Brilliant Logistics Life Hack for Transportation Planners in 2019

The following logistics life hack, specifically directed at transportation managers, presses an existing TMS element into service in an unexpected, unorthodox way and promises to save shippers significantly on freight costs by providing an innovative way to validate rates in a volatile environment.  You’ll be shocked you hadn’t thought of it yourself!

Did you ever use an item in a manner it was definitely never intended to be used, to achieve a goal nobody’d ever associate with that item?  Like using uncooked rice to dry out a cell phone you’d accidentally dropped into the sink/toilet or using a bag of kitty litter beneath your drive wheels to provide traction when stuck in the snow, this logistics life hack uses spot market tendering tools to help validate contracted freight costs.

Here’s how it works.  First, realize that you’re already primed to overspend on truckload freight in 2019.  This is because the contracted rates you’ve negotiated with your carrier base likely reflect the trend established over the trailing 12 months.  With 2018 being a year of record capacity shortage and strong economic output, freight rates were driven to heights by unprecedented short supply and high demand.

Next, take a hard look at what’s on the horizon.  2019 won’t see the continuation of the 2018 dynamic.  In fact, we’re already seeing easing in terms of capacity and overall rates.

If the spot quotes returned are near or below contracted rates in any given lane, this indicates market rates may have fallen year over year.   When spot rates lower than contracted rates are identified in a given lane, redirect a small percentage of freight in that lane to the spot market carrier. 

American Trucking Association Chief Economist Bob Costello says, “We have hit the peak in the current freight cycle.  The economy is still growing, just not as fast as is has been in 2018”.  Other indicators pointing towards modest cooling include increased driver hiring, slowing economic activity thanks to trade wars and falling manufacturing volumes among US factories. That means, unless your company runs procurement events very regularly you’re poised to be overpaying.  You’re just not seeing it yet!

Now here’s the logistics life hack!   Instead of using your UltraShipTMS spot quote tool as you normally would (to drive competitive bidding amongst carriers for expedited loads), leverage the tool as an analytics device and gain insight into where your contract rate should be in real time.  Of course, we’re certainly NOT urging any shipper to stop honoring carrier contract obligations.   What we are suggesting is to set aside a few hours at the beginning of each week to send spot tenders for shipments in your top 10 most commonly used lanes.

If the spot quotes returned are near or below contracted rates in any given lane, this indicates market rates may have fallen year over year.   When spot rates lower than contracted rates are identified in a given lane, redirect a small percentage of freight in that lane to the spot market carrier.

Doing this for perhaps 10% to 15% of your volume during seasonal “valleys” accomplishes two significant goals.  First, it enables you to bank the savings in your budget to offset spikes during “peaks”.  Second, this practice provides timely benchmarks for market rates which may be used to renegotiate contract rates.  Note: we do not recommend diverting more than 10% to 15% of your volume away from your contract carriers with this hack, or you risk undermining your credibility with these very important partners.

Perform this little logistics life hack on your most commonly utilized lanes first and wherever necessary, reach out to the carriers in your routing guide to get the rate adjusted.  Then move on to all other lanes in your routing guide.  This life hack essentially uses the spot market tool as a rate benchmarking and management instrument!

If your TMS solution does not offer a competitive bidding capability for spot market activity, then you should talk to us about getting set up with the UltraShip Spot Bidding Tool today!