FTR's economically derived demand (EDD) model explained

EDD is a unique model created by FTR that calculates the number of new equipment units required each year.

Explanation of EDD from Don Ake, Vice President, Commercial Vehicles:
"EDD is a complex model, used to determine a pretty simple thing. We put all of our freight and economic data into our Freight•cast model, and it compares freight demand to equipment supply.  By doing this, we're able to determine how many trucks are needed in a given year. 
In normal circumstances, what we're going to do...typically we start with the EDD, key market indicators, factor in sentiment, look at historicals, etc. This normally gives us a good understanding of the market.
For the short term, and given the current environment, we're going to be looking strictly at the EDD number and basing our forecast off of this EDD number only.  
Our forecasting process is a data-driven forecast based on this model. We don't forecast on feelings, on opinions, on guesses.  There are certain assumptions that we put into the model, but they are based on economic data and freight."

This complex model calculates the number of new equipment units that are needed to support the movement of freight available in a given year. It is an essential component in helping equipment producers and suppliers forecast demand.

EDD takes into account:

  • Current equipment population
  • Replacement demand
  • Expansion demand
  • Productivity
  • Freight growth
  • Cycle timing