Freight Indexes, What they are? How carriers and Traders are using them?

While reading online articles and blogs, we frequently come across terminology of freight index, so what it means?

It is a calculation based on industry freight data, this data is collected from freight forwarders, shippers and brokers. Analysis of the same data creates a benchmark rate to be used for particular industry given particular time.

Freight index by definition is the weighted average of freight deliveries. Some commonly used indexes are Cass freight index, Dow transportation index, Shanghai Freight index etc.

Thanks to this freight index measure, that allows importer and exporters to estimate freight bills and prepare quotations. These measures provide some great insights into economies supply chain.

It also helps carriers to gauge the overall market and improve their rate and performance against the benchmark. For instance, Carriers can compare volumes of previous months data to analyze their performance. Logically speaking, if the overall market volume is going up by 20%, their sales should also go up by the same percentage or vice-versa.