Spot rates

A spot rate in trucking—sometimes called a spot quote—is a one-time fee that a shipper pays to move a load 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 types, and each equipment type often dictates rates depending on demand. Spot market truckload capacity is available for dry van, refrigerated and flatbed equipment types.

Spot rates are affected by load-to-truck ratios, driver availability, fuel costs and origin-destination pairings. Unpredictable market conditions and disruptions contribute to rapid changes in spot rates.

In general, periods of excess demand result in higher rates. Periods of relatively stable conditions—including ample capacity to meet freight shipping demand—precipitate decreases in rates.

While spot rates are a one-time fee paid to transport a shipment, contract rates reflect an ongoing relationship between the shipper and logistics services providers (LSPs).

Contract rates are long-term, stable pricing for transportation on a specific lane for a set period of time, offered in exchange for volume commitments from shippers to transportation providers.

Spot freight rates are volatile based on trucking capacity supply and shipper demand. Contract rates are fixed and allow shippers to award lanes and freight volumes to specific providers based on rate, service and capacity.

Spot freight rates apply in domestic over-the-road trucking and international air and ocean transportation.

Ocean freight spot rates

Ocean freight spot rates apply to ocean transportation. They are often restricted to one vessel and apply to one shipment or container only. Ocean freight rates are determined based on charges such as cost per weight of goods and space consumed, plus fees associated with pre-carriage, carriage and on-carriage activities.

Air freight spot rates

Air freight spot rates are used when there is a need for expedited, reliable service. Air freight spot rates are based on the initial chargeable weight of the cargo, calculated based on weight, size or volume of goods. Air freight spot rates are calculated per kilogram.

Intermodal freight spot rates

Intermodal spot rates are comprised of the drayage origin rate, rail line haul and drayage destination rate. Shippers access intermodal rates through an asset-based or non-asset-based logistics services provider.

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.

Load boards connect shippers with carriers and create the spot market for moving freight shipments. A load board allows users to post freight shipments or empty trucks and 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 current spot prices within that specific marketplace.

Shippers who rely on spot rates must contend with complex market data. Spot freight rates are generally higher than contract rate commitments. Effective spot rate management depends on maintaining awareness of the vast data available on the spot market:

• 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 influence total costs and risk for every freight move.

Spot rates are more favorable for shippers than contract rates in certain situations:

• Primary and backup carriers cannot cover a shipment

• Need for an expedited shipment

• Limited freight volumes that are not sufficient for contract coverage

Spot rates usually cost more than the contract market, but there are periods when the supply-demand pendulum swings—driving spot freight rates lower than established contract rates.

A transportation management system (TMS) automates and integrates spot market management, allowing users to access load boards or automatically match loads with transportation providers that fit their service lanes. Users can base transportation decisions on price and service level while reducing manual processes.

Key capabilities:

• Find capacity: User-friendly tools lead users to suitable carriers for their freight

• Consolidate coverage: Platforms that make it simple to locate capacity regardless of transportation mode

• Get quotes faster: Centralized applications allow shippers to request quotes and carriers to accept bids in real time

• Access load boards and carrier systems: Tap into major load boards and carrier databases for broad sourcing

• Rate intelligence: Rate index and freight rate visibility tools deliver insight into rate volatility, supporting more optimized transportation and lower landed spend