What Is a Freight Rate Index & How Does It Keep Freight Costs in Check?

What Is a Freight Rate Index & How Does It Keep Freight Costs in Check?

As freight market volatility continues to cause upward pricing pressure, the need to select a reliable freight rate index increases as well. 

A freight rate index can provide insight into the current market rates for multiple shipping modes. These insights help provide a more strategic, data-driven approach to transportation management. The information enables managers to devote more time to scenario planning and selecting modes that best align with transportation budgets and service requirements.

Freight and benchmarking data can provide a competitive advantage for shippers of any size. It helps them gauge trends in the freight market and identify business opportunities. 

That’s why it’s important to understand what a freight rate index is, how it plays into data-driven decision-making, and a few ways it improves efficiency.

What Is a Freight Rate Index?

A freight rate index takes the sum of all freight data and calculates the average cost of transportation. 

Actively analyzing the data creates a transportation benchmark. This benchmark reflects the consistency and value of the data, pricing or demand, regardless of lane or market. 

The freight rate index can be vital for gathering specific data that reveal an overview of visibility and network performance, especially the amount of spend within the final mile. Using the index, shippers make informed transportation decisions based on applied freight data and near-real-time data insights.

A Data-Driven Approach to Optimizing Freight Spend

The scope of a freight rate index is determined by the size of its dataset and the analytics insights that derive from that data. 

Importantly, there is a clear indicator that businesses using analytics can reduce costs and achieve a stronger return on investment. 

As reported by SourceToday, “This is where supply chain analytics, which promises to deliver real-time performance visibility and insight to provide businesses with the operational agility, could help provide a competitive edge. A 2020 Gartner survey revealed that over 29% of businesses achieved high levels of ROI using supply chain analytics, compared to just 4% that didn’t achieve any ROI.” 

Therefore, using analytics to create a freight rate index helps shippers stay aware of the latest market activity so they can proactively measure transportation spend.

Using a Freight Rate Index to Reduce Transportation Costs

Benchmarking helps shippers manage market volatility. Access to benchmarked rates provides a better position for negotiating freight quotes. It can help identify a targeted rate for freight. 

Knowing where the rates, fuel, equipment values, and market activity lie is important. However, knowing where the market is trending is crucial to unlocking supply chain optimization

A clear outlook of market trends and cost projections drives additional savings. These can be directed toward optimization efforts. Here are a few more ways a freight price index can help your team achieve savings:

  • Increased accountability among carriers. Know which carriers offer pricing that aligns well with market dynamics.
  • Using indexed data to identify shipments that should be routed through another mode.
  • Applying data to understand cost projections and when to offset costs. Do you rely on customer-paid shipping or build those costs within product price points?

Calculate your potential Saving While Using an enterprise TMS

Access Benefits of Data-Driven Freight Management

Many supply chain strategies rely on a rate index for trucking and other transportation. These tools show meaningful opportunities for improvement. 

Using this type of resource, shippers can proactively control costs and benchmark rates. A world-class solution like our freight rate index can helps you utilize your TMS to its full potential. That means better data-based decision-making, increased efficiency in daily processes, and more beneficial carrier management. 

These benefits impact ROI and help optimize freight costs. Using a TMS with an embedded index can be a huge competitive advantage. 

Find Out More About Freight Rate Index

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