How Freightos is Revolutionizing Freight Contracts with Index Linking

Freightos Launches Innovative Index Linking for Freight Management

Freightos (NASDAQ: CRGO), a prominent digital freight booking platform, has recently introduced the Freightos Index Linking Toolkit. This groundbreaking toolkit integrates seamlessly into its Freightos Terminal market intelligence solution, enabling dynamic contract pricing that effectively adjusts to market trends. This significant advancement is designed to enhance freight rate management, promising to make global trade more efficient.

Transforming Freight Contracts for Global Trade

The concept of index-linking is proving to be a game-changer. It allows importers, exporters, freight forwarders, and carriers to manage their contracts with greater stability and reliability, thereby simplifying the entire process and eliminating excessive fees. While commonly utilized in bulk shipping, index-linking is now making notable strides in the containerized shipping and air cargo sectors. By adopting this toolkit, Freightos is spearheading a digital transformation within the logistics industry, establishing a new standard that prioritizes resilience and efficiency.

The Need for Flexibility in Contract Management

Research from Freightos highlights the shortcomings of traditional fixed-price contracts, which often lead to renegotiations when rates fluctuate—either due to increased carrier rates or when market prices drop. This new index-linking method aligns freight rates dynamically with market prices, thus minimizing the necessity for contract renegotiations. By ensuring competitive pricing and consistent service, Freightos is addressing a critical need among industry players.

Utilizing Cutting-Edge Indexes for Market Accuracy

The index-linking approach is anchored by Freightos' renowned indexes, including the Freightos Baltic Index (FBX) and the Freightos Air Index (FAX). These indexes rely on billions of transactional data points, ensuring that they reflect real-time market conditions. By utilizing these comprehensive datasets, companies can optimize their pricing strategies and enhance their operational efficiency.

Strategic Hedging Opportunities

Furthermore, when integrated with freight futures agreements (FFAs) available on major exchanges like the Chicago Mercantile Exchange (CME) and the Singapore Exchange (SGX), Freightos is empowering carriers and other stakeholders to further mitigate pricing risks. This fusion of index-linking and strategic hedging provides a robust framework for managing freight price exposure, resulting in improved internal efficiencies.

Industry Insights on Index-linked Contracts

Industry professionals acknowledge the advantages of index-linked contracts. Bjorn Vang Jensen, Executive Vice President at Easy Speed International Logistics, emphasizes that such contracts represent an effective way to stabilize pricing in a volatile environment. He notes that this approach not only secures better deals but also allows teams to shift their focus towards more productive tasks rather than labor-intensive negotiations.

Addressing the Challenges of Modern Logistics

As logistical teams grapple with ongoing disruptions, quarterly renegotiations of freight contracts have become necessary. Anton Barr, the Vice President of Market Data at Freightos, points out that the demand for ocean freight index-linking is increasing, making it more vital than ever. With the introduction of a reliable toolkit, Freightos is making these innovations accessible to all stakeholders.

About Freightos and Its Global Impact

Freightos is recognized as a leading vendor-neutral platform connecting airlines, ocean carriers, and thousands of freight forwarders with importers and exporters. By revolutionizing the global freight booking process, Freightos aims to streamline trades and enhance both efficiency and resilience within the international freight sector.

The Freightos platform plays a crucial role in digitizing the trillion-dollar international freight industry through a comprehensive suite of software solutions. These solutions encompass pricing, quoting, booking, shipment management, and payment systems tailored to meet the diverse needs of businesses around the globe. Their offerings include the Freightos Marketplace, WebCargo, and several other products designed to meet the unique demands of modern supply chains.

Frequently Asked Questions

What is the significance of Freightos' Index Linking Toolkit?

The toolkit allows dynamic adjustments in contract pricing to better reflect market conditions, improving efficiency in managing freight contracts.

How does index-linking benefit the freight industry?

Index-linking reduces the need for frequent contract renegotiations, ensures competitive pricing, and enhances service consistency for industry participants.

What data sources does Freightos use for its index-linking?

Freightos relies on its FBX and FAX indexes, which draw on billions of transactional data points to provide real-time market insights.

How do freight futures agreements complement index-linking?

FFAs help carriers manage pricing risks, combining with index-linking to create comprehensive strategies for price exposure management.

What is Freightos' goal within the global freight market?

Freightos aims to digitize the freight booking process, making international trade faster and more resilient for all industry stakeholders.

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