The Introduction of an Air Freight Rate Index
One of the biggest challenges that many businesses face is figuring out the cheapest and most efficient method for shipping products to customers. Several tools are available for comparing ground shipping routes and prices, but this convenience didn’t exist for air shipping until this year. To help carriers determine fair air freight pricing, John Peyton Burnett introduced the beta version of his TAC Index at the beginning of 2016.
A Closer Look at the TAC Index
The TAC Index is a web-based benchmarking tool that provides live market intelligence on air cargo rates. The beta version includes information on routes from Hong Kong to the U.S. and Europe. However, Burnett wants to expand this to the top 50 trade lanes as fast as possible. The WorldACD already provides monthly air cargo data, but the TAC Index differs by providing live and weekly data. The index will update and announce rates for trade lanes every Monday.
Burnett said, “We hope to develop air cargo hedging tools further down the line similar to fuel and currency hedging products.” Businesses can check out the TAC Index, sign up for a subscription to its valuable information, and gain access to more tools as they become available.
The TAC Index was modeled after the Shanghai Containerized Freight Index. It is set up to prevent any single businesses from skewing the data. The U.S. Department of Justice recognizes value in the concept and has helped Burnett ensure that the TAC Index complies with stock exchanges, banking regulations, and antitrust laws.
Obstacles to the TAC Index
Some people worry that the TAC Index will not be successful if it can’t get enough forwarder-provider information. Businesses want to be sure they are getting the best air cargo pricing, and this isn’t possible if they can only compare a small percentage of the options. That’s one reason why providers and businesses can get a subscription to the TAC Index for free while it is in the beta stages.
Burnett says that many data providers are still undecided about whether to participate in the TAC Index. One of the biggest incentives Burnett is offering providers is free use of the index for their own internal pricing purposes. Some of the top global forwarders have already signed up, but early adoption of the TAC Index has been slow. There is still a good chance that the TAC Index will take off and become successful as more businesses and providers realize the benefits of real-time benchmarking tools.
There are currently no competitors in the space for live air cargo data. By way of explanation, Burnett said, “It is getting sizeable now. We won’t publish every tradelane, but we could. The biggest difference with other indices is the quality of the raw data and that it will be up-to-date, rather than a month old.”
Shippers like the idea of an air freight index because it would provide transparency and create a neutral benchmark. Time will tell whether the TAC Index becomes a standard in the industry or whether the complex air cargo industry is ready for an index at all.
Global Procurement & Supply Chain Professionals Read This…
…Carefully curated procurement & supply chain issues that make you look smart, sent to your inbox every week.
PLUS: Get the FREE Procurement Case Study when you subscribe: “How McDonald’s Overcame Global Supply Chain Obstacles”