contract carriage

Spot and contract freight play essential roles in the movement of goods, and both options offer different value propositions for shippers. Recently, freight market volatility has challenged both shippers and carriers with fluctuating demand, natural disasters, economic shifts and more, making it difficult to forecast costs accurately.

Additionally, wide swings in trucking capacity have further complicated freight management, requiring shippers to monitor and strategically utilize both spot and contract options. Understanding when to utilize which solution can help shippers maximize freight spending, meet service levels, optimize shipping strategies and mitigate risks during uncertain market conditions.

Understanding Contract and Spot Rates

With contract rates, shippers commit freight to a carrier or logistics provider, and the carrier or logistics provider commits capacity for an agreed-upon rate. Contracts provide the security of price and capacity and make up the majority of freight moves. Contracts tend to last six months or longer.

A spot rate is the one-time, on-demand, transactional price a carrier or provider charges to move freight from point A to point B. Spot rates are based on the current market conditions and can change day to day or even hour by hour. The spot market can be highly volatile. Severe weather or unexpected disruptions can drive prices higher quickly.

Like most things, supply and demand factor into the prices of both contract and spot rates. When trucking capacity is tight, spot rates tend to increase and contract rates experience upward pressure. When capacity loosens, spot rates typically fall and future contract rates decrease. Spot rates, which are instantaneous, are a leading indicator for contract rates, with contract rates tending to lag behind spot rates by about four to six months.

There are times when the spot market provides more competitive pricing than contract rates. Some shippers “channel shift” and move to the spot market to take advantage of lower rates. However, disruptions experienced over the last few years have shown how critical long-term relationships are to the successful movement of goods during challenging times.

Determining the Best Option

Market uncertainty is expected to continue for the foreseeable future, and shippers will want as many channels as possible to move goods.

Contract freight offers guaranteed capacity at a predetermined, agreed-upon price, making it easier to forecast freight expenses. Contracts also provide opportunities to negotiate rates and fuel and accessorial charges, which are typically fixed in the spot market. Entering contracts also allows shippers and their logistics partners to develop strong, reliable relationships that can help ensure access to capacity during peak periods, improve service and uncover additional opportunities for savings. Overall, strong relationships can be critical to long-term success.

The spot market offers shippers flexibility and can provide valuable space when there is a planned or unplanned surge in demand, new shipping lanes develop faster than anticipated, or incumbent carriers reject loads. The spot market may also work best on some lanes, especially if they are inconsistent.

Volatile market conditions often drive freight into the spot market, and brokers can connect shippers with thousands of smaller carriers working primarily in the spot market. Because of the flexibility brokers offer, shippers don’t have to commit to more capacity than they need until they need it. Plus, utilizing all available carriers is critical to the functioning of the entire supply chain ecosystem.

Factors to consider include:

  • The overall network
  • The amount of freight to move
  • The consistency of freight
  • The level of service/specialization needed
  • Seasonal surge demand
  • Anticipated growth
  • Contingency plan needs

Developing a Strategy

Penske Logistics can work with shippers to evaluate their overall network and identify opportunities to increase efficiency, such as consolidating multiple less-than-truckload shipments into one cross dock. From there, the Penske team can review capacity needs, individual lanes, planned surges, anticipated growth, and current market conditions to help shippers determine the right mix of contract and spot freight for their operations.

To compete in today's complex global economy, you must look for ways to improve efficiencies, without losing value, in every aspect of your business. One immediate change that can easily help you focus on your core competencies is outsourcing the management of your freight transportation to the experts at Penske.

What is Dedicated Contract Carriage?

The Council for Supply Chain Professionals ( defines dedicated contract carriage (also known as DCC) as a third-party service that dedicates equipment (vehicles) and drivers to a single customer for its exclusive use on a contractual basis. At Penske Logistics, we see dedicated contract carriage as a way for shippers to reduce costs, increase truck capacity and transfer liability. As a dedicated contract carriage provider, we may also take on white-glove responsibilities such as direct store delivery, front-door delivery, customer interaction, cross-docking and more.

The Benefits of Dedicated Contract Carriage

With Penske dedicated contract carriage, you don't have all the worries of fleet ownership, but you receive all the benefits: a safe, efficient fleet that's under your control; visibility to your shipments and deliveries; well-trained, professional drivers; continuous improvement that's measured and tracked; and much more. All this allows you to focus on the real concerns of your business and your customers. Penske's dedicated contract carriage solution relies on industry expertise, dedication to safety and cutting-edge transportation technology to deliver peak service performance, allowing you to surpass your business goals.

Recruiting and retaining drivers along with managing the complexities of running a fleet and staying current with regulations can cut into your time and profits. Penske dedicated contract carriage provides you with a fleet of trucks and well-trained drivers that we take care of. We'll even brand them for you. Penske covers 48 states and Canada and provides dedicated contract carriage service across industries, equipment types and uses. Some of the notable benefits of outsourcing to Penske include guaranteed capacity and the ability to alleviate driver management and truck maintenance concerns while establishing route optimization that saves valuable time and money.

Penske Dedicated Contract Carriage Benefits

Gain Access to Cross-Industry Experience

Penske has experience in a variety of industries: food and beverage, industrial manufacturing, automotive and retail, and others. We can also demonstrate transferrable skills that can adapt to your requirements. We understand your needs because we have experience working in your world. Learn more.

