Research Proves Why You Should Put Your Spot Freight in Your Route Guide

There’s a place for spot freight in your route guide, and knowing where can save you money even when trucking capacity is plentiful. Our research with MIT not only underscores that contract freight and spot freight are compatible in your route guide, but also points to where you can most effectively account for unplanned or rejected freight in your route guide.

You’ll probably have at least some freight that wasn’t planned when you did your annual transportation RFPs and awarded your lanes. If you’re a B2B manufacturer, you might get a new customer or you might need to take on a new supplier in an area where you don’t have trucks lined up. If you’re a CPG company, a new consumer trend might cause one of your products to take off and you have extra freight in your lanes. For retail and restaurant chains, population growth around some of your locations might create higher-than-projected demand. Conversely, if you end up with only sparse freight to tender in some of your awarded lanes, some carriers might not be willing to take it.

The good news is that there are proven and cost-effective ways to plan for the unexpected.

Traditional hierarchical route guides often have one or more primary transportation providers awarded to a lane. In the event the primary carrier doesn’t accept a shipment tender, standard procedure in most transportation management systems (TMS) is to then try to tender the shipment to the backup carriers. Through years of academic research on route guide performance, we can see the impact to shippers’ costs when tenders are rejected, backup transportation is pursued and offering the freight to the spot market is delayed.

Even when trucking capacity is in oversupply and spot pricing is below contract pricing, a shipper will often pay a premium in the spot market. The amount of time it takes to exhaust the long tail of backup providers in a route guide is likely the cause.

Consider that many TMS processes allow a backup transportation provider 45 to 90 minutes to respond to a tender. If there are five to 10 backups, a day is nearly exhausted before a transportation team seeks coverage in the spot market. That spot market exploration typically happens in the afternoon for next- day pickup. This scenario tends to result in higher-than-average spot market pricing and the premium seen in the research.

How much are rejected tenders costing you?

Our research with MIT’s Center for Transportation and Logistics has found that having backup carriers in route guides is effective only to a certain point. Route guide performance is directly correlated to market conditions, and deep backup positions are of little use or value:

  • When trucking capacity is tight, the fourth backup carrier is the extent of a route guide’s ability to support rejected tenders.
  • When the market is loose, meaning trucking capacity is plentiful, route guides tend to fully perform by the second backup carrier. Additional backup carriers tend to be unnecessary and unused.
  • In tight or loose markets, the deeper you go in your route guide, the higher the price.

Below is a table illustrating our research findings.

Routing guide rank Provider Loose market
ex. years 2016 & 2019
Tight market
ex. years 2018 & 2021
Primary A Very high acceptance rate Many loads covered Price A
1st backup B Very high acceptance rate Many loads covered Price A + backup premium
2nd backup C Most loads covered by this point Fewer tenders accepted Price B + backup premium
3rd backup D Seldom used Fewer tenders accepted Price C + backup premium
4th backup E Seldom used Most loads covered by this point Price D + backup premium

In short, there tends to be a premium cost for each tender rejection over the primary service provider. If you go through the carriers in your route guide and only then turn to the spot market, the research shows you may end up paying 23% to 35% extra on your shipment.

How to save on your spot freight

Awarding your spot freight to a transportation provider with guaranteed capacity and positioning that provider as the second backup in your route guide will help eliminate the time lost from multiple tender rejections. Using a 3PL such as C.H. Robinson that can deliver real-time quotes directly into your TMS is another step toward saving you time and money.

Route guides are exceptional vehicles for plannable freight where your primary carrier accepts the freight and immediate backup carriers cover rejections of the primary. Research has shown there is a limit to the value of a deep back-up carrier strategy and that limit is costly. The opportunity exists to blend spot market tools with contract route guides to get the best market experience and cost in any market.

To learn more about digitally enabling your spot market strategy, check out our real-time connectivity information or call your C.H. Robinson representative.

Steve Raetz
Director, Research & Market Intelligence
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