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The high cost of fuel is wrecking havoc with daily operating costs and budgets forecasted when $4.00 fuel seemed unreal. Fuel costs show no sign of stabilizing in the short term but there are measures organizations can take to ease the strain on their bottom line. Supply Chain Solutions applies various fuel management methods based on our clients unique operating needs and goals. Companies searching for a long term, strategic solution to reigning in high fuel costs must look to transportation route optimization. Before any data crunching starts, organizations must determine goals to reach optimal efficiency. If a company can set a goal, say, 5% reduction in their inbound transportation costs, a strategic exercise like route optimization can be implemented more quickly because it will highlight what areas to target first for maximum efficiency. After establishing the goals, a route optimization plan is established, consisting of analysis and goal alignment of the following:
2. Fuel Caps Fuel caps are negotiated by service providers to freeze fuel prices for a pre-determined amount of time. Carriers will often increase line haul fees to pay for the cap, so bottom line savings are not the immediate benefit of using this method. It does allow for much more accurate forecasting and budgeting. Flat rates allow for a more controlled savings as they are set for longer periods by service providers, and prevent shippers from the adverse effect of fluctuating fuel prices. Shippers are subject to fees on behalf of the service providers who has negotiated the rates on behalf of its clients. 4. Fuel Surcharge Fee Negotiation Fuel surcharges are accessorial fees that truckload carriers charge shippers to offset the cost of fuel, and are usually measured in dollars per mile rate. Shippers can use the tight shipping market as leverage to negotiate a lower fuel surcharge. Shippers that are locked in at a base-line haul rate are looking at fuel surcharges as an area of opportunity for short and long term savings.
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