What is Freight Demand Modeling?

Freight demand modeling

Any successful business will take measures to forecast supply and demand for their products and services. There are many software programs out there that can assist companies of every size in knowing what to expect. According to Simplex Group, this helps companies plan for warehousing space, advertising, and staffing. 

Freight forecasting is a method of predicting what the freight market will do in the days, months, and years to come. Freight Demand modeling is an offshoot of freight forecasting that determines how much need there will be for certain modes of transportation and the amount of room needed on those modes of transportation.

It will also determine the need for certain lanes. If you want to understand the significance of freight demand modeling, you should understand a bit about the job of a freight forecaster.

The Job of a Freight Forecaster

The freight industry offers many jobs, and multiple people will handle any shipment. A freight forecaster figures out what freight rates will be changed in the days to come. They predict any obstacles that may disrupt the progress of cargo. They will try to predict the rate of inflation and the amount of profitability a product will have. 

Computer programs and mathematical formulas can help people know what is likely to happen in the future.

Why do trucking companies hire freight forecasters?

The main reason a trucking company would hire a freight forecaster is to figure out how much room they need to have in their trucks to get everything where it is going on time. They will collect data to analyze it for long-term trends. They will also:

  • Monitor weather predictions and news of weather affecting various areas.
  • Analyze the costs of any services used.
  • Analyze rates for various routes taken.
  • Develop a transportation strategy using various modes of transportation such as trucks, trains, and planes.

Freight Demand Modeling 

Part of a forecaster’s job is using probabilistic forecasting to determine a range of possibilities. When a forecaster creates a demand model, they will adapt their way of doing business to a demand profile and look at all the possible outcomes of a shipping situation. They will create a plan for dealing with each of those situations. They will also analyze the likelihood of various situations. 

Benefits of Probabilistic Forecasting 

Probabilistic forecasting analyses the probability of each outcome.  When you use probabilistic forecasting, you will be able to determine the number of trucks you will need in your fleet to accommodate the level of business that you have. 

Plan your Loads 

This kind of forecasting will help you make a plan for loading your trucks. For example, if you have a steady run that uses 2/3 of the room in your truck, probabilistic forecasting will let you know the likelihood of filling the truck up with other clients’ products based on demand. 

Predict Staffing Needs

Probabilistic forecasting will help you determine the number of drivers you need at any given time, so hopefully, you never have to lay off your employees. However, probabilistic forecasting can help determine when you will need full-time drivers and how many and when you will need to hire part-time drivers. It will also predict when you are likely to need to lay drivers off.

Deciding What Lanes to Use

Planning a lane or choosing an existing one can be very challenging. The route you use can predict the time a truck will take to get where it is going and how much you will owe in taxes. It will even let you determine the safety of your load.

Demand modeling can determine how much a load will cost to get across the country. For example, let’s say you have a load traveling from Texas to California. You might think that you would look for the shortest lane or one that would help you pay the least in fees and taxes. 

However, there are many variables in trucking. For example, one of the states you normally drive through might have a terrible storm brewing. It may shut down highways, cause delays, and make your delivery late. All trucking contracts have deliver-by dates in them, and you could have to give your client a big refund if you do not deliver products on time and in good shape. 

What kind of training do freight forecasters have?

Several different schools offer freight forward training. It takes years of on-the-job experience to get good at this detailed and demanding job.

Instead of hiring an in-house freight forecaster, it is best to hire a company that handles freight forwarding. They will be there when you need them, and they will have the required experience to make sure your company’s runs are successful and profitable.

Freight Demand Modeling article and permission to publish here provided by Anna Larina. Originally written for Supply Chain Game Changer and published on April 15, 2022.