Fuel Surcharges

An Expert's View about Logistics in the United States

Posted on: 23 May 2012

Are fuel surcharges really for fuel?

Viewpoint: Changes Are Coming In the Transportation Industry “America's needs move by truck”...it is a true statement always has been and always will be. The transportation industry is faced with tremendous "issues" and "challenges" that are mounting up by the week. Fuel, capacity, equipment, insurance, regulations, contracts, unions, economy downturn, personnel, competition, technology etc. etc. are just to name a few issues that the industry is facing. When fuel reached $4.00 per gallon last summer of 2008 each increment of .05 increases put out approx. 1,000 pieces of equipment per month nation wide. Face it, there are still too many carriers and carrier competition out in the industry, coupled with lack of tonnage tender carriers will be forced in to pricing themselves out of business. Right now many service providers who either have experienced this situation many years back or just want to remain in the fight when the economy turns are walking away from non- profitable accounts and “retiring” equipment to save on insurance/usage/wage costs. LTL revenue for the larger national and multi-regional carriers for the second quarter of 2009 is down a whopping 33% over the same time period in 2008. The pricing wars are incredible....I can't remember seeing this much pricing activity and "low balling" and “back selling” the competition in the last 20 years. Carriers are targeting other carriers in order to gain “market share” even though their operating revenue on shipments skyrockets to over 150%......it’s just plain crazy ! The inter-modal industry has capacity issues also, there are backhaul challenges, imbalance in equipment plus the LTL carrier union dictates as to what percentage of freight may travel by rail. In the LTL market there will be absorptions and mergers taking place and the strong possibility of several larger service provider companies downsizing dramatically or closing up shop during the first quarter of 2010. The pricing wars will end abruptly, when or who knows but rest assured when they end shippers will be faced with major issues one being potential double digit price increases, availability of equipment and choices in the industry. The transportation industry is going to change big time in the not to distant future…be ready for the shock of a lifetime from both a pricing and availability perspective….the only one that will be paying is the customer….shippers have had their free ride it will be time to pay up ! David DiSanto, Principal DiSanto & Associates Consulting in Supply Chain Analysis & Optimization T. 781-272-0297 F. 781-272-0490 www.disantoandassociates.com
Posted: 23 May 2012

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