Lower Fuel Surcharge Case Study

In Case Study #3, the shipper had chosen a carrier whose fuel surcharge was lower than all of the other bidding carriers. The belief system was that carrier with a higher fuel surcharge were charging too much, and that the shipper could operate at a higher level of trust in their relationship with the carrier that had lower fuel surcharges.
The analysis in this case was definitely an interesting study. Consideration should always be based on the total cost of freight, which is freight plus fuel surcharge, and not just one single line item. Often carriers with lower fuel surcharge have higher base rates, and carriers with higher fuel surcharges have lower base rates.
In this case study a comparison was made on the frequency that the fuel surcharge was adjusted, the amount by which it was adjusted, and the trending direction (up or down) that the fuel surcharge was adjusted. These numbers were compared against the data published by Stats Canada for the same time frame to see if they aligned.
Here are the results of the comparison:

This analysis demonstrates that even though the fuel surcharge was lower than the industry average, and was adjusted at regular intervals, the adjustments had little correlation to the true changes in fuel prices for that market region.
The result is a carrier that does not have a good handle on their fuel cost recovery and either has to charge more to compensate, or reduce profitability, and a shipper who is overpaying for their freight because of a poorly administered fuel surcharge program.