Friday, May 22, 2009

The Danger of Over Utilizing "Spot" Market Rates with Carriers

As most transportation management professionals know, the last several months have been a buyers market for motor carrier transportation, a trend which seems may continue for the immediate future. In the normal course of conducting business, I have run across several organizations that subscribe to the tactic of sending out their entire dispatch for a daily "spot" market quote.

This process can take the form of calling, faxing, Internet load posting, or utilizing sophisticated software provided and encouraged by leading TMS companies as a "best practice".

Although in the short term this "bottom feeding" tactic could reduce freight spent, it does nothing to promote a longer term strategic partnership with the motor carrier community. I believe that a shipper should have an established carrier base to which they can depend on with competitive rates and excellent service levels.

There are various legitimate scenarios in which using the "spot" approach is beneficial without putting at risk your established carrier base, but it should not be used as the only method.

Carriers I have spoken with understand that shippers need to be "opportunistic", but they also indicate that, taken too far, this technique will eventually work against the shippers especially when the economy begins it's turnaround and the "struggle to book a load" becomes reality once again.

What do you think?

2 comments:

Judy said...

I agree 100% with your comments. The only exception being if you current carrier base is heavily dependent on the use of freight brokers. This is an opportunistic type to build a "carrier" base.

nextgen said...

Judy, You are absolutely right that this is a good time to build a good carrier base which may actually also include a few brokers. Thanks for the comments!