Suppose you are enjoying your lunch when there is a phone call. The caller requests an urgent hauling from the shippers. It is not within any contracted rates.
How do you respond to this as a driver in a trucking company? Will you have the upper hand in this kind of situation? What about the rates and shipment volume?
These are some of the wondering questions we will answer. First, what is a spot quote in trucking? It is the rate you negotiate, keeping several factors in mind.
The key factor includes the load, volume, and timing of the request. There are many other features and procedures the driver should know.
How Spot Quote Works?
It is difficult to prepare the paper-based agreement within a short period window. However, there are still some processes both parties should adhere to so to avoid miscommunication.
Getting the Request/Call
Whether you get a call, notification, or an email will depend on how the trucking company processes freight hauling. So you might get a call or a ping from the website that works with spot rates as well.
You will have to get all the details about the shipment to assess and offer a good rate. The shipper needs to mention whether the carrier is for TL, LTL (Less-than-Truckload), or volume LTL.
The information must also include the type of carrier required for the goods/equipment. Are they hazardous or fragile? Where do you go to pick up, and what is the destination?
Other standard details should discuss the cargo dimension, weight, volume, deadline for arrival, etc. The shipper must not omit any critical factor regarding the cargo so that the trucking team sends the proper carrier.
This will assist in spitting out an efficient quote with proper terms.
Negotiating the Rate
Honestly, you have the power to spew any cost during the negotiation. However, the shipper usually makes contact with several trucking companies or independent truck drivers. Therefore, keep the rates to an average level to catch the opportunity.
Of course, you have the right to turn down any deal that goes below the average quote. This is why it is better to extract as many details about the shipment as possible. You can gather all the resources and decide on a value right on-spot.
If the request comes through a website/call, you must set up a charge that also refers to the other fees. It could be the dock, or additional fuel charge, etc.
Remember, time is the most crucial factor in a spot quote negotiation. The smaller the window is between the loading and picking up, the better the deal might get.
Since the shipper/broker will have less time to confer, you can gain a better spot quote than expected.
Furthermore, keep the drop-off location in consideration before agreeing to their rate. Sometimes one area offers low rates while getting out of there incurs a higher charge. Hence, discuss such fees beforehand so that it covers everything.
Agreeing to the Terms
Now, once both sides agree to the operating cost amenable, it is your turn to keep the end of your bargain taking safety measures.
Just make sure the schedule picked up for the load and destination correlates within the Hours of Service (HOS) terms.
Therefore, you should not take the lead if the drop-off timing clashes with the stated service hour by your company. Otherwise, you are at risk of HOS violation.
When Spot Quote is Useful?
Why would you agree to a spot quote in the first place? Is it in high demand? You have to know when to accept such a deal and when to decline. Read below to find out when it is most beneficial.
The peak season is when there is high demand for freights but a lower supply of carriers/drivers. It could be the challenging weather forecast, making it problematic to transport certain cargo.
Furthermore, even political/global issues arising nationwide briefly become obstacles for regular hauling.
These types of complications cause the spot quote to spike extremely. Since the shippers must transfer the load within a deadline, most are willing to accept the rate you decide during these events.
Whether it is an LTL, volume LTL, or even a small asset, any fragile freight will work in your favor. The level of sensitivity and hazardousness will determine how high you can go with the rate.
Usually, the shippers will try to notch it down to their budget but eventually comply with an agreeable cost.
This feature does not often appear in the settlement, but it is profitable on your end. Make sure to negotiate the various surcharges beforehand, so you do not have to pay them from your pocket.
If the shipper/broker concurs the all-in rates for the delivery, the company will not have to face unprofitable cooperation.
Here the term load-to-truck ratio plays a significant role. When the carriers are high in demand but have low availability, you can proclaim a high rate. Of course, you must yield to safe and prompt performance.
This will ensure more future settlements by the same shipper during urgent deliveries.
To attain such opportunities, see if the quantity of the freight is higher than the carriers. It becomes a desperate situation you can take advantage of within the market value. This will help turn the trucking service around with impressive annual revenue.
Spot Quote or Contractual?
The trucking company you work for or own should offer both options to be on the market trends. This provides flexible income and chances. But what are their pros and cons?
Spot Quote Pros
- Negotiates price factors right on the spot
- A tight schedule provides higher rates
- Great source of income due to case-by-case payment
- A special treatment to the freight leads to steeper price
- Opportunities to process various lanes, gaining further knowledge
- Ideal for immediate extraction/delivery of sensitive loads
- Quotes/rates on the spot are flexible, unlike contractual ones
Spot Quote Cons
- Inefficiency due to the load work you have to do each time
- Most shippers might not agree to pay surcharges
Contract Rate Pros
- All the negotiations have written proof
- Prices are consistent at all times
- Best approach to evade loss
- Opportunity to build a positive relationship that offers more benefits
- Contractual bonds are further reliable than spot rates
- No forcible pricing placed on the shipment
Contract Rates Cons
- Might not be available during prompt delivery
- Repeated lane management can become tedious
Hopefully, we could help clear some conflicts fogging your mind regarding the spot quote of the freights.
Integrity and rendering safe service will ensure the shipper contacts your trucking company more often in the future. So it is essential to set up an acceptable rate but not too low that it harms the business.
If you can promote a better relationship with the shipping/manufacturing industry, more opportunities will knock on the door. So good luck!