Three Metrics for Managing Truckload Capacity in a Volatile Market

By  Matt Harding | Vice President, Freight Market Intelligence For-hire truckload spend accounts for roughly $300 billion of economic activity across the United States. For shippers managing...


By  Matt Harding | Vice President, Freight Market Intelligence


For-hire truckload spend accounts for roughly $300 billion of economic activity across the United States. For shippers managing day-to-day costs and dealing with service issues in volatile markets, managing carrier performance can be one of the more difficult jobs in supply chain management today.

Thousands of transportation professionals across the globe rely on Chainalytics Freight Market Intelligence Consortium (FMIC) to maximize the utility of many types and sources of transportation information to provide rate information, survey data and market-focused competencies within their world-class organizations. Last year’s economic improvements and weather issues left a number of our members wondering and asking the same questions…

Capacity-Crunch-Metrics

Benchmarked lanes tell shippers how they performed against their peers. However, when transportation markets are volatile, as they were in 2014, shippers need to know more than past rate levels; they need to know what is occurring in the market on a near-real-time basis so they can accurately assess the momentum.

You Need to Know the Past & Present to Predict the Future…

Rates and capacity have seasonal patterns to them. When they change unexpectedly its time to develop strategies that are better aligned to expected conditions. The FMIC recently launched FMIQ specifically to address sudden changes in the market.

Three Superior Metrics for Tracking Capacity

The new FMIQ solution incorporates over $3 billion of annual transportation expense collected monthly from dozens of shippers and offers three superior views of the market as rates and service fluctuate over time.

These three metrics should be used when trying to objectively assess and manage capacity in a constrained market.

  • Rate Index as a Percent Change in Rate
    This data enables shippers to answer – How have rates recently changed and what is their trajectory in U.S. and regional markets? Demanding executives expect rates to go down every year, carriers expect the opposite. The power of rate indices alleviates both of these issues by utilizing a broader view of the market.
  • Primary Accept Ratio
    This ratio shows shippers the percentage of loads being accepted in the market by primary carriers across the U.S. and regional markets. When primary accept ratios go down, it signals that shippers are moving into higher rates. As a result, primary accept ratios are a leading indicator of price momentum in the market.
  • On-time Delivery
    This data lets shippers explore how the national truckload transportation system is functioning relative to the ultimate aim of on-time delivery. Over the last decade, on-time delivery ranks as the #1 KPI carriers are measured on within our FMIC consortiums. It’s critical to understand how the national network is performing relative to your own carrier network.

While most carriers had a profitable 2014, capacity imbalances are temporary and supply will again meet demand – the question is when. Having visibility into recent changes in rates, on-time delivery statistics, changes in demand, and accept ratios will give shippers an edge on many fronts.

As the truckload capacity equation ebbs and flows over time, Chainalytics’ FMIQ solution will provide hard facts to objectively quantify these effects on rates and service. In the face of difficult capacity markets, shippers will know if their experience is shared by others and have access to supporting data to educate their organization that indeed their pain is shared by a wide and representative swathe of shippers.

Not All Shippers Are Impacted Equally

Chainalytics has analyzed hundreds of billions of transportation expense dollars within the FMIC over the last 10 years, and one guiding principle consistently surfaces: Not all shippers are impacted equally when price volatility or supply/demand shocks occur.

To ensure you’re making the best decisions in the face of volatility, measurement of both past market position and present conditions enable better positioning for shippers to be within proper tolerances to the market. This understanding minimizes exposure to significant shocks. If shipper rates are too low coming from a soft to a tight market, they are likely at risk of significant rate increases. If rates are too high relative to the market, they may never suffer the effects of volatility or lost capacity, but their network will be less competitive from a cost perspective.

The key to optimal cost and service is engineering the right balance using external sources of information found within the FMIC. Knowledge of how your truckload network is aligned to the general market through benchmarking services, and then comparing to the momentum of frequent capacity changes by tracking these three metrics above will put you ahead of the game.

For more insights on how to develop a market-wide transportation competency across your organization, contact Chainalytics using the form below or simply email fmic@chainalytics.com.


 Matt Harding is Vice President of the Freight Market Intelligence Consortium and contributes to projects involving large-scale procurement events and transportation management systems implementation.

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