- K-Ratio, a Chicago-based company that provides solutions for shipper customers, carriers, and third-party logistics. These are details about the company.
K-Ratio is a Chicago-based company that provides solutions for shipper customers, carriers, and third-party logistics (3PLs) companies by implementing aligned strategies to reduce the price volatility associated with the movement of freight over the road. The K-Ratio team is comprised of a team of finance, mathematics, and logistics experts for providing the analysis, advisory, and execution services tailored to meet business objectives and remove price uncertainty.
The trucking industry economy is estimated to be valued at $726 billion and when the first trucking futures market opened at the end of March 2019, it brought a significant transformation. As a result, shippers and carriers will now have an opportunity to protect themselves against contract and spot rate disparities estimated at $100 billion per year. And K-Ratio was formed in preparation for the opening of this new market. K-Ratio is predicting that the market will have long-lasting benefits for all participants and it is developing customized services for its existing brokerage clients as well as a new suite of solutions for shippers and carriers that want to hedge their financial exposure or insure smoother cash flow.
The Trucking Freight Futures Market is expected to facilitate sales of approximately 40 million transportation contracts annually and cover trucking contracts on 40 billion miles of roadway . And the Exchange will initially cover 7 van lanes: LA to/from Seattle; LA to/from Dallas; Chicago to Atlanta; Atlanta to Philadelphia; and Philadelphia to Chicago
K-Ratio has attracted talent from a wide array of backgrounds, including NASA scientists, investment bankers, PhDs in mechanical engineering, and the former Chief Information Officer of online travel pioneer Orbitz.
K-Ratio is considered a sister company of K & L Freight Management, which was founded in 1997 by Russell Gallemore as a small expedited freight forwarder. And K-Ratio is the newest business in the K & L portfolio which also includes air cargo, brokerage services, and a proprietary truck fleet.
Here is an interview with K-Ratio principal Kyle Lintner:
Q: Why is this market needed?
A: The most obvious reason is that trucking rates are an extremely volatile market with yearly changes of more than 20% and month to month swings greater than 30%. Additionally, the biggest underlying fundamental issue in the industry currently is the lack of binding agreements. “Contractual” business can cease at the desire of either counterparty, at any point in time, which has a compounding effect on price volatility.
Q: How has trading been so far?
A: Although trading has been light, market activity has been robust with plenty of bids and offers across all products. Brand new markets take time to develop and this market is only six months old, but if feels like we are ahead of schedule with regards to market exploration and adoption.
Q: What businesses can benefit from the market?
A: Any business that touches freight. Companies that produce goods or retailers that sell those goods, obviously trucking companies that move the goods, as well as third-party logistics providers that service both the shippers and carriers of freight.
Q: What types of trades have there been recently?
A: Recently we’ve seen a lot of activity for freight coming out of the Los Angeles market. The LA market is the nation’s largest by volume and that region can really set the tone for the entire country. It makes sense that companies are looking at that market in particular as a way to reduce the variability of, and provide some stability to, their balance sheet.
Q: Since the holiday retail season is coming, what are we seeing in the market?
A: The increased LA activity has primarily been focused on Q4, which corresponds to the busiest and most volatile time of the year for that region. West Coast freight in that timeframe has to deal with surging volumes and seasonal effects like Christmas trees out of the Pacific Northwest. While rates are down from last year’s historic highs, we’re seeing Shippers locking in rates to alleviate any risk to price increases.
Q: How does the trade war affect this market? Can this market offset tariff risks?
A: Much like any other commodity market, political policy influences freight prices, especially considering how intertwined the international economy has become. When you have the ability to dictate trade policy via Twitter, coupled with inconsistent and fluctuating political stances, you get unpredictability in rates and that’s why a market like this exists. Its core purpose is to reduce and remove that price risk from a corporate balance sheet.
Q: How does K-Ratio help industry participants?
A: K-Ratio is a full-service risk management firm that identifies the financial threats living inside of a company and provides the solutions to eliminate those threats. Whether it’s a singular matter or systemic issue, bring us your problem and we’ll give you the answer.
