Today’s freight market is unpredictable, but one thing is for sure: it’s cyclical. Over the course of next year, shippers and carriers will likely see it all: soft markets with declining rates and up markets with rising rates. With so many variables to consider, it’s impossible to predict where rates are heading in the short or long term, and it’s even harder when you have lanes with inconsistent volume. That being said, logistics professionals and shippers are still expected to build plans for 2023 that will save their company money.

Matt Jolles, Manager of North American Truckload at the world’s largest tool manufacturer, Stanley Black & Decker, is one of them. With low volume lanes “ it’s very tough to get consistency from a contract rate perspective. We’ll lock in a rate and as long as they’re seeing freight, we might get three months at the agreed upon price. But the arrangement will typically fall apart,” he says. His transportation team runs operationally lean, making booking efficiency critical. While planners have a set routing guide, there’s limited bandwidth to spend waiting for carrier responses or finding coverage on the spot market. Re-pricing bids also places a strain on resources.

As part of their 2022 plan, Black & Decker started with Loadsmart’s Reliable Contracts on their most troublesome outbound CA lanes. Instead of having a static rate, they used a dynamic rate that included a 100% PTA Guarantee, incentivized margins, and rate transparency. “What Loadsmart’s Reliable contracts allows me to do is take our known, tough to contract lanes and have guaranteed capacity. We haven’t had any noise since we started the program... and we’re able to achieve a reduced time, about 1-min, to book a load.” As the market softened throughout 2022, they’ve taken advantage of the floating rate to drive over $100K in cost savings, all without having to re-bid. Since the start of the program, Black & Decker has expanded to five new locations and tripled the load volume moved by them.

How’d they do it? Reliable Contracts allows shippers to follow three strategies.

Strategy #1: Avoid The Spot Market When Rates Decline

This might be a bit of a head scratcher. If rates are low, isn’t the spot market–where you can get carriers to bid against each other to see how low you can go–the place to be? Not so fast.

While a short-term reward can come by covering a few trucks at slightly lower rates, there are still risks. Access to capacity, for example, is never guaranteed on the spot market. It’s also likely you’ll be working with new and unvetted carriers who do not know your products or service requirements. There’s always a learning curve for onboarding new carriers and it usually impacts delivery performance to some extent. And, for companies with contracts, there are volume commitments that may be put in jeopardy. There is an element of cost transparency that is lost on the spot market as well.

Strategy #2: Guarantee Capacity In a Soft Market Before It’s Too Late

Another head scratcher. Why do you need to guarantee capacity when there is an abundance of it? Simply put, when rates increase, and sometimes they do overnight, finding trucks is hard. During times like this, static contracts are valuable, except when carriers reject loads at the static rate and can’t provide the trucks you need. Unfortunately, this situation became pretty common for a lot of companies in 2021. So, whether it’s likely to happen or not in the next 12 months, companies still need a strategy for when rates begin increasing that will keep costs market appropriate while maintaining guaranteed capacity. The goal in that environment is to prevent overpaying or having the tender rejection rates increase. Much like when rates are falling, the best solution is one that aligns incentives between you and the carrier while providing pricing transparency and protection.

Strategy #3: Work With Providers Who Do What They Say They Will

 Take yourself out of logistics for a second. Why do people more often than not hold up their side of the bargain? Hopefully, it’s because they have a moral compass. But we all know that the strongest influence on whether one party satisfies their end of the deal is when it is in their best interest. So the key to working with providers who do what they say they will is entering into agreements where both parties have a mutual incentive for shared success. While providers today may say they guarantee 100% tender acceptance, this is only a marketing tactic unless they’ve developed a contract where it is in the best interest of both parties to guarantee it.

These three strategies allow you to save money, guarantee capacity, and ensure a high quality of service. If you’re a shipper, you would likely be happy with a solution that gave you one of these. But all three? Impossible. Loadsmart has developed a new way for shippers to operate called Reliable Contracts. It allows shippers to avoid overpaying in a down market, get 100% tender acceptance in an up market, and the peace of mind that we’ll deliver because our incentives are aligned. Matt Jolles and his team at Stanley Black & Decker was able to capture $100K in cost savings compared to contract rate locked six-months prior, 100% PTA throughout the program, and a 8X reduction in minutes to book a load following these three strategies that are embedded into Loadsmart’s Reliable Contracts.

To learn more about how Stanley Black & Decker leverages Reliable Contracts and other Loadsmart solutions in a soft market, click here.

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