There are many terms used in the freight industry that can be confusing for newcomers. “Spot quote” and “rate quote” are examples of such terms. If you’re a 3PL or a broker, how do you ensure you’re an efficient intermediary between the shippers and the carrier when your new customers are unsure on which shipment quote to use. What’s the difference between spot and rate quotes? And which one is right for your shippers?
What is a Rate Quote?
A rate quote is a price that is locked in for a specific period, usually six to twelve months. This type of quote can at times be referred to as a contracted quote and is often used when you have regular shipping needs and want to lock in a low price. Rate quotes are based on the current market rates, but they are not subject to the same fluctuations as spot rates.
One advantage of a rate quote is that once you lock in the price, you don’t have to worry about rates going up. However, if rates go down, you will be paying more than you would if you had chosen a spot quote.
A rate quote also handles security and routine as well as allow you to build a relationship with the carrier which typically comes with other benefits as well.
What is Spot Quote?
A spot quote is one-time pricing for shipping a load or a series of loads. This type of quote is often used when a load needs to be shipped immediately. For example, when there is an unexpected need for shipping or your contracted shipments fall through.
In most cases, the demand for spot quotes increases near and during holiday seasons as well as in uncertain times like Covid-19. In August 2020, the spot rate market rose by an average of 17% highly because of the pandemic.
One major benefit of spot quotes is they handle any surprises along the way and in many cases, you can work with your contracted carrier for your spot shipping needs.
On the dull side, spot quotes can be difficult to handle as you have to go through each quote ensuring everything is correct and on time. To avoid doing the work manually, you can get a one-month free trial with Tai and see how the TMS system will help you manage your spot quote shipments.
Difference between Spot Quote and Rate Quote
The main difference between spot quotes and rate quotes is the price. Spot quotes are based on current market rates, which can fluctuate day in day out. Rate quotes are based on a locked-in price that does not change for the duration of the contract.
Another difference is that spot quotes are typically used for one-time or unexpected shipping needs, while rate quotes are used for regular or recurring shipping.
Which One is Right for Your Shippers?
The answer to this question depends on your shipping needs. If you have a one-time need for shipping, then a spot quote may be the best option. If you have regular or recurring shipping needs, then a rate quote may be the best option.
Also, if your shippers are just starting a company, a spot quote may be a good option compared to a rate quote because they may not yet have a good understanding of their shipping needs. In this case, a spot quote may help them understand costs and shipping procedures.
You should also consider your budget and your shipping goals when making your decision.
How a Spot Quote Works
Spot quote can be summarized by three steps:
- First, the broker contacts a carrier to request pricing for a load. You can do this through a phone call, email, or contact forms. Ensure you outline the standards of your shipment: what needs to be shipped, when does it need to leave, and where is the destination. What’s your shipment weight, dimensions, and load type. Include all relevant information.
- Second, the carrier checks their available capacity and provides a price based on their current rates. It is important to understand what’s covered under the quote to avoid any miscalculation.
- Third, if both parties agree on the price, the load is booked and shipped.
Q: Can I negotiate a quote?
A: Yes, you can always try to negotiate a better price. However, carriers are not obligated to lower their rates. If you want a spot quote, also remember that a quote from last week may not be the same this week.
Q: How long is a spot quote valid for?
A: A spot quote can be valid for an hour, a day, or two. After that, market rates may have changed and the carrier is not obligated to honor the original price.
Q: I have regular shipping needs. Can I get a spot quote for that?
A: Yes, you can request a spot quote for regular shipping needs. However, you may want to consider a rate quote instead, as it may be cheaper in the long run.
Q: What is the difference between a spot market and a contract market?
A: A spot market is the current market rate for shipping, while a contract market is a locked-in price for shipping.
Spot and rate quotes have differences that may make one more advantageous to your business than the other. It’s important to understand both options before selecting one for your shipping needs. It is also worth it to combine both of them if they fit your needs.
If you need help with your shipping needs, we can help. At Tai TMS, we offer a platform where you can directly negotiate competitive spot and rate quotes with carriers. You will get a chance to select a carrier that gives you visibility into your freight as well as enjoy instant rating, end-to-end automation, and an automated tracking and dispatch to minimize errors. Contact us today and request a demo page. We’d be happy to work with you.