What is the Freight Transportation Index?
The Freight Transportation Index is a key performance metric for the logistics industry, economics, and transportation. The data is published by the Bureau of Transportation Statistics (BTS), which falls under the U.S. Department of Transportation umbrella. It measures the annual output of the U.S. transportation sector.
The FTI calculations are based on data from various freight transportation modes. Modes include trucking, rail, pipeline, waterborne, and air freight. The Index accounts for variables such as volume, tonnage, and distance traveled, providing essential—insights into the health of the freight transportation industry.
The Freight Transportation Index consists of the following: for-hire trucking, railroad freight services, inland waterway transportation, pipeline transportation, and Air Freight. It does not include international or coastal waterborne movements, private trucking courier services, or the U.S. postal service. The Index also excludes intercity buses, sightseeing services, ferry services, taxi services, private automobiles, bicycles, and other non-motorized transportation. “For-Hire” freight services are freight or passenger transport services a firm provides to external customers for a fee.
The Index measures month-to-month changes in the service output of for-hire transportation industries, as well as changes in freight shipments. The current and future economic conditions can be better understood when the Index is examined alongside other economic indicators.
Why is the Freight Transportation Index Important?
The Freight Index is derived from real-time data calculations from all parties involved, including carriers, shippers, and brokers. The data compilation determines the benchmark freight rates for each freight route. The data is crucial to understanding the markets because it reflects data consistency, data value, demand-based pricing, rate volatility, and scope of optimization. Utilizing this data is essential since it helps keep the markets transparent, allowing freighters to see the market peaks and troughs.
Freight Benchmarking goes a long way in maximizing logistics profits and freight cost management, going beyond standard data like historical freight costs or freight bill reviews. Data comparison allows for strategic assessments that regulate cost control and management dynamics.
Calculating freight charges for various lanes helps shippers understand prevailing freight rates, stabilize spending patterns, and reduce unnecessary spending at set intervals. Businesses are also better equipped to assess freight procurement costs and strategies, thus improving their industry standards.
The Freight Transportation Index is useful for policymakers, economists, industry stakeholders, and businesses. The tool allows for analyzing performance and market fluctuations in the transportation sector. Understanding the movement of freight goods throughout the country offers insights into the economy because economic activity and freight transportation are closely linked. Analysts can use the index data extensively because it allows them to identify patterns, seasonal fluctuations, supply/demand changes, etc, within the industry.
Ultimately, this data is valuable to the markets because it allows individuals and businesses to make more informed decisions and improve their supply chain management.
Factors in the Freight Rate Market
Shippers looking to ensure transparency in their rates can look to the Index to determine the average shipping costs and justify their freight spending. These critical numbers make it easier for freighters to assess their savings and losses. Businesses use this data to optimize freight spending/costs for a competitive advantage.
The Index allows shippers visibility into the historical freight pricing of any lane, which helps immensely with cost control. Freighters can view specific geographic locations, vehicles, zones, and distances to help set vendor target rates. Predefined costs help prevent unreasonable pricing for different lanes and are applicable within the scope of negotiations. Access to benchmarked rates makes it easier for shippers to negotiate effectively for competitive pricing.
Predictive analytics allow for forecasting accuracy, providing insight into future trends, escalations, fluctuations, and even unforeseen events and crises. Organizations can adjust procurement targets and budgets according to benchmarks.
Indexing helps improve cost control over surges in demand. Data and historical insights help predict peak seasons, which affect industrial freight rates. Cost management is thereby enhanced, preventing monetary losses.
As you can see, the Freight Index allows for a very comprehensive view of freight history, current market rates, and even carrier performance. These reports help shippers choose contract or spot rates for their shipments. Benchmarked analytics allow optimal vendor selection and enhanced freight procurement efficiency.
Freight costs are very important KPIs in logistics and supply chain management. The (SaaS TMS-driven Rate Index) and the shipping cost calculator enable many competitive advantages. Shippers use the tools to leverage accurate data analytics and automated comparisons, optimizing their supply chains.
