When it comes to shipping goods across the vast landscape such as that of the United States or the European Union, many companies often rely on the spot market for their freight needs. While it can be a convenient solution in certain situations, there are several significant problems associated with purchasing freight on the spot market.
What are some of the challenges with spot market freight purchasing?
- Fluctuating Prices: Spot market rates are known for their volatility. Prices can vary greatly depending on factors such as seasonality, demand, and capacity. This makes it challenging for shippers to budget accurately, as they are subject to sudden and unpredictable rate hikes.
- Limited Capacity: On the spot market, capacity can be scarce during peak shipping seasons. Shippers may find themselves struggling to secure carriers, leading to delays and potential disruptions in their supply chain. This can be particularly problematic for businesses that rely on just-in-time inventory management.
- Inconsistent Service: When shippers purchase freight on the spot market, they are often working with carriers they have no prior experience with. This lack of familiarity can result in inconsistencies in service quality. Shippers may encounter issues with punctuality, communication, and overall reliability.
- Higher Costs: Spot market rates tend to be higher on average than contracted rates. Shippers who frequently turn to the spot market can end up paying significantly more for their transportation needs. These additional costs can eat into profit margins, especially for businesses that rely heavily on freight transportation.
- Lack of Visibility: Spot market transactions typically involve less visibility and tracking compared to contracted agreements. This can lead to a lack of transparency, making it difficult for shippers to trace the location and status of their shipments in real-time.
- Security Concerns: Dealing with unknown carriers can pose security risks. Shippers may not have access to the same level of background checks and safety records as they would with trusted contracted carriers. This can be a concern when it comes to the safe transportation of valuable or sensitive cargo.
- Administrative Burden: Managing spot market freight can be administratively burdensome. Coordinating with multiple carriers, negotiating prices, and handling paperwork can consume valuable time and resources.
What can you do considering the challenges?
To mitigate these problems, many shippers are turning to more stable and predictable solutions, such as long-term contracts with trusted carriers or third-party logistics providers. These arrangements provide consistency, reliable service, and often result in cost savings over time. While the spot market can be a useful tool for addressing short-term needs or surges in demand, relying on it as the primary method of freight procurement may come with several costly and frustrating challenges.
In conclusion, while the spot market offers flexibility, it is important for shippers to be aware of the potential problems it can introduce. Striking a balance between spot market utilization and long-term agreements can help businesses maintain a dependable and cost-effective supply chain.
How do we support you as shipper in using the spot market?
With Logivity Loadboard shippers can utilize a private load board to meet fluctuating demand without sacrificing quality standards working with trusted carriers. In our Loadboard service you manage all your spot shipments with carriers in one place.
Share your spot request to your trusted network of carriers and let offers come to you to make the best transport for your need. Make efficient use of available loading space in your carrier network to significantly reduce costs.