Fuel Surcharge Matrix

[RoadKing]

Hello Friends

Just wondering what matrix do you use to calculate fuel surcharge? I have seen some people pick a number out of hat and stick with it until fuel prices go significantly high and some people adjust it weekly.
Not sure if this has been discussed before or not....

 

[theman]

What I find is that nearly all of our customers have their own fuel scale that they use. When it's an American customer, it's generally a rate per mile but different shippers may use different peg levels as the baseline for their fuel ... as long as it scales normally, it doesn't matter.

Canadian customers tend to use FCA fuel. Most discount it ... so they'll pay anywhere between 60 and 75% of the FCA posted recommendation. Personally, I think % based FSC is BS, because it assumes that the rate per mile you are charging and the percentage of fuel expense in relation to total expenses is the same. And we know that this isn't true.

 

[Michael Ludwig]

What seems to work best is to take the FCA percentage number and call it a cents per mile number ... i.e. if the rate is 43.4% then just change it to $0.434 per mile.

 

[busterknoxville]

I use FCA for LTL shipments & I find it works pretty good, as long as your rates are appropriate...there's a nice advantage to being able to point to an independent agency & say "they tell us what to charge" when customers start demanding to know why fsc % aren't dropping as fast or as far as they think it should

 

[theman]

I agree that FCA is a standard ... I just think the methodoligy is flawed. RPM is much more accurate on anything other than local cartage.

 

[Michael Ludwig]

I would suggest RPM is just as, if not more, accurate on local cartage. If you consider that a big part of local cartage rates involve loading and unloading time, then you would be paying FSC on time for which no fuel is used. RPM considers only mileage run.

 

[theman]

I was thinking that fuel burn is higher on cartage because of all of the acceleration/deceleration. So if a company has one RPM scale to cover short and long haul, it's problematic.

 

[Michael Ludwig]

I see what you're getting at ... that's a reasonable assumption.

 

[RoadKing]

I guess there is no standard. Everyone does it their on way.

 

[Freight Broker]

I developed my own formula based on $.45/L price of diesel benchmark. I adjust it on a monthly basis with the calculated surcharge based on the previous month's price as shown on the Ontario Ministry of Energy website. My formula is more complex than most; however, it is more accurate than any of the alternatives I've seen. Having been in this biz for 25 years now and as an engineer by training I enjoy the numbers part of the business the most.