Logistics platform FreightFox recently announced a partnership with Yale researchers to develop a responsive index-based pricing model that facilitates dynamic transportation decisions. The new freight contract and pricing model will take into account the most important factors that influence truck placement, such as seasonality in industry and agriculture, significant skewness in month and dispatches, and limited trucking inventory.
The contract model will be designed to ensure the best placement of trucking fleets at different times to minimise movement disruptions and maximise truck dispatch fulfilments. This will not only keep operations flowing but also support better visibility, allowing manufacturers to plan shipments better and have contingency options in case of failures elsewhere along the supply chain. At the same time, both manufacturers and transport partners can be assured of fair pricing.
With reference to the partnership, Dr Ryan, Assistant Professor of Economics, Yale University and an affiliate of the Economic Growth Centre said: “Failures in shipping and trade are a major concern for firms in India, and offering improved contracts could make shipping more reliable, lower-cost, and raise people’s incomes. The intention of the project is to innovate in new contracts and see if that reduces the costs of trade.”
“We are delighted to collaborate with researchers at Yale to develop such innovative freight contracts and are committed to delivering superior logistic contracting methods by leveraging technology, data and the know-how available at Yale,” said Nitish Rai, CEO and Co-founder of FreightFox. A memorandum of understanding guiding the research was signed in January 2022.
Given the fragmented nature of the Indian economy, manufacturers often encounter logistical issues when it comes to procurement and freight contracts. Most freight contracts are static one-year affairs with fuel adjustment clauses, which fail to take advantage of dynamic trucking capabilities. At present, a typical manufacturing enterprise faces ~25-38% placement failures, which translates to only 62-75 out of every 100 trucks placed per day. As a result, the movement of goods is disrupted, which can lead to a significant loss of revenue.
The issue arising from such failures causes a dent in the market, industry, transport partners and nation. Therefore, it is of utmost importance to develop alternatives to the freight contract status quo and minimise/eliminate the disruption caused to manufacturing customers, fair pricing and better treatment of transport partners and a superior value-added to nations’ GDP with every BTKM (Bn T-Kms) of load movement.