In early October 2018, the average retail price for diel rose 7.2 cents, reports Transport Topics, and oil costs are expected to continue to increase. This represents the seventh consecutive weekly spike in diesel costs, and global economies allude to a future of rising prices. For shippers, the pattern will emerge to drive higher LTL fuel surcharges, as well as a host of other accessorial charges that relate to the impact of added fuel costs. Instead of trying to go with the flow, shippers that understand where LTL fuel surcharges are headed can take steps to reduce freight spend by effectively reducing fuel surcharges paid for unexpected delays or issues.
Driving Forces of Higher LTL Fuel Surcharges
Tariffs and the threat of a trade war are two forces affecting the costs of crude oil, and as companies look to the future with uncertainty, oil markets will undoubtedly try to protect their status. In other words, they will increase per-barrel pricing to create a cushion for future economic change, but as businesses continue to operate with more inventory and protections in place, says Freight Waves, the risk of sudden spikes in fuel surcharges in the only climb.
With 2018 being a midterm election year, uncertainty in the market is nothing new. Unfortunately, the polarizing effect of politics is extending to LTL fuel surcharges as companies prepare for a possible change in control of Congress. Additional driving forces will continue to push fuel surcharges higher. LTL fuel surcharges are subject to Mother Nature as well.
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Mother Nature is perhaps the most iconic forced to affect fuel costs in the world’s today. Cities along the Gulf are still recovering from Hurricane Harvey and Irma from last year, and Michael’s recent swells and reign of terror brought the Florida panhandle to its knees. Uncertainty about the severity of this year’s winter, fuel surcharges related to weather is likely to continue increasing.
LTL Fuel Surcharges Will Continue to Climb
Unlike full truckload, LTL carriers have dozens of stops in the course of shipping. As a result, LTL shipments tend to have higher fuel surcharges, so even minor fuel surcharge hikes in the industry can be profound among LTL carriers, reports Shipware. Data from one of the significant LTL carriers around the globe, UPS, reveals fuel surcharges for LTL freight are rising much faster than any other mode. As of October 15, LTL fuel surcharges for UPS rose to 28.5 percent. In combination with record-breaking flooding in the great state of Texas, and across the Midwest, the risk of significant impact to the energy industry, particularly the oil and gas refineries in the Lone Star State, is excellent. LTL fuel surcharges will continue to increase, and shippers need to know how to protect freight spend and keep it under control. In light of higher LTL fuel surcharges. This is even more true sense, the simplest way to reduce LTL. Full surcharges are to combine freight in full truckload. Unfortunately, full truckload capacity is not there.
How to Protect Against LTL Fuel Surcharges as a Shipper
The easiest ways to reduce LTL fuel surcharges is not really about controlling the surcharges set by carriers. Instead, shippers should focus on making changes in shipping practices that lessen the burden on carriers and reduce wasted fuel. Some of these practices include:
- Reduce empty backhauls. An empty backhaul is essentially fuel cost without profit, so reducing empty backhauls effectively reduces fuel costs for carriers. Also, leveraging your supply chain network to take advantage of backhauls can be a critical factor in gaining shipper of choice status.
- Limit delivery windows, provided it won’t upset customers. There has been much talk about expanding delivery windows to give customers more options, but extended delivery windows could imply higher fuel surcharges. Shippers could avoid this problem by encouraging delivery options that do not go beyond typical delivery hours. However, shippers must ensure such opportunities will not drive customers to Amazon or Walmart.
- Ensure docks are clear when drivers arrive. An empty track can waste much more gas than driving on the road. Trucks that are left idling in the yard waiting for a talk to clear will waste gas, and the same is true of trucks making multiple stops. Multiple stops are the defining characteristic of LTL shipping, but shippers that aim to reduce the number of stops for freight can effectively lower the fuel costs for the carrier.
- Reduce costs of other accessorial charges. According to Zipline Logistics, there are dozens of accessorial charges that may be levied against shippers, ranging from detention times two fuel surcharges and more. Shippers should work to reduce the factors that result in excess surcharges, like ensuring weights and dimensions of packages are accurate when obtaining an LTL freight quote.
From Driver Turnover to Changing LTL Pricing, Shippers Beware
LTL fuel surcharges are not going away any time soon, and shippers need to know that surcharges may not be included with initial freight quotes. Moreover, shippers should follow the practices outlined above to decrease the burden on carriers and gain shipper of choice status. Those two steps will be vital to reducing the impact of other charges and encouraging carriers to offer better rates to your company.