Executive Briefings

Aligning Transportation Budgets with Market Conditions

Many shippers could save money by taking advantage of the substantial spot market for transportation, says Ralph Galantine, product manager at DAT. Capacity varies greatly by lane, however, so good market data is essential.

Millions and millions of freight loads move on the spot market every month, Galantine. DAT posts more than 68 million loads per year on the load boards that it operates. Many more loads never get posted or are posted elsewhere, so Galantine estimates that the overall spot market represents between 10 percent and 20 percent of the total freight market in the U.S.

"A lot of people in the supply chain think of the spot market as a place to go for exception freight - something you don't normally move or can't move with your regular carriers," says Galantine. "But a functional spot market is operating every day between brokers and small and large carriers, with rates negotiated on a daily basis." Rates are lower, on average, than contract rates because much of the capacity would otherwise move empty and brokers act as sales agents for the carrier, reducing overhead costs.

Getting the best deal on the spot market requires doing some research, however. Transportation managers need to look at their own data and talk to suppliers, carriers and brokers; they also need to consult external data, Galantine says. "That's the only way they will know if they are paying too much in a given situation." There are many sources for such data, including DAT, which provides rate data on a lane-by-lane basis for easy comparisons.

Most companies will find that they are paying above market rates, at least in some lanes, he says. "The carriers shippers are using may not be the right carriers for all of their freight," he says. "If they have not been looking at external data and comparing their rates to the market, I am pretty confident they will find they are overpaying on some lanes."

Galantine also suggests that shippers use external data to assess responses they get on bid requests. "They can then see if the responses they are getting back are high market, below market or at market - and then take another look at those carriers," he says. This information can lead to constructive conversations with carriers around reasons for the carrier's higher bid, such as DCs with long wait times or the fact that certain lanes just don't fit in with that carrier's network, he says. Appropriate action, such as going out to more carriers or addressing problems at a DC, can improve operations overall, he says.

To view video in its entirety, click here


Keywords: supply chain, supply chain management, 3PL, transportation management, third party logistics, logistics management, logistics & supply chain, logistics services, supply chain solutions, transportation management systems, supply chain services, retail supply chain

Millions and millions of freight loads move on the spot market every month, Galantine. DAT posts more than 68 million loads per year on the load boards that it operates. Many more loads never get posted or are posted elsewhere, so Galantine estimates that the overall spot market represents between 10 percent and 20 percent of the total freight market in the U.S.

"A lot of people in the supply chain think of the spot market as a place to go for exception freight - something you don't normally move or can't move with your regular carriers," says Galantine. "But a functional spot market is operating every day between brokers and small and large carriers, with rates negotiated on a daily basis." Rates are lower, on average, than contract rates because much of the capacity would otherwise move empty and brokers act as sales agents for the carrier, reducing overhead costs.

Getting the best deal on the spot market requires doing some research, however. Transportation managers need to look at their own data and talk to suppliers, carriers and brokers; they also need to consult external data, Galantine says. "That's the only way they will know if they are paying too much in a given situation." There are many sources for such data, including DAT, which provides rate data on a lane-by-lane basis for easy comparisons.

Most companies will find that they are paying above market rates, at least in some lanes, he says. "The carriers shippers are using may not be the right carriers for all of their freight," he says. "If they have not been looking at external data and comparing their rates to the market, I am pretty confident they will find they are overpaying on some lanes."

Galantine also suggests that shippers use external data to assess responses they get on bid requests. "They can then see if the responses they are getting back are high market, below market or at market - and then take another look at those carriers," he says. This information can lead to constructive conversations with carriers around reasons for the carrier's higher bid, such as DCs with long wait times or the fact that certain lanes just don't fit in with that carrier's network, he says. Appropriate action, such as going out to more carriers or addressing problems at a DC, can improve operations overall, he says.

To view video in its entirety, click here


Keywords: supply chain, supply chain management, 3PL, transportation management, third party logistics, logistics management, logistics & supply chain, logistics services, supply chain solutions, transportation management systems, supply chain services, retail supply chain