While running a business in Europe, you find yourself standing at a crossroads between long-term contracts and On-demand transport, also called SPOT. This article will help you to choose the most suitable model of cooperation with your transport partners.
Long-term contracts have been a traditional option, allowing companies to establish strong and ongoing relationships with their transport providers. On the other hand, spot freights have emerged as an agile, flexible alternative, responding to more immediate and dynamic market needs.
The Long-Term Model
Long-term contracts involve a fixed agreement between a company and a transport provider, typically for more than six months. The transport provider secures a certain capacity of transport services for a predefined period, often at a negotiated fixed price.
It guarantees the availability of transport resources, offering a certain level of security and predictability. Furthermore, long-term contracts foster trust and partnership between parties, potentially leading to improved service quality and tailored solutions.
However, there are potential downsides to this model. Long-term contracts can limit flexibility. For instance, if market conditions change, companies might find themselves locked into less favourable terms. Recent years showed us how unpredictable the market can be.
Additionally, these contracts require a significant level of commitment and management, which might not suit all businesses. For example, in case of any delays in production, it is problematic to recall planned pick-ups, without extra fees.
Moreover, choosing long-term contracts with a transport provider forces you to determine the wage, which are currently dynamically changing. Thus, can result in being stuck with a contract at an unfavourable rate, or breaking it, which may incur extra charges.
What is still noteworthy is that in case of problems with contract orders, the SPOT segment comes to the rescue to patch holes in supply chains.
On-demand Freight
SPOT freight refers to a business model where transport services are purchased on an On-Demand basis. It’s more like a one-off transaction, similar to buying an item off the shelf in a grocery store. It doesn’t mean that it cannot be repetitive as transport in regular routes also can be planned on-demand. That is why, it’s a good solution if you are in industrial branches such as: manufacturing, distribution, construction or pharmaceutical.
There are several benefits to this approach. Spot freight offers exceptional flexibility – companies can adjust their transport needs according to market conditions, demand shifts, or changes in their own business operations. This is particularly beneficial in fluctuating markets or for companies with seasonal peaks.
This model also promotes competition among service providers, potentially leading to more competitive prices. Furthermore, it can be a faster process, requiring less administrative work in comparison to negotiating a long-term contract.
On-demand freight might used to have its challenges such as less predictability and slightly higher probability of not finding a truck on time as in long-term contracts, particularly during peak periods when demand is bigger than supply.
However, thanks to huge development of technology such as machine learning, AI and cloud computing, entrepreneurs are able to manage this kind of shipments much more efficiently.
As many experts say, we are currently in the platform era – we use them to book hotels, ordering pizza or a ride home from a party. The same thing is happening with shipments.
For example, at Quote & GO business owners or transport managers can quote and book van transports throughout Europe within seconds, and later, track and manage all the orders online.
What’s more, booking order means a guaranteed van ready for your needs, no matter where and when you want to pick-up and deliver your precious items. In the past, companies were avoiding basing on spot transportation, but now managing this kind of orders is easier and less-time consuming than ever before.
Which model is for you?
Given the increasing need for agility and flexibility in the European transport market, spot freight, especially with its digital advancements, presents a compelling option. While long-term contracts will continue to have their place for certain businesses and contexts, the spot freight model’s ability to adapt quickly to shifting market dynamics gives it an edge.
If you are in a business where you mostly have to deliver goods to the same customers, it is more reasonable to choose long-term deals. Nevertheless, if your customers are changing (for example in e-commerce), spot solutions would be a better choose.
In conclusion, the choice between long-term contracts and spot freight should be guided by individual business needs and market conditions.
However, with the ongoing digital transformation and the need for agility and responsiveness, spot freight seems poised for a promising future in the European transport market.
