Fuel Surcharge Explained
Why we have fuel surcharge and the current cost implications.
In the current economic climate we have witnessed volatile changes to fuel prices. To protect our customers from constant fluctuations in their transport rates we are injecting some stability into our fuel surcharge procedure. From 22nd June 2009 we started adjusting our fuel surcharge every month based on the average of the previous month's costs. The majority of rate schedules are set on a base cost of 0.78 pence per litre + VAT. Major account customers however have individually negotiated surcharges which may differ from those illustrated below.
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Why do we have a fuel surcharge?
No one can have failed to notice that every time they fill their car up as it costs more and more. As consumers we tend to mentally offset the higher prices against the convenience of being able to transport ourselves when and where we wish. Only every now and then are fuel prices placed at the forefront of the public’s mind when dramatic newspaper headlines or pictures of strike bound holiday makers focus attention on this issue.
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Direct cost implications
For anyone who distributes goods on a daily basis fuel prices have a direct cost implication on the transport movement. Fuel now represents up to 22% (April 2020) of Shipley Transport Services operating costs – we use over 45,000 litres per week.
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Manufacturers quote fixed prices
Manufacturers frequently quote their customers fixed prices and we understand that constant increases due to fuel surcharges do erode margins. However road transport is no longer the cheap element in the supply chain. Not only does fuel cost more we actually pay for diesel on 30 day rolling terms but we receive settlement of our invoices on 30 days end of month terms (at best) effectively acting as the Government’s Tax Collectors at our own expense.
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Should STS absorb the cost?
You may think that Shipley Transport Services as a company should absorb all these increased costs. This however would mean we would have to reduce the amount we spend on maintenance, insurance and health & safety and halt any investment in training, IT resources, vehicles or other equipment. We would not be able to offer the high level of service that our customers have come to expect from us. Within a very short period we would find ourselves in a downward spiral from which it would be very difficult to recover.
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The reality
The reality is that we have absorbed as much as we possibly can. We have reviewed procedures, applied innovative systems and we strongly believe that we are a lean and efficient business. We think that all hauliers who will not compromise the integrity of their service and who intend to still be in business next year and the years to come must impose fuel surcharges or recover their increased costs accordingly. What we can do is ensure that our customers understand the implications for future haulage costs so that they can budget realistic figures and additionally that they in turn can educate their customers about this topic.
We hope that the information on fuel here helps you.
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