The contract market dominates the freight market. Contracts in freight, unlike contracts in other industries, are largely just agreements between shippers and carriers to move freight at an agreed upon rate, but either entity is able to leave the contract for any reason without any true repercussions.
Contract rates within SONAR are calculated from invoice data from a large freight payments processor.
Contract rate data is reported twice: the initial reporting, which is reported on a 14-day lag and the final reporting, which is reported on a 60 day lag.
Contract rates are also broken down across various modes: dry van, reefer, LTL and intermodal.
Analysts can use contract rate data to benchmark the freight market for longer term pricing trends. With a majority of freight moving under contract rates, analysts can use contract rate data to create improved models for truckload carriers and intermodal marketing companies who largely operate in the contract market.
Carriers can use contract rates to benchmark their rates against the broader market. With contract rates on a lane level available within Market Dashboard, carriers are able to benchmark their prices all the way down to the lane level.
Brokers can benchmark the rate that their customers are paying for freight movements. By benchmarking effectively, brokers can take contract rate data back to their customers when appropriate and ask for rate increases.
Shippers: Contract rate data allows for benchmarking of freight market spend, allowing for transportation budgets to be hit estimates more accurately when the market is changing. Additionally, when a shipper’s contract rate is higher than the national average, it allows for having discussions with brokers and carriers to try and find rate concessions. Conversely, if contract rates are below the national average, capacity disruptions could arise.
Contract rates measure the average rate negotiated between shipper and carriers on a national level. Contract rates dominate the freight market, especially with modes like intermodal, where an estimated 95% of freight moves under contracted agreements. SONAR subscribers are able to use the national contract rate data to benchmark themselves against the broader market and make the necessary adjustments.
The contract rates can be broken down into the following indices:
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