It’s all about leveraging smart transportation strategies to deliver efficiency and defend against factors outside your control. Knowing how fuel surcharges work allows you to implement a mix of technology and strategy that offers a competitive advantage.
The Mechanics of Fuel Surcharges
Fuel surcharges are additional fees carriers add to account for fluctuating fuel prices. The surcharge for fuel is typically calculated based on the U.S. Energy Information Administration’s (EIA) weekly fuel price index.
Major carriers like FedEx and UPS adjust their surcharges weekly to reflect changes in the cost of on-highway diesel fuel. For example, when you ship something with UPS, the fuel surcharge percentage that applies is listed in the 90-Day Fuel Surcharge History chart on the day you ship, regardless of any new fuel prices.
This system helps carriers shield themselves from rising fuel costs by passing the costs through to the shipper.
Recent Trends in Fuel Surcharge Increases
Surcharges have steadily risen in recent months. The UPS fuel surcharge is up 175 basis points over a five-month period, with the FedEx fuel surcharge following suit. These increases have added pressure on shippers’ budgets, especially for small and mid-sized businesses already facing tightening margins.
Interestingly, there has been a growing divergence between surcharges and actual fuel costs. Recent index data infers ground surcharges would be about 5.5% lower if they strictly followed diesel price trends. Instead, these higher surcharges persist even as demand softens.
How MercuryGate TMS Mitigates Fuel Surcharge Increases
Sometimes, shippers can negotiate lower shipping rates or secure exemptions from a fuel surcharge increase. A surefire way to offset additional fuel charges is to remove waste in your transportation network using the capabilities of a Transportation Management System (TMS). MercuryGate TMS offers practical solutions for improving efficiency and sustainability while reducing costs.
Optimizing Routes and Minimizing Empty Miles
One of the most effective ways to reduce fuel surcharges is by improving route efficiency. For instance, MercuryGate TMS provides order visibility and advanced route optimization, minimizing unnecessary detours and empty miles. Here’s how we do it.
- Ongoing route optimization: Continuously adjust routes to avoid backtracking and reduce fuel consumption.
- Load visualization tools: Make sure trucks are fully loaded by eliminating underutilized space and reducing the number of trips.
Maximize Efficiency with Consolidated Shipments
A recent study found that more than 40% of trailers are not utilizing their full capacity. Failing to make full use of trailer space increases fuel surcharge costs. MercuryGate TMS helps businesses consolidate shipments, combining multiple orders into fewer, more efficient trips.
- Maximized load space: Ensures that trucks are operating at full capacity.
- Reduced number of trips: Fewer trips translate into fewer fuel surcharges and lower operational costs.
This feature reduces the total miles driven, lowering fuel consumption and exposure to surcharges.
Reducing Costs with Historical Fuel Data
Another way to reduce fuel surcharge costs is to optimize shipments according to historical fuel price trends.
- Schedule shipments during periods of lower fuel prices: If you have flexibility in your shipping windows, you can plan shipments for times when fuel prices are typically lower.
- Optimize fuel-efficient shipping decisions: Create network models that simulate various scenarios to find the most fuel-efficient shipping routes.
Advanced planning helps businesses avoid fluctuating fuel prices and manage transportation costs.
Tracking and Reporting for Long-Term Savings
Beyond immediate cost savings, MercuryGate TMS offers detailed reporting tools that help businesses track fuel consumption, costs, and environmental impact over time.
- Identify fuel-efficient decisions: Use detailed mileage and fuel consumption reports to refine strategies and improve long-term efficiency.
- Uncover sustainability opportunities: By reducing fuel consumption and emissions, companies can also make strides toward achieving sustainability goals by leveraging carriers that use electric and alternative fuel vehicles.
Capabilities like route optimization and load planning reduce fuel surcharges, contributing to lower emissions and a reduced carbon footprint. This combination of cost control and sustainability is critical for businesses looking to balance profitability with environmental responsibility.
Calculate your potential Saving While Using an enterprise TMS
The Best Defense Against Any Fuel Surcharge Increase is MercuryGate TMS
Like death and taxes, fuel surcharges in today’s shipping environment are unavoidable. However, enhancing your transportation network and driving efficiencies help offset these costs. This proactive approach is possible by implementing a robust TMS to reduce fuel consumption, maximize load space, and optimize routing.
For more information on news and trends impacting the freight industry, check out Logistics Landscape. If you are curious about how to defend against fuel surcharges, request a demo today to see how MercuryGate TMS can deliver for your business.
