The Hidden Crisis in Global Freight Procurement
In a revealing presentation at Freightos’ Stable Chaos: A Digital Supply Chain Summit, Dr. Angi Acocella from MIT’s Center for Transportation and Logistics exposed a startling reality that procurement professionals have long suspected but rarely quantified: approximately 70% of contracted freight lanes never materialize with any volume whatsoever.
This finding, based on extensive research spanning multiple years of freight data, challenges fundamental assumptions about how companies approach freight procurement and highlights the massive inefficiencies hidden within seemingly well-structured transportation contracts.
The Contract-Spot Dilemma: A Tale of Two Markets
Dr. Acocella’s research, conducted at MIT’s Freight Lab, reveals critical insights into how shippers navigate the complex balance between contract and spot markets across both ocean freight and full truckload (FTL) transportation. Her findings show that while 90-95% of FTL volume moves under contract, with only 5-10% going to spot markets, the reality of how these contracts perform tells a dramatically different story.
“Having a contract in place does not necessarily mean you’re going to have freight moving,” Dr. Acocella emphasized during her presentation. This disconnect between contracted capacity and actual utilization represents one of the most significant hidden costs in modern supply chain management.
The True Cost of Uncertainty
The research reveals that when shippers are forced into the spot market due to carrier rejections or capacity constraints, they pay a premium of 9% to 35% above their expected contract prices, depending on market conditions. This finding, based on North American long-haul truckload data, quantifies what logistics professionals have long known intuitively: the backup plan is expensive.
Ghost Lanes: The Phantom Menace of Freight Procurement
Perhaps the most shocking revelation from Dr. Acocella’s research is the concept of “ghost lanes” – contracted routes where no volume ever materializes. While survey respondents estimated their ghost lane percentage at 0-25%, with ocean shippers admitting to slightly higher rates of 26-50%, the actual data tells a far more troubling story.
“About 70% of lanes that are contracted end up not materializing any volume,” Dr. Acocella revealed, based on analysis of 5-6 years of data from FTL long-haul shippers with annual procurement events. This massive discrepancy between perception and reality suggests that most companies lack visibility into their own procurement inefficiencies.
The Anatomy of Ghost Lanes
The research identifies specific characteristics of lanes most likely to become ghosts:
- Lanes with historically low or sporadic volume
- Routes representing the “long tail” of a shipper’s network (approximately 80% of lanes carrying only 20% of volume)
- Lanes contracted as contingency options that never activate
- Routes affected by network changes or demand shifts
COVID’s Lasting Impact: A Structural Shift in Spot Market Usage
Dr. Acocella’s longitudinal analysis from 2015 to 2023 reveals a potentially permanent shift in how shippers access spot markets. Prior to COVID-19, approximately 5% of FTL volume consistently went directly to spot markets, regardless of market cycles. However, during and after the pandemic, this figure doubled to 10% and has remained elevated even as markets softened.
“It looks like there may be a structural shift in how shippers are accessing the spot market,” Dr. Acocella noted, pointing to data showing that the percentage going directly to spot hasn’t returned to pre-pandemic levels despite the market softening since late 2022.
Ocean vs. Truckload: Same Problems, Different Structures
While ocean and FTL markets have vastly different structures – ocean being highly concentrated with a handful of carriers and three major alliances, while the US alone has over 500,000 FTL carriers with 90% operating five trucks or fewer – Dr. Acocella’s research reveals that the fundamental drivers of spot market usage remain remarkably similar.
Key Structural Differences:
- Market Concentration: Ocean shipping is dominated by major alliances, while FTL is highly fragmented
- Geographic Scope: Ocean handles global trade lanes with long lead times; FTL focuses on regional, warehouse-to-warehouse movements
- Barriers to Entry: Ocean requires massive infrastructure investments; FTL needs only a truck and CDL license
The Universal Driver: Uncertainty
Despite these structural differences, both markets share a common challenge: tendering uncertainty and capacity availability issues. This uncertainty, rather than market structure, emerges as the primary driver of spot market usage across both modes.
Strategic Spot Usage: From Backup to Business Strategy
Dr. Acocella’s research challenges the traditional view of spot markets as merely a costly backup option. Instead, she advocates for strategic spot market usage on specific lane types:
- Surge Volume Lanes: Direct-to-spot for predictable demand spikes
- Low-Volume, Sporadic Routes: Lanes with irregular patterns that don’t justify annual contracts
- Market-Specific Opportunities: Leveraging spot during favorable market conditions
“If you do strategically use the spot market on the lanes that make the most sense – these low-volume, sporadic volume lanes – then you can actually reduce your costs,” Dr. Acocella explained, noting that benefits extend beyond soft markets to include cost savings and improved carrier performance even in tight markets.
Contract Innovation: Beyond Fixed Prices
The research reveals evolving contract strategies as shippers seek flexibility within the stability of contracted relationships:
Ocean Freight Flexibility Tools:
- Index-linked contracts gaining traction
- Tiered volume-based pricing
- Short-term fixed-price contracts (30-90 days)
FTL Flexibility Approaches:
- Dedicated capacity agreements (pay for capacity whether used or not)
- Shorter-term contracts
- Emerging API-based dynamic pricing
Practical Implications for Procurement Professionals
Dr. Acocella’s research points to several actionable strategies for improving freight procurement outcomes:
1. Data-Driven Portfolio Management
Companies must analyze historical lane performance to identify which routes belong in contracts versus spot markets. The traditional approach of trying to contract everything is both inefficient and expensive.
2. Quarterly Performance Reviews
Rather than annual procurement events, Dr. Acocella recommends quarterly reviews of lane performance, particularly for problematic routes. “Check every quarter how things are going,” she advises, noting that poor carrier performance often correlates with shipper-side issues like port congestion or detention problems.
3. Market Cycle Awareness
Understanding where you are in the freight market cycle is crucial. As Dr. Acocella notes, “History does repeat.” Shippers who recognize cycle patterns can better anticipate when contracts will hold versus when they’ll need spot market alternatives.
4. Realistic Rate Setting
The research reveals a critical insight: lowballing rates in soft markets virtually guarantees carrier rejection when markets tighten. “If I try to lowball and lock in a rate, it’s not going to be used,” Dr. Acocella warns. “Your carriers are going to be rejecting, and you’re going to be relying on backup or spot market anyway.”
The Path Forward: Embracing Strategic Flexibility
Dr. Acocella’s research fundamentally challenges the procurement status quo. The traditional preference for maximum contract coverage, while providing budgetary predictability, creates massive inefficiencies through ghost lanes and forces expensive spot market usage when contracts fail.
Instead, she advocates for a more nuanced approach that acknowledges market realities:
- Accept that some lanes are better served by spot markets
- Build flexibility into contracts through indexing or tiered pricing
- Maintain visibility into actual versus contracted performance
- Align procurement strategies with market cycles
The Future of Freight Procurement
As global supply chains face continued volatility from geopolitical tensions, climate events, and demand fluctuations, Dr. Acocella’s research provides a roadmap for more resilient procurement strategies. The key lies not in trying to contract away uncertainty, but in building systems that embrace and optimize for it.
The 70% ghost lane statistic should serve as a wake-up call for the industry. It represents not just wasted negotiation effort, but a fundamental misalignment between how companies think their supply chains work and how they actually operate.
For procurement professionals, the message is clear: the path to better outcomes lies not in more contracts, but in smarter contracts, combined with strategic spot market usage based on data-driven insights rather than tradition or assumption. As supply chain volatility becomes the new normal, those who adapt their procurement strategies accordingly will find competitive advantage in what others see as chaos.
