Risk analytics firm’s expertise to be available to participants of TransFX’s contracts
Weather is the top factor causing delays in the shipment of goods. From rain, wind and snow, to hurricanes, tornadoes and even flooding, trucking fleets deal constantly with the impact of weather.
As a result, weather is a big driver of spot market rates. Rates can rise and fall because delayed trucks alter available capacity in regions. Some estimates place the cost of weather delays to the industry as high as $3.5 billion yearly. Some 23% of truck delays are caused by weather and almost 32.6 billion vehicle hours are lost each year due to weather-related congestion.
How weather impacts trucking
Click to enlarge (Source: TransFX/Riskpulse)
TransFX is seeking to build trucking futures contracts and other financial solutions to help brokers, carriers and shippers better manage their risk to volatile rates. Since weather is one of the largest drivers of volatility, the company sought out a partner to provide more in-depth, analytical data driven by weather. That partner is supply chain risk analytics firm Riskpulse.
The two companies announced an agreement this morning for Riskpulse to provide unique analytics and insights from its expert team of meteorologists and data scientists to TransFX’s products and solutions suite.
Riskpulse enables decision-makers across the supply chain to standardize and quantify risk associated with the movement of goods through probabilistic intelligence, data visualization, shipment-level analytics, and recommendations embedded in the company’s cloud-based platforms, TransFX explained in a press release.
TransFX seeks to offer freight futures contracts that allow participants to hedge against rate volatility in the physical market, it said. The financially settled contracts, which will feature no physical delivery or service, are meant to be a risk-management tool that participants can use to normalize price fluctuations.
“Weather is one of the biggest disruptors causing market volatility both in the short term and the long term,” says Craig Fuller, CEO of TransFX. “Riskpulse is the pre-eminent leader in weather prognostication with its deep bench of meteorologists and data experts. The inclusion of Riskpulse’s weather expertise will add valuable insight for brokers, carriers and shippers taking advantage of our developing suite of TransFX products.”
Riskpulse employs a team of meteorologists and offers several products that are used by transportation professionals on a daily basis to improve their operations.
“Riskpulse also helps shippers, carriers, distributors, and receivers better manage increased complexity of the shipment lifecycle, generate greater transparency to operational risks, and avoid losses caused by natural, social, or infrastructure-driven disasters,” according to the release.
The type of deep-dive analytic data that Riskpulse supplies is also commonly used by agriculture and energy commodities traders to understand how weather across the globe will impact markets. Using this information helps them make smarter trades.
“Sometimes the future arrives sooner than you expect, and this is one of those times,” says Matthew Wensing, CEO of Riskpulse. “We’ve seen the potential in other markets -- the value of weather analysis to predict commodity price volatility has been second nature to natural gas, oil, and grain traders since the 1980's. We now have the ability to unlock that same value within transportation, and we’re thrilled to partner with TransFX to see the advent of this market.”
Participants using TransFX’s contracts, which will be settled using data supplied by DAT, will have access to the Riskpulse weather data and insights though TransFX.
TransFX’s futures contracts will be based on physical shipping lanes which can see major disruption due to weather events, causing rates to swing wildly. These rate swings could affect the futures market as well, so having insight into future weather events that can cause changes helps participants improve their futures trading decisions.
TransFX is also building tools for real-time price discovery and execution so digitally enabled 3PLs can provide faster quote execution and prices to customers, it says.