How gas and diesel prices are affecting LTL shipping

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LTL fuel surcharges: How gas and diesel prices affect your bottom line

With the recent spike in gas and diesel prices, businesses are seeing many of their costs increase. One of the most obvious places they see this is in their shipping budgets. But how exactly does the price of fuel impact shippers, and how do carriers pass these expenses along to their customers?

What are fuel surcharges?

LTL (less-than-truckload) fuel surcharges are a common cost for shippers, but many are unaware of exactly what they are and how they work.

First and foremost, it's important to understand that LTL fuel surcharges are not fixed costs. They are variable costs that fluctuate based on the price of fuel. The reason for this is that fuel is one of the most significant operating expenses for trucking companies, and as fuel prices rise, so does the cost of transporting goods.

To mitigate this cost, trucking companies have implemented fuel surcharges. These surcharges are added on top of the base shipping rate and are meant to compensate the carrier for the additional cost of fuel. The calculation of fuel surcharges is based on the average cost of fuel in the previous month using data from the U.S. Energy Information Administration.

How are fuel surcharges calculated?

Fuel surcharges are not always straightforward. Different carriers use different methods to calculate them. Some base the surcharge on mileage, while others charge them as a percentage of the total cost of the shipment. This can make it difficult for shippers to predict and budget for fuel surcharges.

The impacts of fuel surcharges on shippers can be significant. For small businesses, unexpected charges can be a major financial burden. For larger companies, they can eat into profit margins. In either case, it can be difficult for shippers to pass these costs on to their customers without losing business.

What can businesses do?

One way shippers can mitigate the impact of fuel surcharges is by working with a third-party logistics provider (3PL). A knowledgeable 3PL like Koho has established relationships with multiple carriers and has experience navigating the complexities of different carrier surcharge calculations. Their LTL experts can negotiate on behalf of the shipper and help get them the best deal available.

Another way shippers can reduce the impact of fuel surcharges is by finding new efficiencies in their supply chains. This may include consolidating shipments heading in the same direction, or optimizing routes to minimize the distance a shipment must travel.

Fuel surcharges are a reality in the shipping industry, and they will likely continue to be a significant cost for shippers. However, by understanding how they work and taking steps to mitigate their impact, shippers can better manage these costs and keep their bottom line healthy.

Image of trucks lined up in a parking lot

LTL fuel surcharges: How gas and diesel prices affect your bottom line

With the recent spike in gas and diesel prices, businesses are seeing many of their costs increase. One of the most obvious places they see this is in their shipping budgets. But how exactly does the price of fuel impact shippers, and how do carriers pass these expenses along to their customers?

What are fuel surcharges?

LTL (less-than-truckload) fuel surcharges are a common cost for shippers, but many are unaware of exactly what they are and how they work.

First and foremost, it's important to understand that LTL fuel surcharges are not fixed costs. They are variable costs that fluctuate based on the price of fuel. The reason for this is that fuel is one of the most significant operating expenses for trucking companies, and as fuel prices rise, so does the cost of transporting goods.

To mitigate this cost, trucking companies have implemented fuel surcharges. These surcharges are added on top of the base shipping rate and are meant to compensate the carrier for the additional cost of fuel. The calculation of fuel surcharges is based on the average cost of fuel in the previous month using data from the U.S. Energy Information Administration.

How are fuel surcharges calculated?

Fuel surcharges are not always straightforward. Different carriers use different methods to calculate them. Some base the surcharge on mileage, while others charge them as a percentage of the total cost of the shipment. This can make it difficult for shippers to predict and budget for fuel surcharges.

The impacts of fuel surcharges on shippers can be significant. For small businesses, unexpected charges can be a major financial burden. For larger companies, they can eat into profit margins. In either case, it can be difficult for shippers to pass these costs on to their customers without losing business.

What can businesses do?

One way shippers can mitigate the impact of fuel surcharges is by working with a third-party logistics provider (3PL). A knowledgeable 3PL like Koho has established relationships with multiple carriers and has experience navigating the complexities of different carrier surcharge calculations. Their LTL experts can negotiate on behalf of the shipper and help get them the best deal available.

Another way shippers can reduce the impact of fuel surcharges is by finding new efficiencies in their supply chains. This may include consolidating shipments heading in the same direction, or optimizing routes to minimize the distance a shipment must travel.

Fuel surcharges are a reality in the shipping industry, and they will likely continue to be a significant cost for shippers. However, by understanding how they work and taking steps to mitigate their impact, shippers can better manage these costs and keep their bottom line healthy.

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