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Improve Customer Service

You want to represent your company in the best way possible. Penske dedicated contract carriage seamlessly integrates into your organization and ultimately becomes an extension of your business. From driving trucks with your logo to wearing your uniform, a Penske dedicated contract carriage solution means we will represent your business in the same manner that you would.

We also help you give your customers the best service possible by giving you visibility into every delivery we make. With ClearChain, you'll be able to rest assured that the parts you're waiting for are on their way or the order you sent is nearing its destination. ClearChain collects load data in several ways, so you can automatically receive alerts regarding shipments based on parameters you set. You can define how often you'd like updates, the type of updates you want (such as ship notifications or estimated time of arrival) and the preferred communication method. Learn more.

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Drive Excellence with the Latest Technology

Penske uses advanced tools and state-of-the-art technology called ClearChain ® to create operational excellence and control within our dedicated contract carriage practice.

ClearChain is a comprehensive suite of optimization and operation tools that leverages best-in-class commercial software and integrates it with Penske's own applications. It provides key benefits in the areas of visibility, operational efficiency and productivity.

ClearChain captures GPS data on your loads and provides customized dashboards, so all vested parties are in the loop and know where your products are every step of the way. Not only will you have a clear picture of your operations, but we can also use that data to improve your productivity as well as make quick decisions, should a disruption occur.

Much of ClearChain's reporting is automated, which means no one has to wait for a driver to update the system. It utilizes a truck's electronic onboard recorder to monitor both engine and driver performance while a truck is in operation. It can communicate with the driver via tablet, smartphone or the web.

From fleet management to driver performance, ClearChain produces disciplined metrics management and ultimately enables continuous improvement, allowing you to reduce costs and increase efficiency. Learn more.

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Improve Safety

Penske makes safety a priority. For drivers, Penske provides the tools they need to be successful. We also continuously invest in state-of-the-art safety componentry for our vehicles. This includes items such as adaptive cruise control, collision avoidance, disc brakes and LED headlights. Penske also routinely conducts a continuous evaluation of new safety products, ensuring that we are always up to date with the latest safety technology. Learn more.

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Eliminate the Need to Buy and Maintain Your Fleet

Fleet ownership comes with the associated expenses of overhead, towing, taxes, washing, acquiring substitute vehicles, licensing and fuel, among other hard costs. And the longer you own a truck, the higher maintenance and repair costs will be. This includes givens like tires, oil changes and routine inspections. With dedicated contract carriage , Penske Logistics owns and maintains all of the vehicles in your fleet. That means we take care of keeping vehicles safe, compliant and on the road.

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Easily Handle Fluctuations

Penske understands that the ability to meet spikes in demand can often make or break a business. We have the solutions to make certain your freight is delivered during both seasonal and unexpected surges. When demand surges, we are able to source additional Penske drivers and trucks. Our vast network of trucks and qualified drivers enables us to place resources where necessary to ensure your business is covered. Learn more.

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Optimize Routing

Today, shippers require some degree of a customized solution to ensure both time and resources are used with maximum efficiency. Penske will fully customize a plan for your transportation needs, taking into consideration your market, your people and your schedule.

Complexities within the supply chain also increase the importance of route optimization. Penske doesn't just look at it as distributing from A to B. We look at the network and optimize it, and that applies to miles, drivers and assets. With ClearChain technology, we model scenarios that look at increasing efficiency by diversifying equipment or by making more frequent deliveries, etc. Learn more.

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Outsource Recruiting and Retaining Qualified Drivers

Recruiting and retaining quality CDL drivers is a big challenge for any shipper. Penske has highly skilled, dedicated drivers, and all drivers receive year-round training and instruction to keep their driving skills sharp.

Penske seeks out drivers who are positive brand representatives and who exhibit a strong customer service commitment and pledge toward road safety. Our drivers enjoy outstanding benefits packages and comprehensive onboarding and training programs; well-maintained, late-model trucks and trailers with the latest safety and technology; 24/7 support from our own roadside assistance team; and a North American network of over 2,900 truck leasing and rental facilities. Penske drivers are highly valued—a strong indicator as to why Penske driver turnover is among the lowest in the industry. Learn more.

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Stay Compliant with Changing Regulations

Requirements for transportation companies seem to change on an almost-daily basis. Penske can create a strategic solution that right-sizes your fleet, keeps it safe, well-maintained and compliant, and runs it all using a combination of operator expertise, proven processes and industry-leading technology. Because Penske is a leader in the truck leasing industry, you can rest assured that we will always keep your fleet safe and compliant. Additionally, we stay up to date on all of the industry's changing regulations, from ELD and hours of service requirements to environmental considerations. You will no longer need to worry about being compliant because we will make sure you are.

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Reduce Overhead Costs

Buying new equipment and keeping it operating at peak efficiency is expensive and can be unpredictable. And with the way technology is constantly changing, enjoying and maintaining the latest technology is extremely challenging. At Penske, we are experts at buying and maintaining cutting-edge transportation solutions and finding the best fit for every customer.

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Submit a Dedicated Contract Carriage Inquiry

Tell us a little bit about your unique business needs, so we can begin a productive conversation. Visit our contact page.