At a basic level, freight is about moving goods from one dock to another. Shippers who're running full truckloads across the continental US have two main options: spot freight and contract freight.

Spot freight offers flexibility when the market shifts overnight. Contract freight delivers predictability when stability matters most. But which of the two do you choose?

At Forza Logistics Group, we’ve seen the stress of volatile rates and the relief of predictable agreements. So, trust us when we say, we can give you a clear idea of how each model impacts your freight strategy.

What Is Spot Freight?

Spot freight is the on-demand side of shipping. A shipper pays a single price to move a specific load. That price is called a spot rate, and it's built around real-time market conditions like capacity, fuel costs, and demand on that particular day.

Spot rates rise and fall quickly, often sitting above contract rates because they represent a one-off move rather than a steady flow of freight. Carriers tend to favor these opportunities when demand surges and trucks are scarce, as the margins can be more attractive.

Spot Rates vs. Contract Rates: The Key Differences

The two models operate on very different terms, and their features highlight those differences clearly.

Contract Freight Features

Contract Freight is built around stability. Pricing is locked in through negotiated agreements, often tied to specific lanes over a set period of time.

These agreements usually come out of procurement bids, where carriers compete for guaranteed volumes. Since carriers gain consistency, they're often willing to lower their rates. So, contract freight is generally more cost-effective for shippers in the long run.

Spot Freight Features

Immediacy is the main driver in spot freight, as rates change constantly, shifting with fuel prices or sudden spikes in demand. A shipper pays a one-time quote to cover a single load, with no ongoing commitment.

The spot freight model favors carriers during tight markets. Since demands are high, they can command stronger margins.

Which Is Cheaper?

Contract freight holds the advantage in most scenarios since carriers trade discounts for reliable business. However, the balance shifts with market cycles.

• When capacity is abundant, spot rates can dip below contract pricing.
• When trucks are scarce, spot rates often climb well above contracted levels.

Movement in the spot market also impacts contract negotiations. As a rule of thumb, higher spot rates lead to higher contract pricing. The same directionally proportional relationship also applies to lower spot trends, reducing contract rates.

The Basics of Spot Markets, Rates, and Pricing

A spot market forms when shipments move outside of contracted freight agreements. Logistics providers then issue a one-time rate for a specific move.

These spot rates reflect market conditions at the time of booking. They require a quick acceptance as they can change within days.

Factors That Determine Spot Rates

The following factors influence spot rates:

• Existing Relationships: Benchmarks or prior dealings with providers can shape initial quotes, with stronger relationships often getting you lower rates.
• Freight Type and Shipping Mode: Some goods, such as temperature-sensitive items and oversized cargo, carry higher pricing.
• Freight Volume: Surges at certain times of the year, like agricultural harvests or holiday retail demands, can overwhelm available capacity, ultimately sending spot rates higher.
• Route Complexity: Certain routes are harder to cover due to geography or limited backhaul opportunities.
• Fuel Pricing and Currency Swings: Fluctuations in both of these factors affect transportation costs.
• Load-to-Truck Ratio: A capacity shortage results in higher prices, while excess equipment leads to lower prices.
• Included Services: Providers that offer additional services like customs clearance, warehousing, and load consolidation tend to charge higher.
• Time Sensitivity: If you opt for expedited or last-minute bookings, expect to pay a premium.
• Special Handling: Materials that need extra care, such as high-value shipments, increase spot rates.
• Weather Disruption: Hurricanes, blizzards, and floods can shut down lanes and reduce capacity, which ultimately creates sudden spikes in pricing.

Why Use Spot Rates?

Companies with irregular or low shipment activity may not have enough volume to secure long-term pricing. So, spot rates suit shippers who don’t always move freight in predictable patterns.

They also provide a release valve when contracted carriers run out of room. For example, in seasonal surges or sudden spikes in demand, spot capacity can fill the gaps.

Another scenario involves loads that fall outside the norm. Shipments needing flatbeds, temperature control, or specialized handling often sit beyond the reach of standard contracts. In those cases, spot freight is the better option.

Benefits and Downsides of Spot Freight

Spot freight has advantages for both shippers and carriers, but it also comes with trade-offs. Let's look at both sides.

For Shippers

Flexibility is the main benefit of spot freight for shippers. When a contract carrier reaches capacity or an unexpected order arrives, spot freight provides quick access to trucks to keep the supply chain moving.

It's also a way to explore new lanes or try out carriers before making a long-term commitment. Since there are no volume requirements and multiple carrier options, companies getting into fresh markets can use spot options until steady volumes justify a contract. Even better, they can benefit from favorable market dips to lower transportation costs.

On the downside, spot pricing swings unpredictably, which can complicate budgeting. Service quality also varies from load to load. Companies that over-rely on the spot market may also strain their existing contract partnerships.

For Carriers

In tight markets, spot pricing works in the carriers' favor. It allows them to command higher rates and ultimately enjoy higher margins. Plus, they have a better chance to strengthen relationships with new shippers or fill empty space with profitable one-off moves.

However, carriers that only rely on spot freight also face uncertainty. Demand may dry up as quickly as it appears. So, trucks remain idle, and revenue is inconsistent.

The Role of Spot Freight in a Balanced Strategy

Spot freight works best when combined with contract freight, as the duo maintains predictability and cost control while providing the means to handle one-off shipments and market volatility.

Accounting for anywhere from 15% to 20% of total freight activity, spot freight is now in more demand than ever. Thanks to digital freight platforms, shippers can get real-time visibility into quotes, competitive options, pricing, and more.

At Forza Logistics Group, we keep your freight moving without friction. Our services span every major mode, including dry van freight, bulk and tanker, drop trailer, intermodal, flatbed, and more. Get a quote now to build a freight strategy that keeps you covered in every market condition.

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