DAT brings $68 billion in data to rate forecasting

DAT brings $68 billion in data to rate forecasting

Truck pricing forecasts are expected to reshape shipper-carrier contract negotiations. Photo credit: Shutterstock.com.

DAT Solutions is using predictive analytics technology to sift through more than $68 billion in annual spot and contract transactions to give cargo owners a better sense of what they could be paying for trucking over the next 12 months, as supply chain visibility shifts its gaze to the future.

In the trucking market, knowing what rates are available today is no longer enough. Shippers increasingly want to know what a shipment will cost next week, next month, or even 12 months from now, and predictive analytics technology is helping them get a better forward view.

DAT Solutions and Knight-Swift Transportation Holdings on Monday announced a pilot test of a rate forecasting tool that will draw on historical pricing data from its DAT RateView database. The tool, DAT says, will provide forecasts for multiple types of users, including shippers.

“We’ve all seen the pace of change and volatility in the [trucking] industry creep up in the last 36 months,” said Ken Adamo, DAT’s chief of analytics. “How can we get better forward-looking projections using historical rate data, time of week and month, and seasonal data?”

Rate forecasts will become increasingly important during annual contract negotiations and bidding events, as truckers, brokers, and shippers all try to determine how the market will unfold. “You can tie a lot of this to the new wave in data science,” Adamo said.

The technology needed to crunch very large amounts of data and also drill down to highly specific data sets is advancing. Forecasting is based on “tried and true statistical techniques,” Adamo said. “What was prohibitive in the past is that it took so long to do.”

Portland, Oregon-based DAT will offer forecasts of varying lengths and adapted for specific types of customers, he said, including trucking companies, third-party logistics companies, and shippers. “As we gain mass, we’ll be able to generate more granular lane forecasts.”

Forecasting changes in contracting

DAT is entering an already active market for truck rate forecasting. Rival load board operator Truckstop.com, in partnership with FTR, offers a lane-by-lane rate forecasting tool. Coyote Logistics provides a more generalized market forecast through its Coyote Curve.

Predictive analytics — and rate forecasts, in particular — could have a significant effect on how shippers procure transportation services and contract truckers. “If you’re a shipper, a 12-month weekly forecast would help you put out target rates for potential carriers,” Adamo said.

Theoretically, more accurate “target rates” could help shippers and carriers determine ranges of pricing that could be included in contracts to trigger an increase or decrease in contract rates without reopening an agreement or pushing a shipper or carrier into the spot market.

When it comes to forecasts, though, shippers are looking beyond rates. “Predictive capacity” became a buzzword after truck capacity tightened in 2017 and 2018. What shippers, and carriers, really want is clearer supply chain visibility, and less market uncertainty.

“In trucking, you’ve got an endless cycle,” Adamo said. “When rates are high, people buy a lot of trucks, and then rates go into the gutter. Being out in front of that will set businesses apart in the new decade.” As technology evolves, “they will respond so much faster to changes,” he said.

The size and scope of Knight-Swift’s operations will help DAT “test out” the forecasting tool, Adamo said. DAT expects to release the application to the market in the second quarter. The rate forecasting capabilities will help generate other reports and services, as well, he said.

“Historical prices are the best indicator of future prices,” Adamo said. “Working with Knight-Swift, we can keep on refining our algorithms by working on real-world problems.” DAT plans to test its forecasting tools with third-party logistics providers and shippers, as well.

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.