Cure the Spot Market Blues
2 minute read
Driver shortage; natural disasters; and an ever-tightening capacity giving you the spot market blues?
What recourse does a shipper have?
A few weeks back, a worried customer, feeling the capacity crunch frantically demanded a meeting. Let’s face it, when natural disasters and federal mandates mix it up with driver shortages and a robust economy, shipping rates begin to climb. According to the Wall Street Journal and a recent DAT Solutions report, 10 loads for every available truck on the spot market were waiting to be moved in the week ending Jan. 20, compared with three in the same week last year.
You know what it’s like, relying on the spot market where carriers and other logistics providers are taking advantage of increased rates. According to the same Wall Street Journal article, “spot-market prices for dry vans, the most commonly used big rig, are up more than 20% year-over-year.” No one knows how long it will take for the industry to reach a new normal. At AM Transport, we predict the market is going to fluctuate for a while, with that new normal more than a few miles down the road.
Are contract rates the answer?
Sure, we know that during the last 3 months of 2017 due to a variety of disruptions old contract rates were broken as carriers began to shift capacity to the better-paying spot market. However, we believe the best antidote to volatility is still a good rate. Even at 3-5% increase, newly negotiated contract rates will save shippers both time and money.
This is how we approached our customer’s out-of-control budget. Once they recognized that the super low contract rates of the past were gone forever, they saw the benefit of fair and consistent rates.
And guess what? Our customer is better off than ever. No longer playing a spot-market game with freight that must be moved, they are better able to budget while leaving the freight moves to us.