Index-Linked Contracts

Optimize pricing and relationships by creating dynamic contracts based on the source of truth for the supply chain industry

Traditional Freight Procurement Is Broken

Traditional freight contracts are built around annual or semi-annual bids, creating static pricing that shippers and their network rely on. In steady, consistent markets, these routing guides and waterfall distribution models sustain service and performance. When the market is in imbalance or is rapidly shifting, these routing guides can fall apart or leave one party at a disadvantage. 

Introducing Index-Linked Contracts

Index-Linked Contracts reduce risk for all parties. For shippers, they ensure rates are aligned with the market. Given that contract rates have been as much as 90 cents higher than spot rates on a lane-by-lane basis, there is no more need to justify spend decisions and validate team performance. For a carrier or broker, this gives alignment to the actual market and reduces risk of loss. In a market where spot rates are much higher than contract rates, many will feel pressure to re-address pricing or reject freight to increase revenues. Avoiding difficult decisions like these improves the relationship with a customer and re-focuses attention on growth and sustainability.

Optimizing cost and performance benefits teams across the organization:

  • Sales and marketing can lean on stronger service levels
  • Finance can trust freight rates are reasonable
  • Transportation can reduce time and output spent requesting rates and instead focus on service and relationships

Rather than tying pricing to a static, historical price, both parties agree to a flexible price, similar to commodities trading.

This shifts the relationship between shippers and their partners to center more around service, growth and areas of opportunity.

Picking the Right Data Partner Matters

SONAR is built by consolidating data from industry-leading technology providers, as well as the key industry players — shippers, brokers and carriers. With more than $200 billion in domestic over-the-road data, along with $1 trillion in global transportation data, FreightWaves SONAR is the leading supplier of supply chain information. Most data is collected within 24 hours of booking, as compared to the rest of the industry, which collects data individually or in batches after invoice. This speed to delivery creates the most up-to-date and accurate data available.

Critical indices around contract, spot, rate averages, rejections and volumes all give the clearest picture of the market today, as well as the direction in which it is headed. By leaning on this data, SONAR users can benchmark against the market, forecast critical movements and monitor areas of risk.

Strength and Sustainability

Pricing conversations should no longer be points of contention. Partner with FreightWaves SONAR to create change and build a stronger supply chain before the next market turn forces your hand.

White Papers
March 27, 2024

The State of Freight – March 2024

March 21, 2024

Take Demand Planning and Forecasting to the Next Level: An Introduction to Tender Data

February 6, 2024

Asleep at the Wheel: Shippers and the Freight Market Outlook for 2024