For importers, transportation planning has rarely been simple. But in today’s environment, uncertainty around import volumes, carrier capacity, fuel costs, and consumer demand is making one decision especially important: Should you continue playing the spot market, or lock in transportation rates with a trusted provider?
According to Gary Kendle, Vice President of Transportation at Weber Logistics, the balance is increasingly shifting toward contracted rates.
“The spot market is one of the first things to increase,” Kendle says. “If I was a shipper, I would try to lock in contract rates for the next 12 months.”
It’s a recommendation driven by what Weber is seeing across the transportation market today.
The result, according to Kendle, is an import market that remains active but may not experience the kind of pronounced peak traditionally seen from early October through the Thanksgiving period.
“The market is good, but it’s not great,” he says. “We’re going to see increased volume, but we’re not going to see a traditionally high peak season as a result of some of this pull-forward.”
That doesn’t necessarily mean supply chains will be quiet.
Inventory that arrived early still needs to move through warehouses and distribution networks. And consumer demand, Kendle notes, has remained healthier than he expected given broader economic pressures.
For transportation buyers, that creates a complicated environment: freight demand may not be booming, but the forces pushing transportation costs higher aren’t disappearing. In fact, they may even grow more pronounced.
One of those forces is trucking capacity.
Kendle points to trucking companies exiting the market, along with changes affecting driver availability, as factors reducing overall transportation capacity.
That matters because the equation is straightforward: when available capacity falls while freight demand remains relatively healthy, carriers gain pricing power.
“If that decline in driver capacity continues, then we’ll probably see rates on domestic imports, domestic truckload, and domestic LTL continue to rise,” Kendle says.
For shippers, it increases the risk of relying too heavily on short-term transportation purchases.
For much of the recent freight cycle, shippers could often take advantage of abundant capacity by buying transportation on the spot market.
Kendle believes that calculation is changing.
Weber is beginning to see spot rates exceed contracted rates across multiple transportation modes, including first-mile transportation, full truckload, less-than-truckload, reefer, and flatbed.
Part of the reason is simple: uncertainty creates inefficiency.
When market conditions change quickly, carriers have less visibility into equipment utilization, driver availability, repositioning requirements, fuel costs, and future demand. That uncertainty tends to show up first in short-term pricing.
“Uncertainty begets inefficiency,” Kendle says. “And inefficiency in the trucking market translates into higher short-term rates as opposed to longer-term rates.”
For shippers trying to build predictable transportation budgets, that makes contract pricing increasingly attractive.
Transportation costs are also heavily influenced by fuel.
And the impact extends well beyond the price of diesel itself. Fuel influences everything from the direct cost of operating a truck to components such as tires and other petroleum-based products.
That creates another reason for shippers to think beyond today’s freight rate.
A spot rate that appears acceptable now could look very different several weeks or months later if operating costs continue increasing. Contract pricing offers shippers an opportunity to create greater cost predictability before additional volatility works its way through the market.
No transportation contract can eliminate market risk altogether.
Volumes can change. Capacity requirements can shift. And unexpected market conditions can affect both shipper and carrier economics.
Well-structured agreements, however, can create greater stability for both sides.
For the shipper, a contract provides greater rate predictability and access to committed transportation partners.
For the carrier or 3PL, longer-term visibility makes it easier to plan equipment, drivers, and supplemental capacity around expected freight volumes.
The strongest providers also avoid building their entire capacity strategy around a single source. Kendle describes Weber’s approach as a “mix and match” model. Weber can first deploy its own asset-based capacity, then supplement those resources through outside carrier relationships when customer demand requires it.
That flexibility helps Weber respond to changing volumes without making unnecessary capital investments based solely on historical shipping projections.
And when additional investment is warranted, clearly defined contract terms can establish appropriate expectations and protections for both parties.
Ultimately, the discussion about spot versus contract rates is about more than price.
It’s about reducing exposure to uncertainty.
Shippers will always need some level of flexibility, and the spot market will continue to play an important role in transportation procurement. But in a market where capacity is tightening and transportation costs face multiple sources of upward pressure, depending too heavily on transactional freight purchasing can introduce unnecessary risk.
That is why Kendle believes now is the time to focus on longer-term carrier relationships.
“Working with a trusted carrier, they want the business for the long term,” he says. “Both sides would want to lock in for a longer term. It’s a negotiated rate, and generally it’s more favorable to lock in that rate in today’s environment.”
For importers, that may be the most important transportation strategy heading into the months ahead.
Markets will continue to change. Import volumes will rise and fall. Fuel costs and capacity will fluctuate.
The goal isn’t to predict every movement.
It’s to build a transportation strategy that doesn’t require you to.
Looking for greater predictability in your import transportation strategy? Weber Logistics integrates asset-based transportation, drayage, transloading, brokerage, FTL, and LTL capabilities with its warehouse distribution infrastructure to help shippers move freight efficiently from port to final destination. Contact Weber today to get started.