Finding an affordable way to move your freight is essential. Whether it’s one shipment that needs to be delivered as soon as possible or multiple shipments moving on a routine schedule, spot rates vs contract rates are two viable options in certain situations. Here at USA Truckload Shipping, our experience moving freight throughout the US has given us a thorough understanding of spot and contract rates. We’ll use this knowledge to explain how they work.
Key Takeaways:
We’ll cover the pros and cons of both freight rates so you can confidently choose what’s best for your business.
Contract rates, or dedicated rates, are pivotal to meet consumer demand, while carriers provide spot rates with the capability to move your freight on the fly. Working with a trusted logistics partner to move your freight on time helps maintain customer loyalty and satisfaction.
Let’s take a look at a hypothetical situation where a spot rate would be appropriate.
Picture one of your retailers requesting a rush delivery of mascara containers because they forgot to include the item in their last order. They need them as soon as possible for a beauty event in a few days. This is where spot rates are handy.
Now, here’s a hypothetical example where a contract rate would work best.
Let’s say you own a warehouse that ships beauty supply goods monthly to various retailers nationwide. You would depend on reliable shipping to deliver freight to consumers who expect their cosmetic goods at their stores at the same time each month. In this scenario, a contract rate would be essential.
Both spot and contract rates are determined by the current freight market, from national van rates in the spot market to flatbed rates in the contract rate market. You can use trend tools to learn the current National Van Rates, as well as flatbed and reefer rates.
Related Article: 10 Ways to Reduce Freight Costs: Strategies for Budget Management
Both spot and contract rates have their upsides and downsides depending on your shipping demands. Let’s start with the bad news before we uncover the good news.
Cons of Using Spot Rates
Because spot rates are short-term transactions, freight market trends can lead to dynamic pricing and make it difficult to stay within budget.
While spot rates could be ideal for urgent deliveries, you may run into tender rejection depending on a carrier’s capacity, which can cause further shipping delays.
Cons of Using Contract Rates
Long-term agreements may serve your shipping needs today, but may not account for business changes that occur over time. Contracts are set to specifics like the consistency or size of your freight, and may not offer flexibility when you need it.
Now, let’s explore how spot and contract rates can be great solutions for your trucking needs.
Pros of Using Spot Rates
When you’re in a hurry to ship products, finding a reliable carrier with the capacity for your freight can save the day and keep your customers happy. Spot rates are also useful if you want to test out a new logistics provider before committing to a lengthy contract.
Pros of Using Contract Rates
Contract rates help you stay on schedule and streamline your shipping. Most contracts are negotiated for six months or longer and prioritize your budget goals and consumer demand. This gives you peace of mind that your business is in good hands today and in the future.
Learning when to utilize spot rates vs contract rates for your freight helps you get the most bang for your buck.
Whether you need expedited freight shipping or reliable drayage services, USA Truckload Shipping is your solution to navigating freight rates that work for you.
Get in touch with our shipping experts at (866) 353-7178 or fill out a request for proposal to get started today.
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