Chart of the Week: Spot to contract rate spread (excluding estimated spot fuel costs above $1.20/gal) SONAR: RATES12.USA The spread between spot and contract rates suggests that the past few months may have been among the most challenging periods for non-asset-based logistics companies to navigate in recent history. The rapid shift in market conditions following long periods of stability can be the hardest to weather from a procurement standpoint — though that doesn’t mean it is all doom and gloom for 3PLs. Freight brokerages are the quintessential middlemen of the freight market. They act as transportation management departments for many businesses throughout the U.S., while also bridging the gap between shippers and an extremely fragmented and opaque carrier environment on the transactional side. These two functions ebb and flow in importance with the market, with transactional — or spot market — functions becoming more prevalent during periods of tightening. During periods of relative stability, when spot rates are low and stable relative to contract — as was the case for the three years prior to the recent market shift — 3PLs deliver value by managing shipper transportation networks and negotiating on their behalf with carriers. This function is widely known as managed transportation. While a shipper may see a single rate for a lane over a 12-month cycle, the 3PL can leverage its expansive carrier network to find the best fit and cost. These rates tend to align more closely with spot rates because they draw from a much larger pool of…
