Contract trucking rates - Truck Dispatcher Training

Contract trucking rates

Contract rates, which comprise roughly 80% of the trucking market, are based on an agreement between a shipper of goods and a transportation provider (asset or non-asset based) for a specific origin and destination and an estimated volume. Contracted rates are usually non-binding agreements based on estimated shipping volumes by the shipper and a per-mile rate quoted by the transportation provider. These contracted freight rates can be broken or adjusted at any time by either party and are often referred to as paper rates. 

Contract trucking rates are heavily influenced by recent spot market movements. If spot rates are currently above contract rates, there tends to be upward pressure on current and future contractual rates for as long as this relationship holds. Said differently, spot market rates are a leading indicator for contract rates both to the upside and the downside. In this sense, current contract rates can be thought of as spot rates from the relatively recent past.

Why shippers like contract rates: easier budgeting & forecasting, more reliable capacity, ability to build strategic carrier relationships, more accountability from providers (KPI tracking) 

Why carriers like contract rates: more predictable revenue, consistent and more efficient, driver scheduling Increased driver satisfaction.

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