Solving the Dysfunctional Freight Contracting and Bid Process

There’s a special level of Hell reserved for the annual truck contracting process in the U.S. 

Truckload freight demand ebbs and flows in two to three-year cycles. When the market is up, truck orders increase as forward growth assumptions, based on increasing rates, signal incoming revenue. Often in the time between new truck and trailer orders and delivery, the market starts to turn. As this excess capacity fails to find volume, freight rates decrease, accelerating a downward trend. 

Freight contracts, meanwhile, are annual, timed to the shipper’s calendar or fiscal year, for budget planning purposes. The result: every second or third year, contract rates snap out of alignment with markets. Think musical chairs when the music stops. Contracts are written to be broken easily, throwing the party with the most risk exposure – truckers as rates rise and carriers as rates fall — into a fragmented, chaotic spot market. Are we having fun yet?

Solutions that tinker around the edges, like quarterly or seasonal mini-bids or seasonal premiums with triggers to smooth the uncertainty, only work up to a point. Technology solutions for better data capture and analytics are a good start, but then what? Is there a comprehensive approach to stabilizing freight contracts, reducing spot exposure and delivering mutual year-round benefit for shippers and truckers?

One answer is to build networks of carriers and shippers with complementary freight demand patterns. Join freight network coordinator Leaf Logistics, shared truckload platform Flock Freight and a major U.S. shipper, AB InBev, for a deep dive into win-win contracts and repairing strained shipper-carrier relations.

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