For one thing, however monolithic or reluctant you might call logistics in adopting new-age innovation – it’s been amidst sea changes since ever. While focusing on this, many areas have revealed their dire need for a perception overhaul instead of just tech or process renovation. One common approach is to rely on contract agreements, which offer a sense of safety and security. However, this approach can often lead to unexpected challenges, especially in tight markets – where rejection rates are high. On the other hand, in soft markets, shippers may overpay for their contracts and miss out on potential savings. So, it’s important to consider strategies, such as spot market procurement, which can offer more flexibility and cost savings.
Here, we’re going to discuss some myths and help you realize the untold sides of the story:
Myth #1: One of the most common myth spot market procurement has is that it’s always more expensive than contracted agreements. This is not necessarily true as the cost depends on many factors. When used optimally, the spot market can offer competitive rates and fast turnaround times. However, shippers often make the mistake of relying too heavily on their routing guide and not utilizing spot market procurement strategically. It’s essential to use spot market procurement for exceptions, short lead times, and less attractive loads to get the best prices.
Myth #2: Another myth is that carriers prefer only contracted agreements and that moving away from contracts can damage the shipper-carrier relationship. While it’s true that carriers value security, most carriers prefer a mix of contracted agreements and spot market procurement. This allows carriers to manage the volatility of daily operations and balance their workload effectively. It’s important to communicate the shift to a dynamic mix of contracts and spot market procurement with carriers to maintain a positive relationship.
Myth #3: Another common myth is that spot market procurement can lead to lower quality and reliability of carriers. While this may be true for some open freight exchange platforms, it’s not the case with TruKKer. Shippers have total control over their carrier base and can carefully select carriers that meet their requirements. Our onboarding team makes it easy to onboard new carriers and minimizes the effort on both ends. Shippers always have the final say when it comes to adding new carriers to their pool.
Myth #4: Lastly, some shippers believe that 100% contracted agreements, even for lanes with no volume, is the best strategy. However, this is not the case. Investing time and money in procuring “ghost lanes” with no or low volumes is not a smart strategy. According to MIT researcher Angela Acocella, having a rate for every single lane does not make sense and will result in overpaying. In tight markets, carriers will reject the load on those lanes, and in soft markets, shippers will overpay for the load. It’s important to have a dynamic mix of contracts and spot market procurement to avoid these pitfalls.
In conclusion, it’s time for shippers to rethink their procurement strategies and embrace the benefits of spot market procurement. By utilizing spot market procurement strategically, shippers can achieve cost savings, flexibility, and faster turnaround times. Don’t fall for common myths about spot market procurement, rather start optimizing your shipping strategy today.