How can I measure capacity in different markets?

FreightWaves Customer SuccessDaily Tips

Did you know? SONAR’s Headhaul Index is a great tool to measure changes in capacity.

What is it?

Headhaul Index (HAUL): Calculates the difference between the Outbound Tender Volume Index (OTVI) and the Inbound Tender Volume Index (ITVI). By measuring the flow of outbound and inbound freight in a market, SONAR users are able to measure capacity based on the inbound or outbound trucks that are moving the freight over time.    

Example: On April 19, OTVI.ATL was 368.21 and  ITVI.ATL was 348.24. 

OTVI.ATL  –  ITVI.ATL  =  HAUL.ATL

 368.21     –   348.24    =   19.87

The Headhaul Index (HAUL) is a good indicator of capacity changes. For example, if the HAUL score is increasing, that could suggest a tightening of capacity in the specified market. Alternatively, if the HAUL score is decreasing, it signifies that available capacity is growing. SONAR Users can drill down the headhaul index to specific regions and market granularity.

View Inbound Tender Volumes in the U.S. Map feature | Headhaul Index – U.S. Map view

Who needs it?

Carriers: The headhaul index will help carriers better position their trucks. Run to the blue. Blue markets contain more freight than trucks, giving carriers more freight options to choose from, and can lead to better rates if the headhaul score remains elevated over a period of time, tightening capacity. Red markets can warn carriers of regions that are saturated with capacity, pressing outbound rates down in those markets.  

Brokers: Capacity is everything when it comes to brokers bidding freight on the spot market. Blue markets could signify tight capacity, a signal for brokers to increase their bids on outbound freight, and increase their margins. Red indicates backhaul markets where carriers need help relocating their trucks to healthier, blue markets. Brokers should be able to book loads at a lower rate per mile for loads that deliver into blue markets. The headhaul index will help brokers understand where carriers want to run.  

Shippers: The headhaul index allows shippers to monitor the changes in capacity for the markets they operate in. When their markets turn blue for an extended period of time, it could be a signal that capacity will tighten, and shippers should extend their tender lead times to ensure capacity for their loads. When their markets turn red, shippers might shorten their tender lead times, and look to the spot markets for low cost capacity.

What can I do with it?

The Headhaul Index (HAUL) is a good indicator of capacity changes in a region or market. When the HAUL score is positive, it indicates that there is more outbound freight than inbound freight in that market, therefore a higher demand for capacity. If the HAUL score is negative, there is more inbound freight than outbound, which shows an excess of capacity. Capacity drives rates, so the headhaul index will help SONAR users predict upcoming changes in spot rates in certain markets.

The headhaul index does not measure trucks that are deadheaded into a market, only the flow of freight (outbound vs inbound) within a market.  

The Headhaul Index can also be broken down by equipment type at a market level by adding a V for dry van (VHAUL) and an R for reefer (RHAUL). Example: VHAUL.EWR – Headhaul score: 37.52, RHAUL.EWR – Headhaul score: 12.86.

Show me how!

1) Click: U.S. Map to view the headhaul index at a high level to see which markets are headhaul markets, and which markets are backhaul markets.

  • Markets that are shaded blue (headhaul market) have more loads than trucks, a signal that capacity could be tightening.
  • Markets that are shaded red (backhaul market) have more trucks than loads, a signal that the market has an oversupply of trucks.

2) Click: Chart to view the historical trends and changes in the headhaul index.

  • Markets with positive trends can tighten capacity, and drive spot rates upward.
  • Markets with negative trends are saturated with capacity, which can push spot rates down.
  • Breakdown the headhaul index to understand capacity by equipment type.

If you have questions about outbound tender volumes, please contact us at cs@freightwaves.com.