Research reveals shippers commit to contracts but leave up to 70% of freight capacity unused, highlighting inefficiencies in logistics.
Shippers are committing a significant portion of their freight volumes to contracts, yet research commissioned by Freightos and conducted by MIT's Angi Acocella reveals that large portions remain unused, as reported by New York's Journal of Commerce.
The study found that while shippers typically allocate at least 90 percent of forecast truckload volumes to contracts, as much as 70 percent of that capacity goes unused. Additionally, more than 70 percent of ocean freight is also tied to contracts, although the extent of unused capacity in this sector was not quantified.
Ms. Acocella noted that shippers often underestimate the amount of unused space, typically believing that waste is limited to no more than 25 percent. She described these gaps as "ghost lanes," where contracted capacity exists but loads fail to materialize, leading to increased costs and performance issues.
The research indicated that truckload shippers are increasingly using the spot market in a more strategic manner. Prior to the COVID-19 pandemic, about 5 percent of truckload volume was directed to spot markets. This figure doubled to 10 percent during the pandemic and has remained stable, suggesting a structural shift in shipping practices.
Despite a soft market, shippers continue to utilize spot loads even within routing guides. While most shippers prefer contracts for their predictability, Ms. Acocella recommends adopting a broader mix of strategic spot capacity alongside long-term, short-term, and index-linked contracts.
Shippers who are forced into the spot market due to contract limitations are paying 9 to 35 percent more than forecasted costs, highlighting the risks associated with relying on spot markets out of desperation rather than strategy.
The study surveyed 108 respondents in ocean trade and 60 in truckload. Judah Levine, head of research at Freightos, emphasized that shippers incur wasted costs through underutilized contracts and could enhance efficiency by strategically utilizing spot lanes. He urged shippers to measure contract versus spot performance, consider index-linked contracts, and automate procurement tasks.
