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What is a Spot Quote and Can It Benefit my Business?

When hectic holiday seasons or times of uncertainty roll around, the demand for rapid spot quotes tends to spike. Spot rates increased by an average of 17% in August 2020. Spot quotes are very helpful when you need to ensure your shipments are on time when the contracted carriers have insufficient capacity. They are also an excellent cost management tool when you have unexpected shipments and contract rates are prohibitive.

Despite these advantages, there are some downsides to spot quotes. They can take up lots of time, they can be messy, and they can eat away at profit margins if you are not careful. This is particularly true if the process has to be handled manually.

At CT Global, we aim to help you overcome major challenges when they arrive using spot quotes that offer maximum ROI. We will identify areas for improvement to help you optimise operations and reduce the need for future spot quotes, but we will always offer the best price and highest quality when they are needed.

What is a spot quote?

A spot quote is an immediate carrier rate outside of contract rates. It is typically required when a carrier lacks the necessary capacity or a shipper has urgent shipping requirements. There is a short expiration window for spot quotes and market conditions are the primary force behind rates.

This means there is volatility in the pricing, making spot quotes a bad fit for a profitable long-term strategy. The volatility means spot quotes are key indicators of the direction of trends for contract rates.

How does a spot quote work?

Spot quotes work in a very specific way. Essentially, there are four main steps that must be carried out:

1. Request a quote from carriers

You can get in touch and make this request by phone, email or using digital contact forms on websites. Any company that does not have an automated process for this step must send out requests one by one. This makes it more time-consuming at a time when you urgently need to arrange something for your shipment.

2. Highlight your shipment’s standards

Every time you request a quote, you should include the following information:

  • Weight
  • Dimensions
  • Type of load
  • Origin and destination(s)
  • All other relevant information

Again, if you fill out all these details manually for each request, it’s going to take more time. In turn, this reduces the profitability of your spot quotes and increases the risk of missing your shipment deadline.

3. Get quotes from the carriers

If any of the information you provide is inaccurate, or any miscommunication occurs, you may be hit with vastly inflated quotes or even errors with your shipments. Accuracy is paramount, so take a meticulous approach in step 2. It can be tedious and time-consuming to manually review the accuracy of every spot quote, but you must be certain that every quote you receive is 100% correct.

4. Compare the spot quotes you receive

Again, manual comparison of spot quotes can be tedious and laborious. This can be problematic as spot quotes have very strict time limits on them. If you find that none fit your needs, you will need to start the entire process again to obtain quotes from different carriers. But you don’t want to be forced into settling for an overpriced quote simply because you don’t have the time to do the process again.

Remember to act fast throughout the process of obtaining spot quotes from any carriers that are unfamiliar with your routes or carrier requirements. Any ambiguity can result in extra costs like late fees, chargebacks and more, and this can severely compound the rate of the spot quote.

Spot quotes vs contract quotes

By their very nature, spot quotes feel like a ‘snap decision’. The strict time constraints and the pricing mean that taking too long to consider a quote can make it unprofitable. Always bear in mind that it may only be days or weeks before a spot quote expires.

Conversely, contract quotes come about after a period of long-term analysis, as well as meticulous forecasting and negotiation. In the long run, spot quotes are always more expensive than contract quotes.

Here are some other areas where the two differ:

  • Time: contract quotes involve detailed cost analysis and forecasting, so they require far more time. Spot quotes are urgent and have a very short expiration period.
  • Relationships: contract quotes are a beneficial arrangement for you and your carrier when set as a long-term relationship. There is a lot of work involved, so they can be lucrative partnerships. Spot quotes require no relationship and are often a one-off collaboration.
  • Load types: contract quotes are based on the ratio of load to truck. Spot quotes generally revolve around less-than-truckload (LTL) shipments.
  • Number of destinations: contract quotes commonly involve shipments with multiple destinations where different regulations apply. This can be very difficult for spot quotes because there is little time for long-term preparation and analysis.
  • New opportunities: spot quotes really shine in this area because they can serve as a potential starting point for new business avenues. The companies involved can learn about one another’s costs and processes through spot quotes, but this is more difficult to do through contract quotes.

CT Global can help with spot quotes

If you need a one-time shipment on short notice, a spot quote can be an excellent solution. But it’s important to understand that they can be challenging to audit, accrue against and maintain consistent bid management. The lack of visibility into this is often highlighted as the main challenge by supply chain professionals and makes the entire process even more difficult. CT Global understands the potential stumbling blocks and we have developed innovative solutions.

With a centralised platform for rate management, all information is organised and easy to access. Our platform integrates concerns like budget accountability, compliance, contract rate management, quality data management and more. This gives you the power to make decisions based on real data so that you always choose the most profitable options for urgent shipments.

A good platform uses automation at every possible juncture in order to save time and resources that are critical when urgent shipments are needed. That time can then be used elsewhere to focus on growth and progression. A spot quote should not be more expensive than what it’s worth to you – they should still be profitable, and they can be beneficial for your business at the right time.

To learn more or to get started with spot quotes, contact CT Global Freight Audit today and benefit from the powerful features we offer.