Spot Shipping Explained: Benefits, Challenges and How to Book Spot Loads

Jul 18, 2023

What is spot shipping? Why, it’s a logistics practice of ordering transportation services for individual loads rather than working on a set periodic contract. It’s of great importance for companies that don’t ship that often, have gone over capacity with their contract shipper, or just needed to deliver some impromptu orders. Now, to cover the subject of spot shipping in more detail.

What is a Spot Freight?

Spot freight is freight shipments that had been arranged individually and not due to a standing contract. It’s a one-and-done deal, with no prior nor future guaranteed shipments. This is ideal for both companies that ship at irregular intervals and ones that have a contract but found themselves dealing with some unexpected freight.

Unlike contract shipments, which are always carried out by the carrier named on the contract, spot freights are arranged after collecting offers from multiple companies and then choosing the most suitable one.

That is not to say that spot freight is always a last-minute affair. It could be a piece of equipment that needed shipping yesterday (your boss is a stereotype right out of the movies) or it could be a box that will be shipped in a month. The key part here is that you’re not signing any deal for multiple shipments of some regularity.

What is a Spot Rate?

The spot rate is the price you pay for your spot freight shipments. It depends a lot on the current market conditions, which are invariably out of the shipper’s control. The spot price will most likely be higher than with contract freight.

In contrast, contract freight will be carried out under prices and conditions laid down in the contract, market conditions be damned. Per shipment, contract prices will be lower as freight companies value the stable, guaranteed work more than the unpredictability of spot freight.

Things to Consider When Pricing Spot Shipments

Spot freight pricing isn’t dreamed up by a random guy in a random office. No, a lot of factors are considered before a quote is arrived at. Here are those factors:

Current market conditions and demand-supply dynamics

It’s a good time in the market and shippers are fighting tooth and nail for carriers? The price for spot shipping is going to be up. On the other hand, if there’s a lot of slack spot market capacity, carriers will be scrambling to diversify, economise and transport freight for less than they’d want.

Distance and route complexity

If you’ve ever mailed an actual physical letter, you’re already aware that the further it has to go, the more post stamps you need. The same goes for route complexity, be it a pickup or delivery at an unusual, hard-to-reach spot or the requirement for multiple pickups/drop-offs.

Spot shipment volume and weight

The bigger truck and the more space you need, the bigger the price will be. In this instance, you may also consider LTL (less-than-truckload) freight: if your pallet/crate/cleverly isn’t taking up all the space on the truck, maybe you can consider letting the carrier sell that free space to another shipper? That way you lower both the price and the ecological impact.

Spot load type and special handling requirements

I’ve already mentioned LTL freight – it may be one of the cheapest spot load types to transport. It’s also a good choice if your freight isn’t sensitive to handling and has little risk of contamination. FTL – that’s full-truckload – is better when your freight will actually fit the truck, needs to be delivered promptly or could be easily damaged. Of course, there are also special handling requirements to consider – refrigerated or chemical transport will cost you extra.

Time sensitivity and delivery deadlines

If you’re in a hurry, you’re in to pay more than you’d like. That’s true for any aspect of the service industry. But if your shipment is only due to ship out in a month or two, then the price will be lower. There’s also the matter of how strict your deadlines are – the stricter, the more expensive.

How to Find Reliable Carriers for Spot Freight Shipments

Now, talking about spot shipping is fine and dandy, but that alone doesn’t get the stock rolling. For that, you need to need to find the right carrier for the job:

Utilise freight brokers and marketplaces

Luckily for us, we’re well beyond the point where finding carriers would mean saddling an assistant with the yellow pages. A lot of carrier potential can be reached by contacting freight brokers, who will then help you sort things out. It does, however, entail trusting the freight broker to understand your needs and have your best interests at heart while also not charging you too much overhead. After all, they have to make their money somehow, and they didn’t get into the brokerage business to do live TikToks!

Conduct due diligence and evaluate carrier credentials

Sure, a broker may say the carrier is good, and their profile on the marketplace may look good. But you still have to carry out due diligence checks to see if they’re on the up and up. And if you’re looking at a couple of competing offers, evaluating carrier credentials becomes a whole thing, especially arduous if your freight has to leave ASAP.

Establish communication and collaboration channels

Right, so you’ve established that the carrier of choice isn’t a supplier in the Fell-Off-the-Back-of-the-Truck market. Now, it’s time to establish the means of communication which will allow you to transfer all the requirements, documentation and anything else that your freight requires. You also have to find ways to solve pickup and delivery issues as well as having a way to track your freight in real time.

