What is a Spot Quote? A Comprehensive Spot Quoting Guide to Streamlining Logistics Pricing
By FarEye | June 22, 2023
Logistics is the backbone of any industry. Proper handling of goods and supplies helps businesses to operate efficiently and effectively. With the increasing demand for transportation, the need for appropriate pricing strategies has also increased over time. Spot quote is one such pricing strategy that is commonly used in the logistics industry. Spot quotes are a little bit different from traditional pricing models and require a different approach.
In this blog post, we will explain the concept of spot quotes in logistics and suggest some best practices for managing them.
What is a Spot Quote?
A spot quote is a one-time rate offered by logistics carriers for transportation services. It is not a pre-negotiated price and is provided on a per-load basis. Spot quotes are usually higher than contracted rates, as carriers are taking on additional risk by picking up freight on a one-off basis. However, if your business has a sudden, unexpected need to ship a large volume of goods, a spot quote could be a viable option.
One crucial factor to consider when using spot quotes is timeliness. They often require faster booking to secure transportation service, and it is essential to take advantage of this. A good practice is to involve multiple carriers in the spot quote process so that you can compare quotes and go with the best rate. Once you accept the quote, you need to have detailed shipment instructions ready, including delivery location, expected arrival time, loading and unloading protocols, and other necessary information.
How Does Spot Quote work?
Spot Quote vs Contract Quote: Differences
Spot quoting in logistics typically involves the following steps:
Request for Quote: The shipper, also known as the customer or requester, contacts transportation providers (such as freight carriers, logistics companies, or brokers) with the details of the shipment. This includes information like the origin and destination addresses, shipment dimensions, weight, mode of transportation (e.g., trucking, air freight, ocean freight), required services (e.g., packaging, insurance), and any specific requirements or instructions.
Information Sharing: The transportation providers review the shipment details and may seek additional information if necessary. This can include clarifying the pickup and delivery locations, verifying the weight and dimensions, or understanding any special handling requirements.
Quote Generation: Based on the provided information, the transportation providers generate a spot quote. The quote typically includes the total cost of transportation, any additional service charges, and any applicable surcharges or fees. The quote may also specify the expected transit time, validity period, and any terms and conditions associated with the quote.
Quote Comparison and Selection: The shipper receives the spot quotes from different transportation providers and compares them based on factors such as price, service level, reputation, and any specific requirements. The shipper evaluates the options and selects the most suitable quote for their needs.
Booking and Confirmation: Once the shipper chooses a transportation provider, they communicate their decision and confirm the booking. This involves accepting the quote, providing any necessary documentation, and finalizing any contractual or administrative processes required by the chosen transportation provider.
Shipment Execution: The transportation provider arranges for the pickup of the shipment from the designated origin location, manages the transportation process, and ensures the safe and timely delivery to the destination address. They handle all necessary documentation, customs procedures (if applicable), tracking of the shipment, and communication with the shipper regarding the shipment's progress.
Payment: Following the successful delivery of the shipment, the shipper is invoiced for the transportation services based on the agreed-upon terms. Payment is typically made by the shipper to the transportation provider as per the agreed-upon payment method and schedule.
Spot Quote vs Contract Quote: Differences
Spot quotes and contract quotes in logistics differ in terms of pricing, duration, and commitment. Here are the key differences:
Pricing: Spot quotes are typically higher in cost compared to contract quotes. They are based on current market conditions, including factors such as supply and demand, fuel prices, and capacity availability. The pricing is specific to the immediate shipment request and may fluctuate depending on market conditions.
Duration: Applicable for a single shipment or a short-term shipping need. They do not involve long-term commitments or ongoing contractual agreements.
Flexibility: Offer more flexibility as they allow shippers to choose from multiple transportation providers and compare pricing and services on a per-shipment basis.
Immediate Availability: Provide immediate availability for shipping needs, making them suitable for urgent or ad-hoc shipments.
Pricing: Contract quotes offer negotiated rates that are typically lower and more stable compared to spot quotes. The rates are agreed upon in advance and are often based on anticipated shipping volumes and a fixed duration.
Duration: Contract quotes involve a longer-term commitment, usually spanning several months or even years. They establish a contractual agreement between the shipper and the transportation provider for a specified period.
Commitment: Contract quotes require a commitment from both the shipper and the transportation provider to honor the agreed-upon rates and terms throughout the contract period. This commitment ensures stability and consistency in pricing and service levels.
Volume Discounts: Contract quotes may include volume discounts, where the shipper receives lower rates based on the anticipated shipping volume or committed minimum volume specified in the contract.
