What is a Spot Quote?
Often, the demand for instantaneous spot quotes skyrockets in hectic holiday seasons or during uncertain times, such as the COVID-19 pandemic. In August 2020, we saw an average of a 17% increase in overall spot rates. Spot quotes are a boon when you need to make on-time shipments and your contracted carriers don’t have capacity. And they serve as a cost management tactic when contract rates are prohibitive for unexpected shipments.
At the same time, spot quotes can be time intensive, messy, and have the potential to gouge into your profit margin, especially if your spot quote process has to be done manually.
We at Trax want you to know how to overcome some of the biggest challenges with spot quotes so you can get the best bang for your buck. We’ll discuss areas that you should master so you can minimize your need for spot quotes, but get the best price and quality when you do.
- Spot Quote Definition
- How a Spot Quote Works
- Spot Quote vs Contract Quote
- Trax Can Help with Your Spot Quote
- Get Spot Quote Help Today
Spot Quote Definition
A spot quote is an instantaneous carrier rate—outside of contract rates—provided when a shipper has urgent shipments or a carrier doesn’t have capacity. Spot quotes have a short expiration window, and rates are highly susceptible to market conditions. This price volatility, which makes spot quotes unsuitable as a profitable long-term plan, aligns spots quotes as leading indicators for the trend direction of contract rates.
How a Spot Quote Works
Let’s dive into exactly how a spot quote works. It can be summarized in four steps, which are:
- Contact carriers to request a quote. This can be done through any medium—email, phone, or digital contact forms. Companies that don’t have automation for this step must fill out and send requests one at a time, which adds more of a time crunch to your shipment.
- Outline the standards of your shipment. For every quote that you request, include the shipment weight, dimensions, load type, origin and destination, delivery deadline, and any other relevant factors. Filling all of these details out manually for each quote request adds more time to the process, chipping into the profitability of spot quotes and your shipment deadline.
- The carriers give you their rates. Any miscalculation or miscommunication can result in astronomical quotes or even errors in your shipments, so be sure to be meticulous. It’s messy business when you have to manually review each spot quote for accuracy, but it’s critical to comb through each and every aspect of your received quote.
- Compare your spot quotes. Done manually, comparing spot quotes can be tedious and time consuming, which is difficult when spot quotes are only good for a short window of time. Plus, if none are to your liking, you need to start the entire process over again with obtaining quotes from other carriers. The last thing you want is to be forced into choosing a less than ideal carrier simply because you’ve run out of time.
Remember to be on your toes when requesting spot quotes from carriers that are new to your route or unfamiliar with your carrier requirements. This ambiguity can lead to excess costs, such as chargebacks, late fees, and others, which can compound the spot quote rate.
Spot Quote vs Contract Quote
Spot quotes have a “snap-decision” nature—the restraints of time and price make thinking too long about a spot quote unprofitable. And do keep in mind that spot quotes do expire within days or weeks.
Contract quotes, on the other hand, are an outcome of long-term analysis, precise forecasting, and negotiation. This makes spot quotes more expensive in the long run than contract quotes.
Here are some other differences between contract and spot quotes.
- Time—Contract quotes require more time dedicated to conducting intricate cost analysis and forecasting, while spot quotes are urgent. As mentioned, spot quotes expire rather quickly.
- Relationship—Contract quotes are profitable for both you and your carrier, but only if they’re set within a long-term relationship. This substantial quantity of work makes them lucrative. Spot quotes, however, don’t require any sort of relationship, as they could be a one-time collaboration only.
- Load type—Contract quotes are founded on load-to-truck ratio. Spot quotes are usually utilized for less-than-truckload (LTL) shipments.
- Multiple destinations—Contract quotes are used for shipments that have various destinations with differing regulations. To do so with spot quotes is extremely difficult, in part due to the lack of long-term analysis and preparation.
- New opportunity—This is where spot quotes shine, as companies opening a potential new avenue of business can use spot quotes as a stepping stone to understand the costs and procedure. Contract quotes are difficult to set for new lanes of business, and do better for long-term and steady processes.
Trax Can Help with Your Spot Quote
Spot quotes are a great method for on-time shipments with short notice. But they are a challenge to audit, accrue against, and maintain consistent bid management. This lack of visibility, which 21% of supply chain professionals deem as their biggest challenge, makes matters even more difficult. Trax understands the potentially hindering issue this creates, which is why we created Trax’s Rate Manager.
A centralized rate management platform organizes information and presents it in an easy-to-read way. Furthermore, a good platform integrates compliance, budget accountability, quality data management, contract rate management, and much more. This empowers you to make data-informed decisions to choose profitable options for any sudden shipments.
By integrating compliance, Trax gives you the opportunity not only to review and select profitable spot quotes, but to do so for more complicated shipments. This even includes shipments through new lanes that are unfamiliar to your carrier, eliminating potential risks that would’ve been unseen otherwise.
Having budget accountability as part of your platform is important. This way, even in the most hectic of times, you can make decisions that align with your budget, drawing the line between profit and loss through increased visibility.
Our Trax platform also delves into the complex world of data management, purifying and centralizing data so you have the intricate information at your fingertips that’s critical for optimized decision making and planning.
Centralized contract rate management gives you outstanding capabilities in planning for your shipments, be it for high-profile customers or time-sensitive shipments. Trax’s Rate Manager is designed to accommodate all freight processes and modes, centralizing all of the information you need.
Finally, a good platform should automate your processes as much as possible so your time and resources can be used elsewhere to help your company grow. A spot quote shouldn’t cost you more than they’re worth—they should make you money.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.