After two years of dealing with an exceptionally tight truckload market, shippers are currently enjoying an inverted market (where average spot rates are below contract). Contract rates are dropping, carrier acceptance rates are high, and capacity is readily available. But smart shippers know that the market is cyclical and that now is the time to lay the groundwork to secure required capacity when the market tightens.
It all starts with better understanding your network. While freight networks differ shipper to shipper, they all share two common traits. First, most of the shipment volume is concentrated on very few lanes with the majority of the lanes carrying very little of the overall volume. Second, many, if not most, of these lower-volume lanes do not repeat year over year.
Shippers should segment the lanes within their network based on shipment frequency, consistency, and balance and then match them to the appropriate procurement method in their portfolio. High-volume, consistent, and balanced lanes are best handled with dedicated assets. At the other extreme, low volume and inconsistent lanes are best handled through a dynamic market mechanism — such as an API to a sophisticated broker or a private load board. In other words, let the low-volume lanes float (to some degree) with the market rather than spend time setting up contracts that typically do not get honored anyway. Save your time and effort on the middle bucket of lanes that have sufficient volume to justify an annual contracted rate but do not rise to the level that warrants dedicated operations. Lanes have different characteristics and should use different procurement methods.
Smart shippers are using this soft market to analyze their freight networks, segmenting lanes accordingly and expanding their procurement portfolio to include dedicated, contract, and spot relationships.