Leveraging a Freight Rates Index to Your Advantage

Recent freight data indicates an increase in volume coupled with diminishing capacity, which could signal the end of a prolonged freight recession and usher in a new era of dynamic rate fluctuations.

Freight rate volatility influences everything from budgeting to logistics strategies, and with peak seasons arriving earlier, shippers face a challenging and uncertain road.

A comprehensive freight rates index is indispensable during these times, providing insights into current market rates across various shipping modes.

This article explores how a freight rates index supports better decision-making. Keep reading to learn more about key features that make these indexes practical tools for today’s transportation challenges.

Adapting to Freight Rate Climate Changes

The present freight rates climate, marked by rising demand and carrier exits, suggests a potential for rate increases. Effective transportation management requires a thorough understanding of these evolving trends.

Key Trends Shaping the Logistics Landscape:

1. Increased retail orders: A significant surge in retail orders fueled by Prime Day 2024 exerts additional pressure on freight rates.
2. Reduced trucking capacity: The trucking industry has seen a reduction in capacity due to bankruptcies and carrier exits.
3. Economic influences: Despite easing inflation and a slight rise in consumer spending, the manufacturing sector remains cautious. Persistent economic challenges, such as fluctuating consumer spending, high interest rates, inflation, and manufacturing orders, impact the freight market.
4. Port activity: Container volume at major U.S. ports shows a significant year-over-year increase, with some breaking previous records, reflecting increased freight transportation demand.
5. Fuel costs: Whether it’s fluctuating fuel prices or additional taxes, fuel prices continue to drive transportation costs.
6. Technology Investments: Ongoing investments in cutting-edge technologies like artificial intelligence and advanced automation can reduce freight costs by eliminating manual processes and gaining efficiency. As Steve Blough, Senior Vice President of Business Intelligence from Indfios, notes in a recent webinar on Analytics, Machine Learning, and AI in Transportation, “Automation is certainly what a lot of folks strive for today and think about when they consider their processes. Automation really requires capturing expert information and building that into the system to help automate workflows.” Investing in cutting-edge technologies like artificial intelligence, end-to-end visibility, and advanced automation helps companies gain a competitive advantage and improve their resilience to future disruptions in the logistics sector.

The logistics landscape remains dynamic, with freight rates influenced by various factors. If economic challenges persist and geopolitical concerns remain prevalent, we can expect continued market volatility in 2025.

While lower contract and spot rates might temporarily benefit shippers, increased inbound cargo volumes, lower capacity, external factors, and additional costs threaten Q3 and Q4 growth.

Understanding a Freight Rates Index

Freight indexes leverage customer data to calculate rate information for all modes of transport. While confidential customer data remains anonymous, freight rates index data delivers insights that allow users to evaluate rates and market trends and see what others are paying for freight. This information helps with negotiating contracts, identifying carriers, and choosing the most effective mode of transport.

Key Features of an Effective Freight Rates Index

Freight indexes offer powerful negotiating information, but it’s essential to recognize that not all freight indexes are created equal. Dynamic decision support indices provide real-time insights into prevailing rates for brokering loads.

In contrast, more static indices offer historical data for benchmarking and procurement, guiding optimal and fair contractual rates. In addition to ease of use and Transportation Management System (TMS) integration, here are key factors to consider when choosing a freight index:

• Latency: Even when using historical information, the data must be current, fresh, and updated daily. With the volatility we’ve seen over the past few years, monthly updates won’t provide the granularity within the lane definitions that a low latency index can.
• Modes: Coverage across various transportation modes such as truckload, LTL, parcel, air, ocean, rail, and intermodal.
• Scope: Detailed information on specific lanes, regions, and equipment types.
• Depth/sample size: A larger data pool provides a more accurate and reliable data sample for effective benchmarking.
• Rate determination method: It helps to understand if the rates are driven by rate bids or settled/actual rates and distinguish whether they were driven by spot or contractual rates. These rates are often considerably different from what they cost in a lane.
• Buy and sell rates: The ability to distinguish between buy and sell rates can provide a significant competitive advantage as these data points highlight the delta between what a load can be bought or sold at.
• Batch analysis: Batch processing drives efficiency by allowing the procurement process to analyze a block of loads or lanes instead of doing them individually.
• Accuracy and adaptability: Seasonality, regions, weather, shipment type, and other factors influence rates. For instance, peak seasons or disruptive weather can drive up rates as demand increases and capacity diminishes. Factor in these consistent increases and anomalies to improve accuracy.

Integrating a freight rate index into your TMS and overall transportation strategy provides a data-driven approach to lowering costs, improving ROI, and improving decision-making.

Optimize Your Transportation Strategy with a Freight Rates Index

Knowledge is power when it comes to navigating the dynamic nature of the freight industry. Incorporating a freight rates index enables accurate benchmarking for improved negotiation and cost control. The data-driven approach provides a clear picture of market trends and rate fluctuations to deliver a more agile and informed approach to transportation management.

Infios' freight rates index feature within the Infios TMS is the first of its kind to offer shippers, brokers, and 3PLs rate information for all modes, including truckload, LTL, parcel, air, ocean, rail, and intermodal. These capabilities provide significant advantages for delivering on your transportation strategies.