Benefits of Spot Trucking

Using spot trucking may require you to do some homework, but that doesn’t mean that it’s not worth it. In fact, it’s a service that shows no sign of going away, just out of sheer usefulness:

  • Flexibility and responsiveness: a contract is fine and good as long as your freight needs fall within its limit. But what if some ad hoc shipping emergency arises or the load doesn’t fit the contract? Enter spot shipping!
  • Cost-effectiveness: if you need your freight transported from Amsterdam to Munich this once, you don’t need to draft a long-lasting and expensive contract. And if it’s LTL freight, you can get a very good price.
  • Access to additional capacity: so your current shipping needs outstrip the capacity of your contract carrier. This puts you in a spot – ironic because that’s where spot shipping can help you with easy access to more freight volume.
  • Testing carriers for future contract agreements: moving freight shipments is probably the best way to test a new carrier. If they carry out the task well, then you know you can trust them in the future. And that’s how you build relationships in logistics!
  • Opportunities for negotiation: if the freight isn’t literally burning a hole in the floor, you have time to shop around and negotiate with carriers – doubly so if they’re selling you their excess capacity!

Risks and Challenges of Spot Shipping

Granted, we’d be lying for no damn reason if we claimed that spot freight shipping didn’t have some challenges and risks. Here are some of the more pressing ones:

Fluctuating spot freight rates

Back in Q1 2023, the spot freight rates had been falling for two quarters. They are forecasted to bounce back by the time of the year. The fact is, these rate changes are often hard to tell in advance. So if you find yourself suddenly in need of some freight, you may be up for an unpleasant surprise.

Limited visibility and tracking capabilities

When you order something, you want to know where your package is at any point of the trip, that’s why God invented postal tracking numbers. However, with spot freight, you’re unlikely to have this capability unless it’s something the company bothers to provide.

Quality and reliability concerns

If you haven’t previously worked with the company that’s carrying your spot freight, how do you know that you can trust them? Will the freight arrive undamaged and in one piece? Will it arrive by the agreed-upon deadline? All those questions will spin around your head until the freight reaches the destination.

Technologies and Platforms for Streamlining Spot Logistics

So those were the benefits and the potential drawbacks of spot freight transport. Are there potential technological aids to improve the process? Yes, quite a few:

Digital freight marketplaces and load boards

Digital freight marketplaces and load boards are very similar in that they both match carriers without loads with shippers without trucks. The key difference is that digital freight marketplaces work a lot faster, updating in real-time. Either way, they’re indispensable when it comes to finding carriers for your spot freight.

Transportation management systems (TMS) and logistics software

TMS are vital in managing freight volumes quickly and efficiently. Tracking everything from planning to execution, they allow you to know where your freight is (or at least is supposed to be). This is the system that handles most of the tasks related to spot shipping. Meanwhile, other logistics software can help plan out the routes with the help of smart algorithms.

Real-time tracking and visibility solutions

Now, without real-time tracking, a TMS is just an Excel sheet that humans can actually navigate. If you want to know where your freight is – rather than where it’s supposed to be at this time – you need all sorts of systems embedded at the carrier level that track the movement of goods. They may be as simple as a GSP tracker on the truck and handheld barcode readers that scan the freight when it is loaded, but they do the job.

Automated documentation and communication tools

Used to be that all the freight documentation was a crumpled A4 in a binder sleeve. A yellow sticky note would be added to provide the driver with the contact number in case any issues arose. We have advanced past that point now, with automated documentation systems allowing for easy movement of paperwork. Meanwhile, communication tools let you reach the driver at any time.

How Does Spotos Help With Spot Shipping?

As you may gather at this point, spot shipping allows most companies to remain competitive even without contract freight. But can it be done easier? Yes, with Spotos, your one-stop shop for spot freight!

Spotos combines the roles of digital freight marketplaces, TMS, real-time tracking as well as automated documentation. The carriers have been vetted and represent some of the best in the trucking industry. Entrust Spotos with your spot freight needs and the platform will ensure that you’ll get the best price for your spot rates.

Frequently Asked Questions

What are the main differences between spot and contract freight?

Spot freight is a one-time deal between a shipper and a carrier. On the other hand, contract freight means several shipments agreed upon beforehand and spread out in time.

How do spot rates work in the trucking industry?

Spot rates depend a lot on supply and demand in the spot market as well as various other conditions. As such, spot freight rates can change multiple times over a year.

Why are spot rates sometimes lower than contract rates?

Spot rates are more sensitive to market conditions than contract rates, so in an overall slump, they can fall faster. At the same time, if the shipper is willing to go LTL for their freight, a lot more opportunities may open at lower prices.

What are spot loads in trucking?

Spot loads are freight that is carried as a one-time deal rather than a continuous contract.

What is the spot market in the supply chain?

Spot market allows shippers to easily ship unexpected or irregular freight outside of contract shipping. This gives supply chains a lot more flexibility.

How can shippers take advantage of the spot rate market?

Shippers can take advantage of the spot rate market to get their freight shipped cheaper than with a contract. It allows for a faster, more flexible option than taking out a full contract.

Where can I find spot rates for loads?

Spot rates for loads depend on the company, though digital freight marketplaces like Spotos can help you check multiple offers at once.

What are the benefits of spot freight rates for shippers?

For shippers, spot freight rates may be cheaper than contract rates depending on current market conditions.

How do spot freight rates vary across transportation modes?

Spot freight rates depend on, in part, the special requirements of the transportation modes: a regular trailer will be much cheaper than a refrigerated one.

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