How Spot Quotes Have Changed the Shipping Landscape During The Pandemic

The Year of the Spot Quote

When quick shipments are necessary, and supply chain managers don’t have enough carriers with capacity, the spot quote has long been a reliable tool to pull out in a pinch. Whether it’s the holiday season or a special event, spot quotes dominate the market if shipments need to be sent with urgency.

So it’s no surprise that the spot quote has become king in a pandemic. A sudden demand for critical medical supplies, pharmaceuticals, and other life-saving products has led to global shortages, and manufacturers worldwide have been under pressure to increase production and delivery. This urgency has caused a trend for short shipping deadlines, and despite a lack of supply and labor, manufacturers have been expected to meet those deadlines.

While spot quotes are a great management tactic for unplanned shipments, if the use of spot quotes is consistent, as it has been for many shippers in 2021, the bottom-line result of that practice can be very costly. When suppliers and distributors quickly compete for prices and efficiency, the advanced research and forecasting that comes with a contract quote environment are often lost. Additionally, spot quotes are highly susceptible to change based on quickly shifting market factors, and more often than not, surcharges increase significantly.

As a result, many supply chain managers have started planning to request spot rates as far in advance as possible. These requests need to be forecasted. While the need for a spot quote is inherently unpredictable, market trends can still be tracked and prepared for. Incorporating a robust TMS allows suppliers to strategize best plans under market pressure, using data analytics to determine how many carriers are needed and assess the quality of the carriers available. With freight quotes, the lowest priced option is not always the best option, so as shippers seek a balance between keeping their supply chains strong while also maintaining the quality of their deliveries, it helps when a TMS can easily compare carrier options.

If shippers use spot rates, they also need to use very detailed shipment information so that rates are as accurate as possible. This means accounting for any special requirements, especially non-standard freight requirements. It cannot be assumed that the quote from a previous spot rate will be the same as it was the last time. Spot market rates can change over the course of a day or even hours.

Preventing the Need for Spot Quotes

Beyond attempting to manage best practices for the use of spot rates, suppliers can benefit from planning to avoid using these one-time rates as much as possible. For example, sometimes companies will get into a habit of requesting spot rates for the same freight moves, over and over, choosing carriers based on the lowest price, or taking more time to consider other factors. In these cases, carriers don’t have an incentive to give the best rates or best service when there is no stability in their relationship with a shipping company. As a result, shippers can be less likely to be satisfied with the delivery quality.

The key for suppliers is to use past data and available information about the market to know when spot quotes are best suited for, how they should be calculated, and when they should be avoided. Right now, spot rates are on the decline, but they remain relatively high, although there is hope for more steady contract rates in the New Year, once the new year passes. With the use of solid logistics management and a robust TMI, supply chain managers can make these decisions about when to engage with spot rates or not.

CTSI-Global offers over 60 years of data analytics and relationships with 20,000 carriers, all continuously tracked by the Honeybee TMS™. This way, supply chain managers can quickly compare rates while also reviewing data on delivery reliability.

Contact CTSI-Global today to learn how to navigate re-evaluating your routing guide.