Economic uncertainty has been a contributing factor to the trucking industry since its inception. However, the pandemic brought it to a new level. This recent uncertainty led to much more spot quote business. When uncertainty is high, building a relationship is not as high on the priority list. While the spot market was helpful to carriers when the pandemic was at its peak, this is not the case most recently.
Experts have seen multiple indicators signaling drops in the spot market, but what does this exactly mean for you?
What is the Spot Market
First, it would be helpful to first understand what the spot market is. The rate at which freight is moved directly in the moment or immediate future is referred to as the spot market in the transportation industry. The spot market is more demand-dependent because it relies mostly on the work of brokers to ship products at short notice. Supply and demand impact how spot market rates will transpire.
Impact of the Current Spot Market on Carriers
The main impact of spot market rates is on truck drivers and owner-operators. The rising inflation and slow restocking of inventory has led to lower earnings for trucking companies. The risk of a struggling economic recession has left some analysts alarmed. There are the insanely high fuel prices and the lack of drivers that makes freight recession an issue at hand.
There is a fluctuation of spot market rates in the industry when you factor in the number of available truckers. When there are fewer trucks and drivers then rates are likely to rise. Fewer loads result in rates dropping, creating a capacity, or a load-truck ratio. Unfortunately, some drivers and owners of their own carriers fall under when the spot market declines. They often must resort to working for other companies or find work elsewhere.
How The Consumer is Being Impacted
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3PL’s Potential Solution to Spot Market Decline
A company facing the issue of trucking’s spot market decline should partner with a trustworthy 3PL. A third-party logistics provider has the network capacity to help you in situations like the pandemic and rising oil prices. Securing a contracted freight rate is the first step you can take. A 3PL can negotiate the best-priced contracts so that you won’t be left hanging dry. Another potential solution would be to only work areas that aren’t as susceptible to declining spot market rates. Lastly, you can be connected to varying customers and freight types to have options. 3PL providers have experience in how to watch and understand rate fluctuations. Their expert knowledge can guide you to make well-informed decisions regarding freight loads, contract rates, and route scheduling.
If you need a 3PL service to guide you through a spot market decline, then you should check out HTL Freight. To find out more, you can contact us. Additionally, if you want to get started today, you can click here and request a freight quote.
