4 Considerations for Managing FTL Freight Contracts in 2024

2024 is a year marked by a unique flavor of volatility: from geopolitical tension impacting ocean freight, imports, and volumes from the West Coast, FED interest rates relaxing from the peak of 2023, and Spot Linehaul Rates staying fairly consistent since January, it’s difficult to cut through the noise and implement an effective strategy for the incoming market. This article discusses 4 key considerations to make sure you’re well-positioned to handle the 2024 freight market.

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1. Use Software to Run an Efficient Bid Process 

Some domestic shippers run monthly, quarterly, or annual bids. 

This process typically takes place in an excel sheet: A shipper will create an empty sheet, list the lanes and volumes they anticipate over a certain time period, and leave empty cells for carriers and brokers to fill in with their bids. This excel sheet is then sent to 10-20+ carriers, for them to fill and return via email. From there, the shipper copies the rates into a centralized spreadsheet before manually comparing them, and awarding lanes over email.

Shippers in our network reported this process takes anywhere from 8 hours to 4 days per bidding cycle. Running this process annually, let alone quarterly or monthly, is incredibly time-consuming.

By switching to Portex, the average bid in our shipper network went from 8 hours to ~45 minutes.

The best software for your freight procurement team will depend on the constraints of your business. Consider variables like intended use, cost, set-up time, and types of features the platform offers. Some examples of viable software providers include:

Portex
‍Optimized for companies of all sizes. Upload your bid to Portex, invite your carriers and then Portex automatically aggregates the bids from multiple carriers and organizes them by metrics such as “Lowest Price” and “Best Historical Service.” This is an extremely cost effective and quick option to reduce the time it takes to manage your bids by 70%. 
Cost: Low 
Set up: 10 minutes 
Types of Bids: Freight specific: mini bids, monthly, quarterly and annual contracts.

Jaggaer by SAP
Enterprise-level solution tailored for comprehensive and complex bid management. Jaggaer is a platform that lets you facilitate any type of bid process in procurement generally. Because of its complex abilities and diverse applications, it has high set-up costs but can be very effective for enterprise clients with highly-specific needs.
Cost: High
Set up: 4-9 months for complete rollout
Types of Bids: Any: Fully Customizable Software

Emerge
Freight-Specific Enterprise platform to streamline the bidding process for shippers and carriers. Emerge also offers a carrier network to help scale your operations with service providers outside of your existing network.
Cost: High
Set up: 4-6 weeks for standard implementation
Types of Bids: Freight specific: spot market bids, contracted bids on any time interval, and ad-hoc bids

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2. Long Term vs Short Term Contracts

Depending on your market and business expectations, you may want to adjust the frequency of your bid process.

Longer term contracts offer predictability in your Financial Planning and Analysis (FP&A). This can create consistency for your gross margins and secure demand so you are not concerned about finding capacity. Longer-term contracts typically start at 6 months and go all the way up to multiple years, although the most common contracts are one year long.

Alternatively, you may opt into shorter term contracts to maintain exposure to the market. If the market is consistently favorable towards the shipper, you might find you can get better rates to move the same product. Shorter term contracts are typically between one month and a couple of quarters.

Lastly, for shippers who may have unpredictable freight demands, it is practical to run most of your freight over the spot market. That said, if there is a short-term period where you anticipate increased and consistent volumes over lanes, you can put out a bid for a short term contract to obtain more favorable rates or gain consistency in your FP&A.

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3. Spot vs Contract Freight

Another way to create a financial hedge in your strategy is to take your expected volumes and distribute the volumes across both spot and contract markets. 

For example, if you are confident that rates are going to rise but don’t want to commit all of your volume to a contract, you can allocate 60% of your freight to the contract market and set aside the remaining 40% for the spot market. 

The 40% of freight moving over the spot market gives you exposure to the market, whether it goes up or down. This can add complexity to your P&L but can reduce the risk of over-committing to certain rates too far in advance.

Allocating freight between spot and contract markets can also act as a hedge if you suspect your freight demand may decrease. If the volumes you allocate to the spot market no longer need to be shipped, you do not risk breaking a contract or hurting your carrier relationships.

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4. Contract Multiple Carriers for the Same Lane

‍During the lifecycle of the contract, there may be instances where your dedicated carrier on a lane is overwhelmed and can not service all of your freight. In this case, it is helpful to have another carrier you can call on to help supplement your dedicated carrier.

One way you can protect against this example is by allocating 50% of your contract volumes to two separate carriers. Should either carrier be unable to service your freight, it is much easier to call on the other for them to create additional capacity for you.

At Portex, we typically see shippers award freight to 1-3 carriers. After 3 carriers on a lane, you risk spreading yourself thin with managing relationships rather than investing your resources into the business.

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While managing your domestic freight bids, consider that software solutions, optimized bid intervals, balanced spot and contract freight, and strategic carrier allocation can fundamentally unlock substantial operational efficiency. These strategies are essential tools when navigating the 2024 freight market effectively.

If you are interested in implementing software tools and implementing best practices, Portex offers an easy-to-use freight procurement platform, designed to simplify your workflow. It takes 15 minutes to implement, saves shippers 20+ hours/week, and improves operational efficiency by 10x. Schedule a call to learn more.