Do you know what freight index is? Measuring the domestic freight is a serious task that affects and determines the flow of the economy of each state. Knowing the freight index on sea, land, and air is crucial for every state and system.
What is Freight Index?
By definition, the freight index is a data average of weight for trucking, waterborne, freight rail, air freight, and pipeline. It is a measurement of aggregate deliveries of freight. Formed as data by the Bureau of Transportation Statistics Transportation Services Index (BTS TSI), the Cass Freight Index, and the Dow Transportation Index, the freight index is used to track the supply chain indicators.
Thanks to online technology’s impact on the shipping industry, numerous companies today send data that allows the nation to collect freight bills from the shipping clients, as well as provide estimates of freight cost for shipping and logistics.
These three economic indicators inform predictions and analyses about the health of the economy within the state. They reflect the transportation providers’ responses to the demands of the economy in regards to moving passengers or freight.
In order to produce higher quality and bigger quantities of goods to deliver to customers, various industries demand freight transportation services for raw material, finished products, and intermediate goods. This goes across the entire supply chain. As a result, transportation is considered a great indicator of economic decline or growth.
Freight Index vs. Passenger Index vs. Combined Index
Some people mistake the freight index with passenger and combined index. The first refers to the average data for waterborne, trucking, air freight, pipeline freight, and freight rail. This does not include the data for weighted average for passenger transit, aviation, or passenger rail. The latter falls under the passenger index, which is similarly calculated.
Lastly, the combined index refers to an average of both the passenger and freight index. Once the data on both is collected, the weighted average of the two is calculated to provide an average, statistically accurate number.
Transportation Services Index
Also referred to as the BTS TSI, the Transportation Services Index represents the volume of passengers and freight being moved. BTS creates three indexes: one for passengers, one for freight, and a combined freight index. The three indexes produced by BTS incorporate physical volumes’ monthly data i.e. the ton miles being shipped for the freight index report and the ton miles being travelled for the passenger index report.
To create this report, data is collected only from domestic transportation for hire that provides transportation services for a fee to external customers. In order to create these reports, BTS weights and adjusts, as well as combines the monthly data. They weigh the series based on the dollar contribution or the economic value of the transportation mode for-hire to the economy. As a result, an index is provided that gives insight into the transportation demands within the country, as well as the transportation activity.
Cass Freight Index
This freight index is complied by Cass Information Systems, the network behind automated payment systems and the largest payer in the nation of freight bills. Cass Information Systems is a big private payment management company that sends the data based on the request of its clients. Based on the index, the United States determines the shipping frequency and activities, tracks the progress and the trends, and is able to collect the payment based on shipping and logistics.
Starting from 1995, the Freight Index in the United States is considered to be the most trusted measure in the freight market of North America. The Cass Transportation Index Report is delivered on a monthly basis, providing the state with data and insight into freight frequency and trends. This data is continuously used as an indicator of the supply chain and the economy, as well as its impact on the state’s overall economy.
The Index includes data regarding all freight modes on a domestic level. It comes from approximately 36 million invoices processed by Cass Information Systems on an annual basis on behalf of hundreds large shippers in its client base. The process is simple. Large shipping companies provide their freight information to the Cass with the purpose to track the payments and create the monthly reports. Statistics show that on a yearly basis, Cass’ Index is derived from around $28 billion in processed spending.
When people need to transport something, such companies allow them to calculate the freight rate and ease the shipping process. For example, a company processes the truckload freight rate on behalf of the shipping party to the Cass Information Systems. Then, the Cass includes this in the calculations and report that helps North America determine its freight numbers and rates.
The companies that collect and process this information represent a wide range of industries including food, consumer packaged goods, chemical, automotive, OEM, pharma or medical, retail, as well as heavy equipment. On average, the annual volume of freight per organization goes from $40 million to more than $2 billion depending on the popularity and size of the company.
TSI BTS Index and Cass Freight Index
The Cass Freight Index is very similar to the BTS Freight index. It consists of series based on shipment volumes and on expenditures to ship goods within the country. To be more, the data of both includes information from various domestic freight modes.
In the case of shipments that are handled by Cass, the data source is recorded in the month when the transaction is being processed and is proprietary. It isn’t affected by the time when the freight is being shipped, which is the biggest difference between the Cass and the TSI BTS Index. To be more, the shipment index of the Freight TSI is weighted by the economic value and seasonally adjusted, while the Cass index is solely based on shipments.
The Freight TSI by BTS is a transparent and comprehensive indicator, compared to the Cass Freight Index that is known to be timelier. Lastly, TSI uses the economic value added weights, while the Cass expenditure index is solely weighted by shipment expenditure.
Dow Transportation Index
Unlike the other two, the Dow Transportation Index does not measure the shipments directly. This is a stock prices index for 20 firms within the transportation industry and it only combines the stock prices for those particular firms. Based on their stocks, the Dow Transportation Index is calculated.
The Dow Index also calculates the mix of stocks that has changed a few times since it was first created back in 1884. The latest noted change of this kind was witnessed in 2015 as a result of the replacement of Con-Way, Inc. with the American Airlines Group.
When you multiply the total freight and passengers volume by the rate charged per passenger and ton mile, you get the revenue of the transportation firm. This equals the company’s earnings less the expenditures on fuel, equipment and labour. In other words, the TSI’s physical measures are extremely important and play an essential role in the Dow Transportation Index.
Rebecca Potter, the author behind the best essay writing service reviews and a transport planner at a popular shipping company explains: ‘’The Dow Transportation Index functions quite differently than the TSI. This refers to their interest rates, the fluctuations in costs and rate charged per mile. Compared to the TSI that only uses current volumes for the report, the Dow Transportation Index uses future volumes to measure the transportation stock prices.’’
Other Related Indexes
Other related indexes to the main three include the:
- US Department of Transportation that creates the Transportation Services Index. This index reports on seasonally adjusted movements of passengers and freight within the country.
- DAT RateView follows freight industry specific sectors like truckload freight and provides broker-buyer, real-time prices.
- The US Bureau of Labor Statistics creates the Long-Distance, General Freight Trucking database on a non-adjusted, industry level.
Wrapping Up
Thanks to the aggregate volume as well as the wide diversity of different shippers, North America is able to get a statistically accurate representation of their domestic shipping activity. According to Steve Peterson, an Economics expert at the best essay writing service uk and former supply chain coordinator: ‘’The system is tweaked so perfectly that it allows the US to collect accurate data that would seriously and positively affect the economy plans for the future. It is essential for a state to be fully aware of its domestic shipping activities, which this system definitely provides.’’
The freight index in combination with the passenger index gives a company an idea of what happens in terms of shipping and transport within its borders. This is essential not only for safety measures, but also for the progress of the economy. By collecting such data from various sources like the ones mentioned in this article, the US is able to track its economic progress or downsides, compare them with past reports and statistics, and take measures to improve it.
