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How to keep transportation costs down when fuel prices spike

How to keep transportation costs down when fuel prices spike

Fuel prices have been on a bit of a rollercoaster this year due to Russia’s war with Ukraine and Europe’s ongoing energy crisis, with prices on gas rising above $5 a gallon and diesel hitting prices as high as $6.91 a gallon in some areas earlier this year. And while we all breathed a sigh of relief as the cost of filling our tanks has dropped since those record-setting prices, they’re once again on the rise.

Nationally, gasoline prices are up 11 cents a gallon in the past week, while diesel increased 38.8 cents. The jump in pump prices quickly followed the move by the Organization of the Petroleum Exporting Countries (OPEC) and its allies Wednesday this week to approve a production cut of 2 million barrels a day beginning in November. It also came with an increase in demand as more drivers fueled up in the past week.

This isn’t great news for anyone who needs to fill their tank right now, but it can be especially negative for those in the supply chain. “From a truckload perspective and understanding that typical fuel surcharge programs use 6-cent increments, this is an additional 6 to 7 cents per mile in increased fuel surcharge expenses vs. the previous week’s costs,” said Senior Carrier Representative, Greg Holt, in a letter sent out to Shipwell customers on Thursday last week. “On a year-year basis, with the 46% increase vs. 2021, this means, using a 600-mile length-of-haul move as an example and using $1.20 as the peg rate, this is an additional 27 cents per mile or $162 in fuel surcharges alone, not counting any base rate changes.”

What will the new OPEC+ induced fuel price increase cost shippers?

How much more will fuel surcharges be with the new OPEC+ price increases? Today, shippers will see an increase of 27 cents per mile compared to last year.
Infographic: Fuel surcharge costs increase as diesel prices climb 46% since 2021

How can businesses maintain control of expenses?

With this increased cost of operating a supply chain to get products and materials where they need to be, companies are faced with the options of operating at a loss, raising prices for their customers, or exploring new methods to save on costs. And with inflation already hitting both businesses and their customers hard, those first two options can only go so far. This has forced many to reassess their shipping strategies and look for opportunities to shave costs and find valuable new efficiencies in their supply chain through improved order consolidation and routing options.

Traditionally, finding ways to optimally consolidate orders into shipments and put them on the most efficient route with the fewest number of trucks required has been a daunting task that, depending on order volume, could take hours or even days out of the week to plan effectively. Packing multiple customer orders into the most ideal mode allows a greater quantity to be dispatched at once, greatly reducing both the costs for the shipper and the number of road miles — and thereby the amount of fuel — needed to get shipments to their destination. But with many performing this optimization via manual process or through third-party software or spreadsheets outside of their Transportation Management System (TMS), uncovering the most efficient options is rarely an easy task.

Assessing each individual order’s size, weight, locations, pickup and delivery times, and consolidating them onto the most cost-effective and available routes and modes is typically a valuable but time-consuming task. However, with automated tools like Shipwell’s Load Optimization, it can now be completed in a matter of seconds. 

There may not be much that shippers can do to improve gas prices or inflation, but with improved efficiency, it’s possible to significantly reduce the time it takes to plan and route shipments as well as the costs associated with moving them. 

Ready to take control of supply chain efficiency to save on fuel costs and other transportation expenses? Check out Shipwell’s new Load Optimization capabilities. Or to speak to an expert about how Shipwell can help you to uncover greater efficiency in your supply chain, schedule a demo today.