Prime Freight Logistics sends most of its customers different rates for their transport from port of origin to port of destination in a bi-weekly manner. However, there might be more than one rate sent to customers, this is the case of prime freight rates and spot rates. These will be explained in the following guide.
Prime Freight Rate
Prime Freight rates rate refers to a stable and fixed pricing arrangement presented by a carrier or transportation provider for regular cargo volumes. These commitments are typically feasible only for moderately larger shippers, as minimum truckload freight volumes are often required.
However, shippers enjoy several advantages with these rates. Firstly, despite the volume requirements, the stability and security offered by the contract guarantee that the logistics provider will uphold the necessary stream of deliveries.
Moreover, it's significantly easier to gauge performance, evaluate future truckload freight needs, and cultivate strategic carrier partnerships. These advantages greatly support business expansion endeavours.
These rates entail numerous contractual obligations, with the shipper reaping substantial benefits. Contract carriers are mandated to fulfill freight delivery obligations, and cancellations might incur significant costs, often supplemented by cargo insurance provisions.
On the flip side, Prime freight pricing typically remains steady, being a fixed rate paid consistently over time. Given that transporting full truckloads proves more advantageous for carriers, firms with higher freight volumes wield greater negotiation power. Consequently, larger companies stand to gain significantly more from contracted rates.
This type of pricing is most effectively employed by companies maintaining a steady volume of freight requiring delivery. Carriers are significantly more motivated to offer favourable contract pricing when assured of consistently filling their vessels with substantial volumes.
When receiving a Prime Freight rate, you will see the following message at the botom of the quote:
To summarize, the following are benefits of Prime Freight rates:
Stable contract pricing makes costs more predictable.
Performance is easier to measure.
Creates partnerships with carriers.
Higher chances of securing capacity.
Stable deliveries and consistent orders.
Spot Rate
Spot rates, also known as spot quotes, represent a one-time fee offered by transportation providers for delivering a shipment to its destination. Such offers typically apply to a single transaction and confine delivery services to a singular vessel, truck, or aircraft, within a specified date range.
The spot market is inherently susceptible to freight pricing fluctuations, reflecting real-time shifts in supply and demand. However, this volatility also presents opportunities for securing better deals. Spot market rates tend to decrease during periods of low (global) estimated shipping volume or under favorable conditions.
For instance, reduced oil prices lead to decreased shipping costs, which can translate into lower spot market rates. Conversely, holiday seasons often witness increased freight volumes from retailers, driving rates up. Familiarity with market dynamics and factors influencing supply chains facilitates the negotiation of favorable terms.
It's important to acknowledge that spot deals come with fewer guarantees. For instance, volatile conditions in the truckload market may prompt carriers to retract agreed-upon deals if they no longer find them advantageous.
Spot market rates exhibit considerably more volatility compared to contracted rates due to their direct susceptibility to daily fluctuations, supply and demand dynamics, and various other influencing factors. Moreover, spot rates are offered for individual shipments only. However, they might be lower than contracted rates when the timing aligns favourably.
When receiving a Spot rate, you will see the following message at the botom of the quote:
To summarize, the following are benefits of Spot rates:
It can cover last-minute changes or when carriers cannot fulfil a shipment.
It can be used to cover unexpected shipments.
Rates could be lower if global truckload freight shipping volumes are low.
Rates could be better if a company cannot get enough freight density or volume to negotiate a good contract rate.
In conclusion, here at Prime Freight Logistics, we make sure that you have all of the possibilities at your disposal, which is why we send quotes for both spot rate and Prime Freight rate.