Want to know tomorrow’s freight rates today? You can make a pretty good prediction based on the daily data from DAT Hot Market Maps, according to Ken Adamo, Senior Pricing Consultant at FedEx Custom Critical.
Adamo was speaking to brokers at the DAT User Conference this past October. In his presentation about rate forecasting, he explained how historical lane rate data and load-to-truck ratios from DAT RateView and DAT Data Analytics help his company make informed decisions and offer competitive, confident pricing.
Adamo went through a series of case studies, including an analysis of van rates from Atlanta to Houston, a lane influenced highly by seasonality. He showed the tight correlation between load-to-truck ratios and freight rates – when one goes up, so does the other one.
"The reason we use load-to-truck ratio instead of just load posts or truck posts is because it’s a measure of relative demand," explained Adamo. "If there are a lot of loads and a lot of trucks, that’s a good economy, but it’s in balance. If there are a lot of loads but not many trucks, then that’s when start to see this measure of relative demand – this is when pricing power kicks into the marketplace."
Other factors are considered in the predictive model, such as weather and produce yields. He presented other predictive models in which load-to-truck ratios were also part of the dataset used to anticipate everything from staffing needs to the likelihood of carrier failure on a given lane.
"Data on its own has no meaningful or intrinsic value," said Adamo. "A number on its own doesn’t have much meaning, but when you comparing it to your own history, to what you’re competitors are doing and what the market’s doing, then that number begins to have more meaning."
Categories: Best Practices and Benchmarks