How a Carrier Balances Spot v Contract Trucking Through Tech

Trucking is one of the most important aspects of the American economy. The trucking industry moves more than 70% of all freight in the United States, and employs more than 7 million people in 2020, says the American Trucking Association. That’s why it’s so important for truck drivers to be well-informed about their options when it comes to balancing spot v. contract trucking. Furthermore, figuring out how to best allocate trucking assets can be troublesome, but technology can help. Let's take a closer look at how.

Carriers Apply Technology to Visualize and Manage Spot v. Contract Trucking Assets

Carriers must consider the opportunities for back-hauls, per mile price reductions, volume fluctuations, changes in wait times, and tendering data to make the most of their assets. How they use spot v. contract trucking services varies by driver type and overtime based on load availability (and if there is any), additional carrier expenditures. It's for this reason that spot market services are accounted to be the most important operating expense in trucking.

Most carriers or trucking companies can expect spot opportunities to provide about 10% of their total revenue, which is still a considerable figure. This number varies by carrier, with spot call rates being either higher or lower than contract rates and dependent on spot service needs and price expectations. 

A major factor affecting spot revenue is the level of competition within any given spot sector at any given time. However, carriers have better insights into what registered capacity exists beyond their fleets through online tracking tools and connecting systems, much like newtrul. By having access to the right data, they know exactly how much capacity exists among load providers relative to demand. In turn, they can better manage truck profitability and avoid losses. 

Carriers May Also Turn to Digital Freight Aggregators to Source More Capacity

There's another advantage in working with connected platforms. Digital freight aggregators help carriers get their capacity in front of more shippers. That helps to reduce total costs, but it also opens the doors to more high-quality loads.

Spot opportunities can be scattered across a variety of marketplaces that may or may not be in a carrier's wheelhouse. Having access to an aggregator platform that sources capacity from a network of shippers cuts down on time spent hunting for spot business.  

Now with a scattered spot freight market, that usually involves short to medium length hauls. Still, carriers need a sure-fire way to find the right loads for every truck, driver, and available route. Freight trucking companies also leverage digital marketplaces to spot-bid loads in their service areas or work with spot freight brokers to find the right spot load opportunities. Not relying on one market offers much better control over revenue.

Carriers Apply Analytics to Know Their Value

Applying analytics tools also helps carriers to navigate the market. Using metrics highly like those brokerages use when selling capacity, carriers can better understand the needs of shippers and brokers alike. Meanwhile, spot trucking companies can use analytics to see gaps in the spot markets, then bid on available loads with less reliance on traditional brokers. 

Before examining spot v contract trucking, it’s important to understand the difference between spot and contract rates. Both spot rates and contract rates are paid for by shippers or brokers, but vary in their terms. Spot rates are negotiated on a per-load basis with no long-term commitment from shipper to carrier, while contract rates are typically renegotiated annually. However, highly volatile markets may lead to multiple mini-bids, essentially asking trucking companies to offer a better rate for a short period. Yet, that comes with the risk that carriers could still lose money. Ergo, the best choice is for carriers to know more about what their networks and assets are worth before heading to the negotiating table.

Benchmarking Truck Performances to Better Allocate Assets

Using analytics also has another value-add. Analytics and benchmarking help carriers track their network performance. In turn, they're able to stay more competitive and avoid seeing shippers jump ship for other carriers. That may rarely be the case in markets like late 2021 or even early 2022, but the risk always remains. 

When carriers identify trends like market rates increasing while overall utilization falls, they can adjust their capacity accordingly. If spot rates go up but you continue to see overall utilization decline, then the rates will require balancing in one or more markets. The real trick for carriers is knowing which market leans more toward spot v contract trucking

Carriers Pool Capacity to Find Higher-Quality Loads and Avoid Deadhead

The cost of deadheading in supply chain trucking can be significant. By pooling capacity, carriers can better avoid deadheading. Depending on a variety of factors, deadheading may affect 5-15% of all miles driven. Thus, finding ways to avoid deadhead is a valuable strategy for trucking companies looking to optimize their supply chains.

Empty backhauls and running without a full truck is the definition of deadhead, and it causes more problems than many realize. Deadhead leads to trouble finding and retaining drivers, especially for carriers operating with third-party owner-operators. Remember that owner-operators have an interest in moving as full a truck as possible, and deadhead is taking money from their pockets. Further, empty backhauls increase congestion and emissions as empty trucks stop and go on the road. Fortunately, technology like newtrul that puts capacity in front of more shippers means a lower risk of deadheading. It's that simple. 

Create More Value in Your Trucking Company With newtrul

Carriers and trucking companies have long been using data to improve their business operations. They understand their strengths and weaknesses in different markets, pool capacity where needed and use data-driven decision-making to stay ahead of the competition. If you’re looking for a way to improve your own logistics operation, learn more about how your company can be part of the solution in managing spot v contract trucking capacity by requesting a newtrul demo today. 

Back to Blog

Related Articles

How Carrier Sales Can Reduce Deadhead in Trucking Thru DFM

Deadhead in trucking is a necessary evil that most people know very little about, but it’s the...

What's Eating Profitability Among Trucking Companies in the Carrier-Leaning Market?

For many trucking companies and carrier networks today, the greatest struggle they face comes down...

Optimizing the Trucking Network: How Brokers & Shippers Are Using Tech

Logistics managers working within the trucking network today have to keep up with the newest...