As everyone knows, the spot market is quite uncertain. Not long ago, many were talking about the high rates they were able to demand while the spot market was in a bull market. I’ve been in the trucking business long enough to see these cycles repeat themselves many times. The spot market, in the end, always corrects itself, then turns around and bites those who have put all their eggs in that basket.
Most people who take advantage of high market prices when the spot market is in their favor, have little to no concern about how the high shipping rates affect the businesses they are serving. Yet, somehow in their mind, it’s unfair when the spot market favors the shipper. In the end, it always comes down to supply and demand.
When there are ten trucks available and a hundred loads to move, the market is in your favor. When there are a hundred trucks and only ten loads, it’s fair to expect rates to be depressed. Meanwhile, there is a whole other segment in trucking - which is contract rates. These may not seem very appealing when the spot market is in your favor. However, that is the exact time when a carrier should be seeking longer-term contract rates. This is simple business 101 and is no different from whether you’re selling a crop, a product, or providing a service like we do, in the trucking industry.
When a new product comes out such as the latest television, cell phone, or game console, the price is usually considerably high while there is demand from people who want the latest, and greatest, version available. As soon as the competition catches up to that manufacturer’s product, the price of that very same item will often drop. Once again, it all comes down to supply and demand.
Another subject that pertains to supply and demand within the trucking industry, comes down to how available we are. Many in our industry call for increased flexibility. Increased flexibility makes the trucking industry more available to serve our customers. The availability of our services simply puts us, in the trucking industry, at more of a disadvantage when it comes to the market forces of supply and demand.
Below, I have left a good link that explains supply and demand in more detail.
Introduction to Supply and Demand (investopedia.com)