Utilize the Pricing Power Index

FreightWaves Customer SuccessDaily Tips

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

What is it?

DHL Supply Chain Power Pricing Index (DHLPPI.USA) – A weekly analysis produced by the Freight Intel Group using data and analytics in SONAR and other sources to estimate the current pricing power dynamics between shippers and carriers. The DHLPPI is a tool that will show SONAR users who has the upper hand in the negotiations of freight rates between shippers and carriers based on the current market conditions. 

This chart shows 40’ and 53’ container volume out of L.A. in the past year. 

Who needs it?

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

Shippers: The DHLPPI will give shippers an indication of the power they will have in negotiating freight rates with carriers. A DHLPPI 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.

What can I do with it?

The DHL Supply Chain Power Pricing Index (DHLPPI) measures from 0-100, with 50 being a neutral, or even strength in pricing power between shippers and carriers. When the DHLPPI score drops below 50, it’s an indication that shippers have more control of pricing freight over carriers. As the DHLPPI score declines closer to 0, the more control shippers have over the pricing of freight lanes. When the DHLPPI score increases over 50, it’s an indication that carriers are taking control of the pricing on freight lanes. As the DHLPPI score increases toward 100, the more control carriers have over pricing. 

The DHLPPI 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.

Show me how!

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

  • A DHLPPI 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 DHLPPI 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 where neither the shipper nor carrier has the upper hand.
    DHL Gauge

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

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

DHL Chart

Pro Tip: Use DHLPPI 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 outbound tender volumes, please contact us at cs@freightwaves.com