If you’re reading this you probably want to figure out a way to get control over fuel surcharges. And who can blame you? Just look at diesel fuel prices today — people look forward to filling up their tanks about as much as going to the dentist. But the extraction is from your wallet, not from your mouth, and it hurts just as much. But you are not alone! — you’re in the same boat with thousands of other managers.
Why are some fuel surcharges based on a percentage of the freight charges while others are based on cents per mile? Why would a fuel surcharge on one shipment be more than that on another? What if these shipments have the same density, the same origin and destination, and the same weight, but different value? For example, freight charges — and their resulting fuel surcharges — are typically higher on a shipment of laptop computers than on a shipment of other products with the same density but much lower value. This means that somebody might be making some money on this, at your expense.
SO, what can you do about it? You really want to control this untamed animal, and the good news is there ARE some things you can do.
First of all, break things down into two basic categories: Less-than-truckload (LTL) shipments and truckload (TL) shipments. You’ll take different approaches with each.
Let’s start with LTL. Ask your carrier sales reps why the freight charges on your shipment of laptop computers (or whatever) are different than other products where product density is about the same. Do shipments of laptops need more fuel to transport? Of course not. So why not consider negotiating a different freight rate structure that lowers your base freight charges AND the resulting fuel surcharge? That’s where a good transportation consultant comes in. That worth-their-weight-in-gold person can perform a study to compare your products and shipments to others, and can develop a rate negotiation strategy for your company — A very good idea.
Now how about TL? First ask, “How many TL carriers do I use”? Take a look at the fuel surcharge tables for these carriers. They’re not the same, are they? But aren’t these different carriers all driving similar kinds of trucks? Don’t they get similar fuel mileage?
Tip #1: STANDARDIZE THE FUEL SURCHARGE TABLES! Sit down with your carrier reps and ask each why their table is different than their competitors’ tables (this should result in some interesting answers). While I can guess what their responses will be, feel free to let me know what they tell you.
Tip #2: Many companies put a lid on fuel surcharges, capping them off at a certain level (these are the companies with either lots of buying power — maybe $50 million in freight expense or higher — or, they have GOOD consultants who can benchmark fuel costs and know how to negotiate these caps). It’s definitely worth a try.
But aren’t you already paying for some fuel in the base rate? Of course! Freight rates already include some cost component for fuel, even before fuel surcharges are added. You don’t want to pay for fuel twice, particularly at today’s prices.
Diesel fuel prices will probably continue to rise, what with diminishing supply, increased world-wide demand (China and India are taking off), and political turmoil. Now’s the time to put together a good fuel surcharge strategy — and make surcharges less worrisome than going to the dentist.
And don’t be afraid to ask for help.
We have the experience, knowledge, and tools required to reduce fuel surcharges and freight charges in your company, and savings of 15% or more are common. Take a few moments to browse through our site to read about the services we offer, then fill out the contact form and send it to us. There is NO obligation and no salesman will contact you unless you so request.