Daily Tip: FreightWaves Supply Chain Power Pricing Index (FWPPI.USA)

FreightWaves Customer SuccessDaily Tips

Did you know? You can measure whether shippers or carriers have control of pricing with SONAR’s Pricing Power Index.

Each day we’ll send you a daily tip designed to guide you to becoming a SONAR expert. If you have any questions, please contact your Customer Success Representative or email the team at cs@freightwaves.com.

FreightWaves Supply Chain Power Pricing Index (FWPPI.USA) This is a weekly analysis index produced by the FreightWaves Freight Intel Group using data and analytics in SONAR and other sources to estimate the current pricing power dynamics between shippers and carriers. The FWPPI is an effective tool that will show SONAR users whether shippers or carriers have the upper hand in freight rate negotiations based on current market conditions. 

The FreightWaves Supply Chain Power Pricing Index (FWPPI) measures from 0-100. A score of 50 is neutral/equal strength in pricing power between shippers and carriers. When the FWPPI score drops below 50, it’s an indication that shippers have more control of pricing freight than carriers. As the FWPPI score declines closer to 0, the more control shippers have over the pricing of freight lanes. When the FWPPI score is over 50, it’s an indication that carriers are taking control of the pricing on freight lanes. As the FWPPI score increases toward 100, the more control carriers have over pricing. 

FW Supply Chain Power Pricing Index 

Carriers: The FWPPI will give carriers an indication of the power they have in negotiating freight rates with shippers. A FWPPI score over 50 strengthens a carrier’s ability to negotiate toward the rates it prefers, but a score below 50 reduces a carrier’s ability to negotiate. 

Brokers: The FWPPI is very important to brokers since they act as a carrier when bidding freight for a shipper, and act as a shipper when booking freight with carriers. Brokers will need to know on which side they have the ability to use their pricing power in order to create margins. A neutral market – a FWPPI score of 50 – can be difficult for brokers and compresses their margins. 

Shippers: The FWPPI gives shippers an indication of the power they have in negotiating freight rates with carriers. A FWPPI score below 50 strengthens a shipper’s ability to negotiate a lower freight rate, but a score over 50 can increase a shipper’s tender rejection rate, reducing a shipper’s ability to control its carrier costs.

The FWPPI score gives SONAR users a high-level view of who holds the power in negotiating spot market rates and contract rate rebids. It also aggregates and synthesizes many data points including, but not limited to, freight volumes, rejection rates, spot rates, contract rates, economic data and economic policy.

1) Click Gauge Chart to view the FW Supply Chain Power Pricing Index in a gauge format.

  • A FWPPI score over 50 indicates the negotiating power on freight rates is leaning toward carriers. The higher the score, the more negotiating power a carrier has.
  • A FWPPI score under 50 indicates the negotiating power on freight rates is leaning toward shippers. The lower the score, the more negotiating power a shipper has.
  • 50 is a neutral score; neither a shipper nor a carrier has the upper hand.

2) Click Chart to view the historical trends and changes in the FWPPI.

  • Allows users to view historical changes in pricing power between shippers and carriers.
  • Allows users to view which direction the FWPPI score is currently trending.

Pro Tip: Use FWPPI in conjunction with OTVI, OTRI, HAUL and OTLT to understand the strengths and weaknesses in pricing at a national level with DHLPPI, and market level with SONAR’s tender data to help optimize your rate. 

If you have questions about the FreightWaves Supply Chain Power Pricing Index (FWPPI.USA), please contact us at cs@freightwaves.com. 

Happy Hauling,

FW Team