Instead of tendering all their volume, they only tendered the majority of it, focusing on the high-density lanes. They held back the low-volume lanes— the ones with the highest likelihood of being rejected by their core carriers— and instead took them straight to the spot market, where rates are much lower than they were last year. Shippers who work with a dedicated broker to use the spot market strategically ahead of time for loads that are unlikely to be accepted by core carriers will nd a better rate than if they go through the waterfall concept, run short on time, and turn more urgently to the spot market. “They’ll pay through the nose to move that load,” Croke says. “This is a new phenomenon,” he adds. “We have not seen this in previous bid cycles. Shippers are using the spot market more strategically to manage their costs and guarantee service. “Normally it’s hard to control service on the spot market because you don’t know what you’re getting,” Croke says. “Shippers who work with brokers that have a core set of carriers engineer service into their business, and get a much better rate.” THE PANDEMIC CHANGED EVERYTHING The disruptive in uence of the pandemic and the increased reliance on the spot market that it caused has greatly increased shippers’ comfort level with load boards and the spot market. Forced to use load boards by circumstances, shippers now feel savvier about the process and more trusting of it. “The pandemic changed everything for a lot of shippers because once they gained experience inside a marketplace that they weren’t comfortable with in the past, and had a good outcome, then it became a trusted marketplace,” Hutto says. “When you can satisfy the needs of the shipper, and maintain consistent pricing, the shipper becomes more comfortable moving goods in the best way possible, whether that is using core carriers or the spot market,” he says. n
Load boards help shippers find drivers who are able to help them move the freight that their core carriers are unable to handle.
the load, then the shipper turns to the spot market. In 2022, carriers rejected more loads than usual. “The split is typically 90/10—about 90% of loads move on contract and about 10% on the spot market,” Croke says. “One year ago at this time it was 75/25—25% of loads moved on spot. “We moved a lot of air, literally, because shippers were desperate for capacity,” Croke says. “They moved anything they could, anytime they could grab a truck, so consolidation levels were way down. It created the notion that we had higher demand, but we were moving the same volume on more trucks. “Now, the same volume moves on fewer trucks because shippers are consolidating,” he adds. “The fuel surcharge drove shippers to reduce transportation spend, which accounts for a massive swing back to the normal 90/10 balance.” A NEW PHENOMENON In years past, major shippers would go to their contract carriers rst for every lane. However, in 2022, some shippers took a notably different approach during the request for proposal (RFP) tendering process.
The availability of sophisticated technology has brought increased transparency to load boards, helping make shippers more comfortable about using the spot market. “Shippers can get the best of both worlds,” Hutto says. “They have the ability to use core carriers, and they have the ability to take any freight that is hard to move and move it in the spot marketplace. They can trust it; they have a connection into it and reports that come back to them,” he says. “Because of the exibility that the spot market can bring and the technology that has developed, it has changed fundamentally to a more trusted marketplace.” WATERFALL METHOD Most shippers use the “waterfall method” to secure loads, Croke says. Shippers send upcoming loads out to carriers via the EDI (electronic data exchange) tendering process. The carrier that previously had bid the lowest rate on a line will be at the top of the routing guide, with the rst option to accept or reject the load. If the rst carrier rejects the load, then it moves to the next carrier on the list and so on down the line. If none accept
134 Inbound Logistics • January 2023
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