Spot rates are the price of an asset or a commodity that reflects the real-time balance of supply and demand in a marketplace. In freight transportation, a spot rate is the short-term transactional freight price that a shipper offers to move a shipment from origin to destination.
What is a Spot Rate in Trucking?
A spot rate in trucking, sometimes called a spot quote, is a one-time fee that a shipper pays to move a load (or shipment) at current freight market pricing. Spot rates are a form of short-term, transactional freight pricing that reflects the real-time balance of carrier supply and shipper demand in the market.
Spot rates in trucking are accessible across equipment, and each equipment type often dictates rates, depending on demand. Spot market truckload capacity is available for dry van, refrigerated, and flatbed equipment types.
What Influences Spot Rates in Trucking?
Spot Rates vs Contract Rates
Spot Freight Rates Across Transportation Modes
Peak shipping, seasonal fluctuations, the geopolitical landscape, holidays and festivals, and oil prices can all influence spot freight rates for air and ocean transportation.
- Ocean freight spot rates and spot container rates apply to ocean transportation. They are often restricted to one vessel and apply to one shipment or container only. Ocean freight rates are usually determined based on a summary of charges, such as the cost per weight of goods and the space the shipment consumes, as well as fees associated with pre-carriage, carriage, and on-carriage activities.
- Air freight spot rates are commonly used in global transportation when there is a need for expedited, reliable service. Air freight spot rates are based on the initial chargeable weight of the cargo, which is calculated based on the weight, size, or volume of goods. Air freight spot rates are calculated per kilogram.
- Intermodal spot rates are comprised of the drayage origin rate, rail linehaul, and drayage destination rate. Shippers access intermodal rates through an asset-based or non-asset-based logistics services provider.
Where do you Find Spot Rates for Loads
A freight rate index provides rate information for specific transportation modes, such as truckload, less-than-truckload (LTL), parcel, air, ocean, rail, and intermodal. Carrier rates, shipper rates, contract rates, and spot rates are compiled and updated regularly to give users an understanding of the overall pricing landscape of the transportation equipment type or lane.
Load boards connect shippers with carriers and create the spot market for moving freight shipments. Hosted online, a load board allows users to post freight shipments or empty trucks and then secure a rate “on the spot” to complete the shipment. Load boards are available through various logistics services providers, some of which support digital freight matching.
Accessing a load board, or bid board, offers immediate insight to shippers and carriers on the current spot prices for transportation within that specific marketplace. They might not provide context outside the scope of data compiled from the load board provider’s carrier and customers.
Challenges in Spot Rate Management
Shippers who rely on spot rates must contend with complex market data. Spot freight transportation may work for some shipments, but generally, spot rates are higher than contract rate commitments. Likewise, challenges are common when managing spot market capacity and freight procurement challenges without adequate capabilities. Effective spot rate management depends on maintaining awareness of vast data available on the spot market load board:
- Dozens, if not hundreds, of local and regional carriers.
- Thousands of lanes.
- Differences in modes and transit time.
- Unemployment rates in certain areas.
Each of these factors influences total costs and risk for every freight move. As a result, shippers must look at the impact of those variables on every shipment’s origin and destination.
When do Spot Freight Rates Make Sense?
- Primary and backup carriers cannot cover a shipment
- Need for an expedited shipment
- Limited freight volumes that aren’t sufficient for contract coverage.
Spot rates usually cost more than the contract market, but there are periods when the supply-demand pendulum swings. This drives spot freight rates lower than established contract rates. Utilizing the spot freight marketplace in this environment allows shippers to control spending on strategic spot shipments. At the same time, transportation strategy without spot moves contributes to a risk of stock-outs and supply chain delays.
See how to make the spot market work better for you.
How MercuryGate TMS Helps Navigate Spot Rates in Transportation
MercuryGate TMS offers centralized visibility to the spot market to deliver the most effective utilization of spot rates across all modes.
- Easily find capacity: User-friendly navigation tool leads users to the suitable carriers for their freight.
- Consolidate coverage: Consolidated platforms make it simple to locate capacity, regardless of transportation mode.
- Get quotes faster: A centralized application allows shippers to request quotes and carriers to accept bids in real-time.
- Access all major load boards and carrier systems: Tap into all the major load boards and carrier databases for the broadest possible sourcing.
Supporting more visibility into current rates with the extensive Rate Repository and Freight Rate Index, MercuryGate is a market leader in providing insight into rate volatility. That leads to more optimized transportation and lower landed spend.
