Should Mid-Size Shippers Rethink Dedicated Contracts?

As the U.S. trucking sector faces a sluggish recovery, more carriers are shifting to dedicated capacity contracts. Should mid-size shippers consider this route, especially given the favorable rates environment?

While dedicated contracts offer predictability, cost stability, and reliable capacity, they also come with limitations that may not align with the flexibility requirements of mid-size shippers. 

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Dedicated Contracts – A Primer

Dedicated contracts are long-term agreements between shippers and carriers, ensuring that specific trucking resources are reserved exclusively for a shipper's freight. These contracts often span one to three years, providing consistency in both cost and service levels. Unlike the spot market, where rates and capacity can vary drastically, dedicated contracts offer a more controlled environment – but at the cost of flexibility.

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Potential Drawbacks for Mid-Size Shippers

For mid-size shippers, dedicated contracts can present challenges:

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• Reduced Flexibility: Locked-in capacity can be a burden when your shipping needs fluctuate, making it harder to adapt to demand changes.
• Higher Fixed Costs: Committing to long-term contracts may lead to paying for capacity you don’t always need, reducing cost efficiency.
• Limited Carrier Options: Long-term agreements may restrict your ability to pivot to better carriers or rates as the market evolves.
• Lack of Current Incentive: With recovery in the trucking sector looking to be relatively distant, there is less incentive to move away from favorable spot rates.

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Balancing Flexibility with Stability

How can you maximize flexibility while ensuring you get the best rates and service possible? 

The answer lies in leveraging technology. A platform like Portex offers the ability to manage bids, compare rates in real-time, and secure competitive pricing without the constraints of long-term commitments.

It also offers access to diversified carrier relationships. With access to a broad carrier network, you have the flexibility to adjust quickly as market conditions shift.

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The Bottom Line

Of course, there is talk of rising spot rates – with tariffs to other macroeconomic elements contributing to this debate. 

And while dedicated contracts may seem like a safe bet in uncertain times, they aren’t always the best fit for mid-size shippers. A more flexible, data-driven approach can provide both cost efficiency and operational resilience.

Is your business positioned to stay agile in a changing market? Portex can help you navigate the options.

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