The media’s buzzword of the moment is “inflation”. Materials shortages, rising prices, and consistent demand all indicate that we’re on the cusp of an inflationary period. The outcome remains to be seen, but now is the time for companies to practice smart spending. For a simple way to spend smarter, take advantage of volatility in the spot market to address rising freight costs.
Freight rates on the rise…and going higher
As supply chains reconnect around the world, demand has pushed freight rates to significant highs. Almost all modes are tight with capacity and increased rates — especially ocean imports and other U.S. truckload and LTL lanes. A good portion of this volatility comes from decreasing carrier compliance — the number of carriers turning away freight is steadily climbing, reaching rates of 20-25%.
Other headwinds are also pushing up spot prices. According to the Department of Energy, the cost of fuel jumped 12% in the first quarter. The result is higher spot prices and heavy fuel surcharges.
In ocean freight, China’s Port of Yantian is responsible for a bottleneck and costly delays. The port handles roughly 25% of China-to-U.S. shipping volume, but it has only reached approximately 30% capacity in the wake of new COVID-19 outbreaks. Ships are waiting up to two weeks to dock and transferring costs back to shippers seeking to move ocean freight.
Even air freight prices are up — with rates rising as much as 25% in April and May of this year — in response to skyrocketing fuel costs and the struggles facing truck and ocean transport.
Spot auction tools and automated bidding assist in best possible rates
Virtually all shipping lanes are currently inflated. And with costs likely to remain high, the spot market is a minefield for shippers seeking LTL and one-off transport. Navigating these markets means relying heavily on spot auction tools and automated bidding solutions to identify and lock-in the best possible rates.
The tools offered by nVision Global’s IMPACT TMS provide a premier example of how machine learning and intelligent systems can pinch pennies in the current market. Automating bid strategies and qualifying carriers prior to placing a reverse bid cuts down on the number of null responses and can quickly identify the best carrier and rate combination for a specific shipment. At a time when agility is the key to spot market success, there’s simply no substitute for these smart TMS tools.
Be prepared to navigate the spot market
Don’t fall into the trap of avoiding the spot market altogether. Shippers with contract carriers are known to lean too heavily on their terms to avoid the volatile spot market — even when a one-off solution is more suitable and cost-effective.
The spot market is expensive, but it’s still a resource for LTL and specialty trucking. IMPACT TMS tools and similar smart systems can save money on certain ground, ocean, and air transport options — in some cases beyond pre-negotiated contract terms. It’s worth exploring, and rather than fear the spot market, shippers should seek to capitalize on it now more than ever.