April 25, 2022
The Solution to Combat Industry-Wide Fuel Surcharges in 2022
This blog post was originally published by Deliverr, which is now Flexport. The content has been adjusted to fit the Flexport brand voice and tone, but all other information remains unchanged. With the merging of Deliverr’s services (DTC fulfillment, B2B distribution, and Last Mile delivery) into Flexport’s existing international freight and technology services, we’re now able to provide merchants with true end-to-end logistics solutions spanning from the factory floor to the customer’s door.
Gas prices are soaring across the U.S. While consumers are feeling the pain at the pump, many ecommerce merchants are also heavily impacted when shipping freight that exceeds the typical charge to cover fuel costs. With totals rising on invoices, your team needs to understand how carriers calculate fuel costs and implement surcharges in times of inflated fuel costs.
In this blog, we’ll outline how those calculations are made, the current surcharges from popular carriers, and how partnering with a 3PL can help lessen the monetary impact.
How Are Surcharges Calculated?
Each carrier has its own method for calculating fuel costs depending on market value. With the cost of fuel constantly fluctuating, it can be difficult to know if you’re getting the best price:
- FedEx and UPS change their fuel rate weekly based on the national average price per gallon with the change going into effect on Mondays.
- FedEx calculates its cost based on the average price of fuel from the previous week, while UPS takes the average from the two weeks prior.
- DHL changes its fuel rate monthly, taking into account the average from the previous two months.
Depending on the market value, these prices can be vastly different among carriers and typically only account for the fuel cost and do not include surcharges.
Surcharges are additional fees on top of the cost of fuel. Carriers calculate this charge through an index-based system. UPS, for example, calculates its surcharge percentages when prices are between certain thresholds. If the price of fuel is “at least” one amount, but “less than” another amount, the surcharge percentage is applied.
And if those excess charges aren’t enough, there are still additional surcharges for peak times, remote delivery, delivery with pickup, and other services. The prices can change without prior notice and often go unquestioned by merchants. It’s important to contact your carriers to understand their charges and get the most competitive price available.
Here are resources to check current carrier surcharges, which you can check each week for updates:
- Pitney Bowes
- EIA U.S. On-Highway Diesel Fuel Prices (used for US Ground FSC)
What Solutions Are Available To Help Combat These Increased Surcharges?
Large carriers increased base rates in recent years to cover costs, and fuel surcharges are only increasing their revenue. Even with the rising cost of fuel, you shouldn’t feel stuck and destined to pay outrageous surcharges. Let’s look at some solutions to combat these rising costs and keep your business running efficiently.
Diversify Your Carriers
Shopping around for the best rates or using multiple carriers can help alleviate some of the strain from hefty surcharges. DHL offers a flat rate for the month which might be more competitive than the changes occurring weekly from other providers. Spreading your shipments among multiple carriers can also help you avoid additional surcharges from large shipment volumes.
You may also consider intermodal options that previously had been overlooked. Using rail services might be an affordable option, especially for long-haul shipments. Rail is an efficient way to move goods and can reliably haul large loads with significantly lower fuel costs.
Consolidate Your Shipments
Analyzing your freight shipments might lead to opportunities to consolidate orders and avoid unused truck space. When possible, combine multiple LTL shipments into a single shipment through the carrier that offers the best rate. Also, look for ways to avoid empty backhauls to optimize your operation.
When partnering with a warehouse network, your products are easily shipped and stored strategically around the country without additional freight charges. Flexport’s vast fulfillment network via our Trucking service allows you to confidently transport inventory in a timely manner at an affordable cost.
Partner With a Third-Party Logistics Provider (3PL)
With fuel prices increasing and no immediate relief in sight, many merchants are turning to 3PLs to get the best rates for their shipping needs. Because of their relationship with carriers and the number of shipments made, 3PLs have an advantage when it comes to negotiating competitive rates.
Flexport offers transparent pricing so your team is never left guessing how much you’ll pay. We negotiate on your behalf to find the most competitive rates. By entrusting your shipping needs to our team, you no longer have to coordinate with multiple providers to decipher fuel surcharges. We take the onus to ensure you’re getting the best bang for your buck.
When working with multiple entities, there may be additional costs as you rely on one vendor to pick up your parcel, another to prep it, another for storage, etc. Partnering with a 3PL like Flexport ensures all your needs are met for an affordable rate. We pride ourselves on offering competitive pricing and will work with you to accommodate your specific needs.
We offer fulfillment and storage services to help your business optimize operations to save you valuable time and money. When partnering with us, you join a network of warehouses that place your inventory closer to your customers. While increases from carriers are inevitable due to fuel surcharges, your business can find other ways to cut costs to still come out ahead.
Try our free Cost Calculator to see how much you could save on fulfillment and storage costs.
As the industry faces an increase in fuel costs, merchants need to be proactive at finding shipping providers that offer the best rates. Being well-informed about the fees you’re being charged is imperative to avoid unnecessary losses. With shipping costs set to max out budgets, your team should focus on ways you can consolidate orders or partner with third parties to ease the burden of costly freight services.
Partnering with Flexport gives you access to competitive pricing without the hassle of negotiating with carriers. Along with affordability, we offer transparency so you can be confident that what you see is what you get. We can help your business overcome fuel surcharges so you can continue to thrive. In a market that is continually changing, Flexport offers peace of mind with expertise and optimized services to meet your needs. Chat with a fulfillment and logistics expert to learn more about how we can enhance your operations.
The contents of this blog are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. We do not guarantee, represent, or warrant the accuracy or reliability of any of the contents of this blog because they are based on Flexport’s current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This blog has been prepared to the best of Flexport’s knowledge and research; however, the information presented in this blog herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this blog.