Dive Brief:

• Knight-Swift is the first company to pilot a rate forecasting tool based on the DAT RateView database to help predict freight rates, according to a DAT press release emailed to Supply Chain Dive.
• The pilot will run through the first quarter of the year and be made available to other carriers, brokers, analysts or shippers beginning in the second quarter, DAT said.
• "DAT rate forecasts will be used to respond to RFPs, as well as for project-based pricing," Ken Adamo, chief of analytics at DAT, told Supply Chain Dive in an email. "7-day projections will be helpful guidance for workload management."

Dive Insight:

Adamo said DAT's vast database of historical transaction information helped it build the rate forecasting tool. The company handled more than $68 billion in freight bill data last year and the model is based on five years of historical data. The model considers variables like the day of the week, if it's the end of the month or quarter, and it accounts for seasonality.

The ability to forecast the freight market more accurately allows carriers to build up assets accordingly and buy more capacity as needed. It can also allow shippers to plan and budget their freight needs. Without forecasting, capacity could be out of line with the market and budgets could be blown. This was often seen throughout 2019 as capacity was much higher than demand and trucking companies struggled with the consequences.

DAT's dataset includes spot and contract information, according to the company press release. Carriers tend to have more interest in forecasting the spot market and shippers will be more interested in the contract market, according to a 2018 presentation by Chris Caplice, the executive director of the Massachusetts Institute of Technology’s Center for Transportation and Logistics.

DAT has already been testing its model against actual results and working to improve its accuracy. Adamo said the work with Knight-Swift will provide "the perfect proving ground."

"The plan is to run DAT's new rate forecasts in parallel with our current model, provide feedback to the DAT team, and improve our internal confidence levels in areas of difference," Don Everhart, the vice president of technology and analytics at Knight-Swift Logistics, told Supply Chain Dive in an email.

DAT will also benefit from Knight-Swift's size as it is the largest for-hire carrier by revenue, according to Transport Topics. Testing the forecasting tool with a carrier like this will allow DAT to discern how it functions before rolling it out to a wider audience.

Better forecasting will increase Knight-Swift's confidence in the market conditions, which will allow it to provide better rates to customers and ensure the brokerage team is buying freight "efficiently," Everhart said.

"We will also be providing shipper-to-carrier contract forecasts which will help shippers better protect against budget uncertainties and unexpected shifts in transportation spend," Adamo said.

Correction: A previous version of this article misstated the amount of freight handled by DAT last year.