The pursuit of transparency across the freight industry through standardized indexes

Shippers, brokers and carriers across India can find value by tracking the index, as it helps them perceive the volume and capacity equation across the country, increasing visibility and leading to a more transparent market. 

Mishra pointed out to the need for such an index in a massive market like India, iterating that such an index is critical to improving efficiency across fleet operations at-large, as fleets will know how to price haulage costs. 

For instance, north India witnesses considerable fog in the months of December and January, which leads to lower truck utilizations. If fleets can understand this trend, they can start demanding slightly higher rates from shippers. Similarly, during the summer, fleets operating across south India find their truck tires burn out and equipment fails in the extreme heat. During these times, fleets lower their road speed, and maintenance shops can stock tires much earlier, to ease the situation. 

However, such indexes are scarce across countries, including the developed ones, with Europe having failed to formulate one across the continent. The U.S. is leading the way, with indexes developed by several organizations shedding light on freight movement across the country. FreightWaves’ SONAR is by far, the most comprehensive of the lot, with it marrying data, technology, and tribal knowledge to provide users all the necessary tools needed to navigate the freight market. 

To bring transparency across markets in different countries, Mishra regarded that it is vital to foster collaboration between companies that are working in parallel on similar goals in foreign markets. 

“These indexes should not be built in isolation, as it becomes even more difficult to implement them, because there have not been enough precursors. The goal is to have a transparent portal for either doing trades on spot routes or offering information on transactions,” said Mishra. “However, there are several regulatory hurdles that have to be cleared, liquidity to be built in, and trust to be garnered before we go in that direction.”

Once the indexes are set in place and are mainstream, freight industries across countries can look at creating a futures derivatives market that can inure businesses within the freight ecosystem from market volatility, just like companies trading within the commodities market do. 

Measures are already underway in the U.S., with Nodal Exchange listing the world’s first Trucking Freight Futures contracts in collaboration with FreightWaves. In its nascent stages, this futures contract currently allows businesses to hedge their exposure to rate volatility in three of the largest U.S. freight corridors.