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1) Percentage Fuel Surcharge Disparity
between Shippers
This analysis is
based on two shippers with the same type (class) of freight with the same
origin and destination zip codes using the same carrier*. Shipper 2 pays less
in fuel surcharge.
| Shipper 1: | A 60% discount on $2,000 shipment = $800. | A 40% fuel surcharge on this $800 shipment = $320 |
| Shipper 2: | A 70% discount on $2,000 shipment = $600 | A 40% fuel surcharge on this $600 shipment = $240 |
2) Percentage Fuel Surcharge based on
carrier, broker, 3PL or 4PL profit
margin.
Another way to
look at it, which quantifies the phrase "fuel surcharge is a profit center for
carriers" is by multiplying the carriers profit margin by the fuel
surcharge.
| Shipment costing $1,000: | If the carrier is making 20% on this shipment the carriers profit is $200 without the fuel surcharge. | A fuel surcharge of 50% increases the carrier' profit by $100 so the profit is now $300. |
| Shipment costing $3,000: | If the carrier is making 20% on this shipment the carriers profit is $600 without the fuel surcharge. | A fuel surcharge of 50% increases the carriers' profit by $300 so the profit is now $900. |
This is why the only accurate way to compensate a
carrier for fuel increases is by basing the fuel surcharge on mileage. A
mileage based fuel surcharge is simple with Truckload carriers but can get very
complicated for LTL carriers. LTL mileage based fuel surcharges need to be
negotiated on a case by case basis.
As fuel surcharges continue to rise the savings from
a mileage based fuel surcharge will be significant for most shippers. In order
to evaluate how much your savings would be Transnet can do an audit on your
shipments and for a fee renegotiate your fuel surcharge with your carrier or
shipment provider.
For more information on fuel surcharge options
contact us.
* This also applies to brokers, 3PLs, 4PLs etc. that are charging a percentage fuel surcharge.
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