerous factors, from the weather through the elections, that may lead to changing transportation and trucking freight rates for any/all markets. To understand the real trucking rate, freight management parties must realize the limits of traditional spot versus contracted freight strategies. They must look beyond the broad view and see how granular data contributes to everything surrounding contracts, spot rates, accessorials and more.
Spot versus contracted rate ideals limit insights
- All freight is bought and paid for on spot.
- There may not be enough drivers available to cover the load.
- All freight involves the spot market to some degree, whether by contributing to tender rejections or encouraging carriers to reallocate resources.
- Spot market instability is much more indicative of what all parties will experience in terms of capacity and total freight spend.
True market benchmarking of rates means looking beyond contracted and spot rates
True trucking rate benchmarking must also consider these factors:
- Lane conditions indicated by SONAR Lane Signal.
- The rate of rejections for the industry.
- How mode rejections compare throughout the market.
- Which markets are ready for more activity?
- Where capacity is available versus tight.
- The specific values and insights into your enterprise’s unique trade activities.
Market data predicts spot rate deviations
Understanding the spot market deviation and trucking rate impact hold value in rebalancing the use of freight services and meeting changes within the market. Key points to remember when it comes to spot rate deviations include:
- Predicting rates helps NO ONE. It’s predicting rates across the spectrum of freight that makes a difference.
- From reefer through parcels, seeing deviations’ likelihood in advance helps to reallocate freight resources and plan accordingly.
- Dedicated fleet services are the enforcement arm of contracted service.
- Disruptions affect carriers, brokers, forwarders, shippers, and freight management parties differently and by market.
- Customized views of the market aid in decision-making.
Top metrics reduce confusion
Relying on trucking rate data in the context of the whole supply chain and opportunities for savings is essential to making the most of freight services’ use. Top indices that make this possible include:
- The Tender Lead Time Index shows how much time freight waits for shipping.
- The Tender Rejection Indices provide insight into trucking capacity across markets, modes and parties.
- Outbound Tender Rejection Rate Versus DAT National Long-Haul Freight Rates provide a way to see what other forecast providers overlook.
- Headhaul Index reveals which carriers are more likely to accept a tender.
- Inbound and Outbound Tender Volume Indices help to plan capacity and movements.
The shipping industry needs
a new metric – the Market Rate –
to end the spot vs contract battle
Trucking rate insights help parties see how other bidding strategies may impact rates
Rebalancing the types of bids used can help a company ensure its trucking rates are reflective of industry trends, so spend can be kept under control. Types of freight bidding processes powered by freight and trucking rates’ data include:
- Traditional bids, involving annual full truckload contracts, may still be valuable and useful in certain markets with ample capacity.
- Mini-bids provide short-term relief to lack of access to contracted capacity and better rates than strictly using spot rates.
- Spot bids are one-off shipments that come out of the blue and do not fall subject to contracts, but their likely rates can be predicted.
- Dedicated service bids involve a higher degree of certainty – such as drivers that only work within a private fleet – to guarantee freight service; dedicated service also comes at a higher price tag.
When’s it really time to rethink trucking rates and the need to conduct a new bidding process
Differences of opinion exist on this topic. Any company can engage to rebid through any means. However, an ill-timed bidding process could do more harm than good. FreightWaves’ experts recommend only engaging in a new bidding process if the disruption lasts for a period of at least 30 days. It’s at this point when shippers begin to move more freight into the spot market, resulting in higher trucking rates due to limited capacity.
Regardless of what these trends typically reveal, the biggest takeaways are the same:
- The spot market is the biggest factor in considering any approach to freight bidding, sourcing capacity, testing new markets, or otherwise retooling your supply chain strategy.
- Freight market participants must review insights about the spot market in SONAR that reveal the general market’s outlook.