A Spot Price is a price that applies to one specific shipment, between one specific origin-destination pair, on one specific day or group of days.
Depending on the reason a spot quote is being issued, it may be either higher or lower than normal Fair Price pricing for the same freight in the same lane.
There are two specific circumstances in which Copper Run will issue Spot Prices:
1. Severe Capacity Supply Shortage
Some capacity shortages are predictable:
Capacity shortages always occur in specific lanes during concentrated produce harvest periods. The primary example of this occurs in the U.S Southeast every March – July, as the watermelon harvest works its way north. When the crop is ripe and has to come out of the fields, there are enough melons to fill almost every available northbound truck, and they have to be shipped before they rot. The same phenomenon also occurs during other harvests, including onions in Texas, tree nuts in California, and vegetables in portions of the Southeast. At the peak of the harvest in any given state, truck rates can spike upwards by more than 60%.
Capacity shortages also always occur at times of statutory holidays, particularly if the holidays are back –to-back. When shippers and receivers are closed, trucks cannot pick up or deliver freight, the normal flow of trucks across the continent becomes disrupted, and available capacity is reduced (remember that truck capacity is very perishable).When holidays are back-to-back, such as at Christmas / New Years, or at Canada Day / Independence Day, truck flows are severely disrupted truck availability is stretched very thin, so free market rates increase. Think about it this way – if businesses are closed for 2 days in the same week, then loading/unloading capability is cut by 40%, and if it can’t load or unload, a truck ends up sitting, and sitting capacity is perished capacity. And capacity loss is even greater if a significant portion of the driver pool decides to take a slow holiday week to be with their families.Some capacity shortages are not predictable:
The obvious example of an unpredictable capacity shortage is that caused by severe weather, particularly winter weather, and particularly when it impacts major highways in the great lakes and u.s. Northeast regions. We know that snow is going to occur each winter, but we don’t know exactly when or where. When a storm does impact highway freight capacity, prices spike.
2. Customer Request
Some customers prefer to request spot price quotes for each shipment, rather than to use prices on file. While this approach may result in lower prices for individual shipments, particularly in a competitive bidding environment, it usually also results in higher prices for some shipments.When compared to a stable quote-on-file approach, wherein a broker mitigates with the inevitable day-to-day rate fluctuations internally, it is not at all clear that net savings can be achieved by using a spot price approach. It is a bit like buying a ticket on an airplane – you can buy a single ticket or a multi-use flight pass well in advance, or you can wait until the day before the flight and take your chances. You may end up with a last-minute spot-price bargain, or you may end up paying an exorbitant price for one of the few remaining open seats. The customers who thought long-term and fixed their ticket cost early experienced no price variation or increase at all.If you’re using spot quotes for every shipment now, talk to us about this – you may be better off in the long run to establish fixed Fair Price pricing with Copper Run.