The freight prices are quite erratic in the current road freight marketplace, which is dominated by brokers and other regional operators. The current market is extremely vulnerable to factors like truck demand and supply, seasonal variations, fuel price hikes, and other market forces.
The primary informational gap in the current system is the absence of detailed data on freight prices. Since there is no bible to refer to for arriving at calculated freight prices, it becomes difficult to analyse the current trend and forecast the emerging trend in freight prices for specific lanes on specific dates.
Which is why a shipper, left with no choice, has to depend on brokers and transporters for spot rates.
Why is a Freight Exchange needed and what purpose will it serve?
In this traditionally broker led road freight marketplace, a National Freight Index will be a revolutionising breakthrough in the Indian logistics ecosystem serving as a single platform to view freight prices while acting as a benchmark for spot and future prices in the road freight marketplace.
A NFI will create a robust mechanism to facilitate price transparency for truck owners, shippers and other stakeholders involved in the transaction leading to sustainable freight pricing and profitability, especially for the small fleet owners and shippers operating in the marketplace.
This will bolster the Indian Logistics ecosystem by establishing trust and transparency.
How will it work?
The idea of a freight exchange is a pricing algorithm that collects inputs from various data points to arrive at the most precise freight prices for the road freight spot market in India. By leveraging historical trends of spot price movements in the road freight industry it will offer live rates while continually improving its analysis and forecasts of these freight prices using Artificial Intelligence and Machine Learning.
In addition to offering live freight rates for different lanes and vehicles across the country, It will also help forecast upcoming price trends and variance analysis by taking into account factors such as the input cost of fuel, toll, demand and supply forces and other market dynamics.
Who will benefit from this exchange?
The NFI will largely benefit the two of the biggest stakeholders involved in the truck booking marketplace, i.e. Shippers and Truck Owners.
Shippers- Representing the Demand Side
The Freight Index will help shippers source trucks at the best prices by using it as a benchmark
Give them knowledge of the broad, evolving industry trends so they may adjust their business pricing in lines with these trends.
Provide transparency and visibility in the freight pricing enabling them to economise their profitability
Truck Owners- Representing the Supply Side
By using NFI as a benchmark, fleet owners can price their spot deals
They can economise their fleet usage and increase asset utilisation
By comparing freight prices across different lanes, they can allocate their fleet to maximise returns on these lanes
Get a visibility on return load rates to price their front load deals
The NFI will provide visibility into how their freight bill would have performed had large and medium-sized businesses, who typically work under fixed contracts, switched some of their road freight volumes from fixed to spot rates.
With some companies trying to create a freight index in the past for specific vehicle types on selected routes, there still remains an opportunity for the creation of a comprehensive nationalised freight index offering an aggregated picture of the freight prices in the Indian road freight market.
