Finally – A freight index relevant to our marketplace
Nulogx today is launching something desperately missing from the Canadian over-the-road transportation industry: a national general freight index relevant to our marketplace.
The index tracks changes in over-the-road transportation costs. It is derived from Nulogx’s database of more than $750 million in annual freight transactions. Included in the index are domestic and cross border truckload and LTL transactions. The index includes base freight charges, fuel surcharges and other accessorial charges. (Not included in the index are liquid bulk, dry bulk, forest products and other specialized freight.)
The index is being developed with the help of Dr. Alan Saipe, president, Supply Chain Surveys Inc., who reviews it monthly for validity. Dr. Saipe is well known and respected in transportation circles. I’ve had the good fortune of working with him on transportation research related projects in the past and his knowledge of the market is top notch.
The Canadian General Freight Index is based upon actual costs in the Canadian transportation marketplace and so Dr. Saipe believes the trends it reveals are good statistical estimates of what has really happened.
Done right and on a monthly basis, I believe this index will provide both carrier and shipper executives with much needed insight into how freight costs are trending.
The first report authored by Dr. Saipe already tells a fascinating story about how freight costs fared while the economy was working its way into recession. In the first seven months of 2008 general freight costs rose 14.4%, driven up by increases in both freight rates and fuel surcharges. From January to July rates increased 7.3% while average fuel surcharges rose by nearly 44%.
Then the realities of the slowing economy in both Canada and the US began to take over. In August average fuel surcharges started to fall tracing the decline in the cost of crude oil. At the same time freight rates leveled off as the economy weakened, and then notched up for the start of 2009. The combined result brought total freight costs steadily down from their peak in mid-08 – the index has fallen 13.4% since July 08. In fact, as Dr. Saipe points out, in May ’09 ground transportation cost less than it did in January ’08.
Dr. Saipe also looked at fuel surcharges and how they responded to changes in crude oil costs. They started down in August 2008 and fell steadily through to March 2009. Then they leveled off, even though the cost of crude bounced upwards in the spring. Technically fuel surcharges have lagged the cost of crude oil; still, they followed crude down within weeks.
And what of freight rates? The key learning, according to Dr. Saipe, is that average freight rates have not come down during the recession – nor have they gone up by very much. On average, rates in May ’09 are up about 1% from July ’08. But the story is quite different in the different segments of the market, Dr. Saipe points out.
Both the Canadian General Freight Index and the Base Freight Cost Index are built up from four sub indexes –one for each of Domestic TL, Domestic LTL, Cross Border TL, and Cross Border LTL –and each segment is different. Interestingly, domestic freight rates have come down in the recession, while cross border rates in Canadian dollars have increased.
Most of the 6.2% Cross Border LTL rate increase came from the weaker Canadian dollar, although average underlying rates did show a small increase. Only about half of the 9% increase in Cross Border TL rates came from the weaker Canadian dollar, with higher underlying rates accounting for the rest.
The index is sensitive to the Canadian/US exchange rate because some of the charges are in US dollars.
Dr. Saipe will be authoring a report on further findings from the Nulogx freight index for our Decisions 2010 Issue, later this year.
Nulogx plans to update the index each month, posting the results to their website
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Nice report. I love reading reflections of Adam Smith’s invisible hand. It’s a respite from the iron axe of legislative impediments.