Profitability, one of the Fuel Wise core values, is the life blood of all business.
For shippers in the supply chain, the expense column that is freight costs can play a significant factor on the bottom line profitability of the entire organization. Unfortunately because the shipper is actually focused on being great at their core business, often best practices in this area of business fall by the wayside. Sometimes even when an investment is made to audit and improve in this area, the lack of knowledge stands in the way of being truly effective at managing this cost. Sophisticated shippers have been using fuel surcharges to their benefit for decades, as a key means of negotiating best rates and reducing their overall spend.
For transport companies, freight rates are often fiercely negotiated and the associated fuel surcharges forgotten. While some carriers have implemented a good fuel surcharge program, which allows them to offer more competitive rates while being protected from volatile swings in fuel costs, other firms have missed the mark by not understanding the power of an effective fuel surcharge program. By trying to follow industry standards and re-actively adjusting fuel surcharges, these companies either overcharge their customers in their base rate and lose competitive advantage or are forced to make up for loses in inexcusable fuel surcharge hikes that do not correlate to the actual price of fuel; in the worst cases, trucking companies take major loses as they are not properly positioned to recover from huge spikes in fuel and their revenue is effectively decreasing as their expenses are on the rise.
By following best practices in fuel surcharge management, both shippers and carriers can improve the overall profitability in their business. Carriers can be more aggressive in their rates as they know that they are protected from the most volatile expense on their books, allowing them to earn the business of key accounts that will help them grow. Shippers benefit from the most aggressive rate packages, allowing them to focus on their core business and becoming more profitable.