Contracts Aren’t Always a Guarantee
Anyone who’s worked in freight for more than a week knows a contract doesn’t guarantee freight will move. In both ocean shipping and full truckload (FTL), contracts are meant to bring predictability. Yet reality often forces shippers into the spot market, where costs and risks are higher.
In FTL, around 90–95% of freight moves under contract, with just 5–10% handled through spot. Ocean freight shows similar reliance on contracts. But contracts can fail: carriers roll containers, reject loads, or blank sailings; shippers over-forecast volumes. When that happens, the spot market acts as a relief valve—albeit an expensive one.
Research from MIT’s Center for Transportation and Logistics shows that shippers can pay anywhere from 9% to 35% more when forced into the spot market, depending on market conditions.
Ghost Lanes and Empty Promises
One striking finding from recent MIT research is the prevalence of what they call ghost lanes. These occur when a shipper contracts a lane, but no freight ever materializes.
“Seventy percent of contracted lanes never move a single load,” the research revealed. For carriers, this means counting on volume that doesn’t appear. For shippers, it raises questions about planning accuracy and procurement practices. Ghost lanes represent wasted administrative effort and introduce inefficiency across the board.
The lesson? Contracts may look solid on paper, but the freight market is built on shifting sands.
Why the Spot Market Becomes a Necessity
So why do shippers end up in the spot market? The reasons vary:
- Carrier constraints: lack of capacity, network imbalance, or rejecting freight due to rate misalignment.
- Shipper missteps: forecasting errors or lanes that never produce volume.
- Market dynamics: oversupply or undersupply of capacity pushing freight outside contracted terms.
When these disruptions occur, shippers face tough choices. They can accept higher spot rates or risk service failures.
Beyond Contracts: Smarter Procurement
Researchers at MIT have also explored index-linked contracts and other smarter contract designs for FTL. These tools aim to reduce the volatility between contract and spot markets, giving both shippers and carriers more stability.
By linking rates to external indices, parties share market risks more transparently. Instead of renegotiating every time the market shifts, index-linked contracts provide a built-in adjustment mechanism.
This concept is slowly moving from trucking into ocean freight, where volatility has been especially pronounced since the pandemic. Shippers burned by sky-high rates during tight markets are now more open to hybrid models that blend fixed contracts with index-based adjustments.
Spot vs. Contract: A Balancing Act
Ultimately, the choice isn’t about eliminating one market in favor of the other. It’s about managing the balance.
Shippers need contracts for stability, but they also need spot for flexibility. Carriers want predictable volumes, but they too use the spot market to monetize excess capacity. The challenge is finding a portfolio mix that reduces costs without exposing either side to excessive risk.
For some, that may mean redesigning contracts entirely. For others, it may be about improving forecasting and reducing ghost lanes. Whatever the solution, the data shows one thing clearly: in freight, a contract is never the final word.
