As peak ramps up, shipping leaders face a critical question: Are we locked into the right carrier capacity strategy, or do we need to pivot now before it’s too late?
Get this decision right, and you’ll handle the holiday surge smoothly while protecting margins. Get it wrong, and you’re either scrambling for capacity at astronomical rates or stuck paying for shipping volume you never use.
The answer isn’t one-size-fits-all. It’s about understanding your actual cost structure and risk tolerance.
Fixed Capacity: The Contracted Rate Play
Fixed capacity is the traditional move: negotiate your rates, commit to volume, and lock in guaranteed space for peak.
Sounds great in theory… until the numbers don’t line up.
The hidden costs:
- Paying annual minimums whether you use them or not
- Missing out when spot rates dip below your locked-in rate
- Penalties for falling short on commitments
- Zero flexibility to pivot when performance slips
When it works:
You’ve got predictable volume. Your peak-to-trough ratio is under 2:1. You need guaranteed space when everyone else is fighting for trailers.
If you’re consistently shipping 80% of contracted minimums in your slow months and hitting 100%+ during peak, you’re winning. But if you’re sitting at 40% utilization before the surge? You’re paying for capacity you’ll never touch.
Variable Capacity: The Flex Play
Variable capacity is all about agility: using the spot market, regional carriers, and on-demand options that flex with your volume.
The trade-offs:
- You’ll pay more during peak surges
- You lose priority when carriers get tight
- Forecasting becomes a headache
- Managing multiple partners adds operational noise
When it works:
Your peak season runs 3x your baseline. Demand fluctuates year to year. You’re scaling fast and can’t afford to be handcuffed by contracts.
You’ll pay a premium per shipment, but you only pay for what you actually move. That flexibility is worth gold when forecasts shift or the market flips overnight.
The Hybrid Reality Most Shippers Face
Let’s be real – almost no one runs 100% fixed or 100% variable anymore.
The best shippers build hybrid models:
- Lock in enough contracted capacity to cover your base + ~20–30% surge
- Layer in spot market and regional carriers for everything above that
The art (and the math) is finding that breakpoint—the exact moment where fixed becomes cheaper than variable. And that’s impossible without visibility into your actual data.
Running the Numbers That Matter
Variable vs fixed capacity modeling breaks down when you’re guessing at shipping costs. You need to track:
- Carrier contract utilization rates by month and service level across your entire network
- Actual landed costs, including accessorial charges, fuel surcharges, and dimensional weight penalties that blow up your “contracted rate”
- Break-even analysis showing at what volume level contracted rates become cheaper than spot market pricing
- Peak rate multipliers that reveal how much more each incremental shipment costs during carrier capacity crunches
Most shipping leaders have a rough sense of these numbers. But “rough sense” leads to bad decisions that can cost millions.
Modern shipping analytics platforms pull this data automatically from your TMS and carrier invoices. You can see real-time carrier contract performance, compare actual all-in shipping costs across carriers, and model different scenarios before committing to annual carrier agreements.
The Data You’re Missing
The biggest mistake in capacity modeling? Looking only at base rates while ignoring the variables that actually drive costs.
- Dimensional weight
- Residential surcharges
- Address corrections
- Weekly fuel adjustments
- Carrier-specific peak fees
Your “contracted rate” of $8.50 per package might actually cost $12.30 when you factor in all the accessorials. If you’re not seeing that data in one place, you’re building strategy on fiction.
The Gut Check Questions
Before you lock in more volume or ride out your current plan, ask yourself:
- Do I know my true all-in cost per package, by carrier and service level?
- Can I see utilization rates month-to-month?
- Can I model a 20% swing in volume—up or down—and still protect margin?
If you’re hesitating on any of these, you don’t have enough data visibility to make smart capacity decisions.
Making the Call
Variable vs fixed capacity modeling isn’t about picking one strategy and sticking with it forever. It’s about understanding your true shipping costs, knowing your breakpoints, and having the flexibility to adjust as your business evolves.
Build your model on real data, not guesswork. Test multiple scenarios. And make sure you can track actual performance in real-time as peak season accelerates.
The winners this peak season aren’t the ones with perfect spreadsheets—they’re the ones who see their data clearly, know their breakpoints, and can pivot mid-peak before problems turn into losses.
Data drives confidence. Visibility drives control. And in Q4, control is everything.
