Contract loads offer numerous advantages. But due to the volatile and at the same time uncertain market situation, the contract market for truck transports is currently reaching its capacity limits. Forwarders have to find free transport capacities through other channels. However, contractors often view transport assignments on the spot market critically. We show why the spot market is so important as a supplement to contract loads and how forwarders can avoid the risks of awarding contracts to unknown carriers on the spot market.
Assigning transports on the spot and contract market
Spot and contract markets are the basic channels for arranging truck transports. To do this, forwarders must first determine which aspect has priority for them when awarding transport: Working particularly securely and reliably with contracted partners or assigning transports particularly quickly and flexibly on the spot market.
Based on the current market situation, it can currently be seen that it is primarily those forwarders who can operate successfully on the market who make use of both contract and spot loads to find and secure available transport capacities. In doing so, they benefit from the advantages of contractually assured cooperation with selected hauliers and at the same time can secure expanded transport capacities on the spot market.
- Peter Bauer
- Head of Forwarder Sales Training & Performance WEST Region
- “Spot and contract loads cannot be considered as separate anymore. The tense situation on the transport market is creating a demand for digital solutions that equally serve freight allocation for both areas.”
Advantages of the contract freights
In Europe, around 80% of truck transports are currently based on contracts. This is mainly because contract transport orders bring a number of advantages for the companies involved in the transport.
- Advantages for freight forwarders: Freight forwarders can secure transport capacities in advance, saving valuable time in the stressful day-to-day disposition
- Advantages for hauliers: Contractual cooperation is an important protection for secure and punctual payment. Also, hauliers prefer to cooperate with known and reliable contractors.
Challenges for forwarders
The situation in the land transportation market remains tight. Finding transport capacities is just as much a matter of increased time and financial effort as finding available loads. As early as May 2022, experts from the German BVL assumed that the critical conditions would continue until at least mid-2023.
Even if supply chain problems have eased in isolated cases, the transport sector continues to face numerous challenges: Ongoing effects of the Corona pandemic, uncertain market conditions due to the war in Ukraine, rising raw material, transport and toll costs and, last but not least, a problem that has accompanied the industry for years and is increasingly imposing limits on growth: The acute shortage of drivers for truck transport. According to a 2022 report by the International Road Transport Union (IRU), Europe has a shortage of nearly half a million truck drivers. The report recorded 425,000 vacancies – 80,000 of them in Germany alone. That represents 9 percent of unfilled positions. In addition, one-third of all drivers have already passed the age of 55 and are therefore also at risk of dropping out in the foreseeable future due to retirement.
Why the contract market is reaching its limits
Under these conditions, it is becoming increasingly difficult to find reliable contract partners who can guarantee compliance with the negotiated conditions over a long period of time. In addition, the principle of contract freight also limits flexibility in the allocation of transport.
For forwarders, this means in concrete terms that they are dependent on always being able to transport a certain load with their own contracted partners. As soon as their own network of contractual partners cannot offer transports, alternatives are needed to find available transport capacities.
On the other hand, hauliers also make themselves dependent on the order situation of their forwarders. Contractual transports are not infrequently based on estimated values on the part of shippers or forwarders. Production volumes are always subject to economic fluctuations. At the same time, internal company problems can lead to delays, so that on certain days there is no cargo for certain routes. The haulier loses a firmly planned transport order as a result.
Find cargoes and transport capacities on the spot market
The aim is not to get forwarders to put all their freight out on the spot market. The list of advantages of working with reliable contract partners is far too long for that. Rather, it’s about creating a complement to that network. A way to find transport capacity when the own network of contractors can’t help out.
In order to be able to exploit the full potential of the spot market and place transport orders there quickly and securely at the same time, forwarders can make use of digital transport platforms for transport allocation, freight management, tenders and freight exchanges. The platforms are equipped with advanced features that help hauliers digitize and thus simplify the management of their own network and the spot market:
- Database of potential hauliers
- Ability to check and verify unknown hauliers
- Insights into ratings and references of transport partners
- Advanced carrier management for effective management of the entire haulier pool
Get access to your personal spot market
Trans.eu not only offers a classic freight exchange and thus helps to simplify the transport allocation process. With our latest tool, we offer you the opportunity to take your carrier management to a new level. The private freight exchange closes the gap between contract and spot market. Benefit from the possibility to initially advertise your freight orders within the small circle of your existing contract partners. If no interested party or no available transport capacities can be found, you can then post the cargo on your private freight exchange and optionally also on the public freight exchange.
Freight publication on Trans.eu:
1. transportation assignment to selected contractors of your network
2. publication on private freight exchange with preferred hauliers of the spot market
3. publication on the public freight exchange with 25.000 verified hauliers