How to Automate the Spot Quoting Process?
Automating the spot quoting process in logistics can streamline operations, improve efficiency, and reduce manual effort. Here are some steps to consider:
Data Integration: Integrate your systems to ensure seamless flow of data. This includes connecting your shipment management system, customer data, pricing data, and carrier information. This integration allows for real-time access to relevant information during the spot quoting process.
Online Quote Request Portal: Create an online portal where customers can enter shipment details and request spot quotes. This portal can include a user-friendly interface where customers can input shipment specifics, such as origin and destination addresses, weight, dimensions, preferred mode of transportation, and any special requirements. Automate the collection and validation of this information.
Pricing Algorithm: Develop a pricing algorithm that factors in various parameters such as shipment characteristics, carrier rates, fuel prices, and other relevant variables. This algorithm should calculate the spot quote based on the inputs received from the customer through the online portal.
Carrier Selection: Implement an automated carrier selection process that considers carrier availability, service levels, pricing, and customer preferences. This could involve integrating with carrier APIs or databases to retrieve real-time information on carrier availability and rates.
Quote Generation: Use the pricing algorithm and carrier selection process to automatically generate spot quotes based on the customer's shipment details. This can be done in real-time, ensuring accurate and up-to-date pricing.
Customer Notifications: Set up automated notifications to inform customers about the spot quotes generated. These notifications can be sent via email or through the online portal. Provide comprehensive information, including the specific quote amount, validity period, and any applicable terms and conditions linked to the quote.
Quote Comparison and Selection: If you offer multiple spot quotes from different carriers, provide customers with a user-friendly interface that allows them to compare and select the preferred quote. Enable features such as side-by-side comparison, estimated transit times, and any additional services offered by each carrier.
Booking and Confirmation: Automate the booking and confirmation process once the customer selects a quote. This can involve generating the necessary documentation, capturing customer acceptance, and communicating the booking details to the chosen carrier.
Reporting and Analytics: Implement reporting and analytics capabilities to track spot quoting performance, customer preferences, carrier performance, and pricing trends. The data obtained can offer valuable insights, enabling process optimization and identification of opportunities for improvement.
Continuous Improvement: Regularly analyze the spot quoting process and seek feedback from customers and carriers to identify areas for enhancement. Make iterative improvements to the automation workflow to further streamline the process and enhance the customer experience.
How Can FarEye Help in Spot Quoting process?
FarEye is a leading logistics technology platform that offers various solutions to optimize and automate logistics operations, including the spot quoting process. Here's how FarEye can help:
Centralized Platform: FarEye offers a centralized platform that empowers you to effectively oversee all your logistics operations, encompassing spot quoting. By integrating pertinent data and features, it simplifies the process, enhancing overall efficiency.
Integration Capabilities: Provides seamless integration with a diverse range of systems, including transportation management systems (TMS), enterprise resource planning (ERP) systems, customer relationship management (CRM) tools, and carrier APIs. This allows for seamless data exchange and automation between different systems involved in the spot quoting process.
Intelligent Pricing Engine: FarEye's intelligent pricing engine enables automated calculation of spot quotes based on shipment details and predefined pricing rules. It takes into account various factors like origin and destination, shipment weight and dimensions, mode of transportation, carrier rates, and other parameters. The engine ensures accurate and optimized pricing for spot quotes.
Carrier Connectivity: FarEye's platform connects with multiple carriers, allowing real-time access to carrier rates, availability, and service levels. This facilitates automated carrier selection, utilizing predefined criteria such as cost, transit time, carrier performance, and customer preferences. The platform helps in choosing the most suitable carrier for each spot quote.
Customer Portal: FarEye provides a customer-facing portal where customers can enter their shipment details, request spot quotes, and compare available options. The portal offers a user-friendly interface for customers to view and select quotes, providing transparency and empowering them to make informed decisions.
Workflow Automation: FarEye automates the end-to-end spot quoting process, including quote generation, customer notifications, quote comparison, and booking confirmation. The platform ensures timely and accurate communication with customers, reducing manual effort and improving response times.
Analytics and Insights: FarEye's analytics capabilities provide valuable insights into spot quoting performance, customer behavior, carrier performance, and pricing trends. The platform generates reports and dashboards to help you make data-driven decisions, optimize the spot quoting process, and identify opportunities for improvement.
Scalability and Flexibility: FarEye's platform is designed to handle high volumes of spot quoting requests and can scale as per your business needs. It offers flexibility to adapt to your specific business requirements and supports customization to align with your workflows and processes.