A fuel surcharge does a couple things. It helps to normalize fluctuating fuel costs, and it helps overcome inefficiencies in the operation - namely trucks that aren't optimized for fuel efficiency or that aren't driven as efficiently as possible.
You calculate your surcharges based on the impact the fuel costs have on your fleet. Frankly, some part of that calculation is always testing what the market will bear. One carrier's surcharge can be a competitive advantage over another's, and traffic managers notice that kind of stuff.
Traffic managers will naturally balk at higher fuel surcharges. However, in recent times, the pressure on traffic managers might be coming not only from the accounting department but also from the public relations and the sustainability department.
"Sustainable shipping practices are vital to securing procurement contracts at the world's largest retailers," writes Scott Wicker, vice president of sustainability and vice president of corporate plant engineering for UPS, in Environmental & Energy News. "They also appeal to a key group of consumers who demand green behavior from businesses."
Wicker suggests that your customers' customers are questioning your customers' commitment to sustainable transportation. End users of products as diverse as coffee, vacuum cleaners and garden tools - soccer moms, young liberals, construction workers, eco-friendly citizens and others - want their vendors to be as green as they are, and they are sending those retailers a message. That means your customers may soon be coming to you with some questions.
Companies that have made very public commitments to reducing the carbon footprint of their entire supply chain don't want to be surprised by a YouTube video of a 1984 Fender Flapper idling at a loading dock with twin columns of black smoke rising from the exhaust stacks.
In his column, "How Greener Shipping Can Make You More Green," Wicker suggests that shippers scrutinize their transportation provider's operation by having them submit a Sustainability Report that provides an indication of whether the trucking firm is a credible business partner.
That fuel surcharge could be seen as an indicator of whether a carrier is simply billing away its inefficiencies or is actively managing fuel costs (and fuel consumption). The types of trucks you operate send a certain message, as does the way the trucks are equipped. Are they SmartWay spec'd from stem to stern, or are you using just the minimum of the low-hanging "green" fruit needed to get you into California?
Smart shippers know that a 2010-generation engine is more efficient than a 2006 model and that wide-base single tires are more efficient that deep-lug dual tires. They know trailer side skirts make a difference and that long-nose classic trucks aren't as fuel efficient as slope-hood aero models. Everything you do as a carrier sends a message to your customers, and more and more shippers are paying attention.
There are all sorts of ways to demonstrate your environmental commitment, from programs to reduce out-of-route miles to driver training for improved fuel economy. The "green" argument may even be a way to convince customers to load and unload freight at times of the day that minimize time spent on congested highways.
The upside here lies in the commitment you've made to more sustainable trucking practices and the investment in environmentally friendly equipment. Not only do you save fuel costs in the long run, but you also can justify a better rate because you are a transport provider that is going to make your customer look good.
From the June 2012 issue of HDT