Make Connections

Network, Get Answers, Find Members in Your Area, and More!

Forums » Strategies & Tactics for Getting Efficient

Handling Carrier Fuel Surcharges...

    • 270 posts
    July 15, 2008 8:03 AM EDT

    So far this year carrier fuel surcharges have been fluctuating a lot.  They have been for the most part going up.  Below is a list of the increase for the last 7 months:

     

    Month                 Ground %          Air%

    Jan ’08              6.25%                 19.50%

    Feb ‘08              6.25%                 18.50%

    Mar ‘08              6.00%                 18.50%

    Apr ‘08               6.25%                20.00%

    May ‘08              7.75%                 25.00%

    Jun ‘08               8.50%                 28.00%

    Jul ‘08                9.50%                 32.50%

     

    I was curious, since these increases are much larger than any normal carrier rate increase from year to year that I can remember, how are you dealing with these rapidly increasing fuel surcharges?  Are they effecting your sales?

    ---
    Bert at Harvey Software, Inc.
    Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

    Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

    • 270 posts
    July 15, 2008 12:23 PM EDT

    Janie, glad to hear you are doing well and thank you for you input! 

    I don’t know if you have noticed but you can now receive new discounts by printing your own USPS Internet postage.  These discounts are not available at the Post Office as you must use an Internet postage service to receive them.  You can also use Delivery Confirmation free when sending Priority Mail when using Internet postage.  You are right.  Many of our customers are taking advantage of these options along with shopping around for the best price.

    As for the subject of this post, the concern I have is a few retailers have told us they are eating the cost increases in the short term.  They say they are hoping fuel surcharges will go back down soon and they are afraid to increase their shipping charges as it would scare off customers at checkout time.

    On the other hand, some others have told me that they have signed long term contracts with carriers to commit to monthly volumes to receive discounts and free software they were given.  Now they are regretting this decision.  They said doing so forced them to use that carrier when their product sales were down while at the same time fuel surcharges pushed their shipping costs higher than before their discount.  They wished they could price shop like you have done but they had no choice but to stay the course. 

    I found these statements troubling and I was curious what others are dealing with these issues as our economy changes.  I think now is the time to be creative and I am looking at how others are dealing with this issues.

    Thanks again for your reply.

    Bert

     

    bert2008-7-15 17:26:5

    ---
    Bert at Harvey Software, Inc.
    Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

    Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

    • 270 posts
    July 28, 2008 4:06 AM EDT

    Nate,

     

    Sounds like you have a very good service for the right type and volume of customer.  We have supplied our shipping software to several companies like yours.   I will also say I have seen major savings passed on to companies by businesses like ours when the situation is right.  For this reason people should pay attention to companies like yours when the time is right in their business cycle.

     

    From my viewpoint, I see carrier fuel surcharges a little different than in your points.  For example, I see fuel surcharges fluctuating up and down.  They are not solely a way for carriers to take money from businesses, but more a way that the carriers can afford to offer their services in trying economic times without having to change their rate tables constantly.  Recently, you are right.  The surcharges are going up and up, but so have oil prices.  I think oil prices have gone up faster than any US or global company ever expected.  Eventually, parcel carriers will incorporate their operating costs directly into their standard rates during their annual price increase and lower the fuel surcharges.  Or even better, the fuel surcharges go down due to decreased oil costs or increased efficiencies in their delivery system.  All businesses do this over the long haul in a free market system.  As long as the economy changes, nearly all services, including yours, will go up in price.  Just a fact of life we all have to deal with as entrepreneurs.  This was the reason for my posting of this topic - I wanted to see how others are dealing with these current increases.

     

    I agree that the more you can move in bulk with delivery from local centers, the more you can save.  This can also be seen in services where carriers incorporate USPS for final delivery or in carrier services like consolidated clearance for international shipments.  In all of these cases the key is in what you have to move and the best logistics channel to move your goods to market with at the least amount of cost.  All this must be done fulfilling the end customer’s expectations for time of delivery and condition of the end product at the time of delivery.  I really feel that the time has ended that freight charges can just be passed to the consumer without any concern.

     

    Many of the companies here at Startup Nation do not ship enough products in large volumes to a given geographical location to be able to take advantage of bulk consolidators and forwarder services.  Many send single products one at a time all over the globe and just need the cheapest and best way to get this done.  Fuel surcharges are a serious thing to deal with for these companies.  I will admit, not all SuN members are smaller volume or non-regional shippers.  To my joy I have seen some here that started out small and are growing very rapidly.  That is what is great about this group and I think many of those could use a service like yours.

     

    The main point you have made that I think is very important is that companies must always be looking for ways to deliver their goods with maximum customer satisfaction, but at the least possible cost.  Even for those that think they can just pass the charges along at checkout time.

     

    Bert

     

    ---
    Bert at Harvey Software, Inc.
    Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

    Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

    • 270 posts
    July 28, 2008 9:08 AM EDT

    I guess it is time to add August to my totals on this post...

     

    Month                 Ground %          Air%

    Aug ‘08                  10.25%             34.50%

     

    How are others dealing with these costs?

     

    Bert

    ---
    Bert at Harvey Software, Inc.
    Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

    Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

    • 9 posts
    July 24, 2008 1:34 PM EDT
    Hello Janie/Bert,

    Couple things.
    • Discounts typically don`t apply to surcharges like residential delivery and fuel.
    • Many carriers move the price increases into the surcharges
    • The rates are going up and they typically don`t go down. Every year the main carriers jack up the rates and increase the surcharges.
    • Wouldn`t hold out hope of them coming back down.  Once they get used to the revenue its hard to give up.
    The way fortune 500 companies deal with this is they locate inventory closer to their end buyers.  They use multiple warehouses to store inventory and ship from.  Example, if you have 70% orders in the US, 10% in Canada and 20% in UK...that is how you should split your inventory.  Move some to Canada and the UK.

    Why?

    Because moving inventory in bulk is more efficient.  Freight is cheaper than parcel. You cross borders in one shipment rather than individual.  That means you clear customs once, your VAT/GST tax base is adjusted and your inventory is now "local" in other countries.  Also, once your inventory is spread out your delivery times to buyers will be cut. 

    We have a calculator that shows how this works in the US and Canada that I can`t paste in here.  We don`t have our UK European warehouse added to it yet, but you`ll get the picture.
    http://www.shipwire.com/help/c/how-it-works/storing-goods/

    I wrote a long blog article on the difference between a discount and cutting your shipping costs by acting like a fortune 500 company.  It is too long to paste in here.  I`ll warn you it is slanted to talk about Shipwire; but, the examples hopefully make sense.
    http://www.shipwire.com/help/how-to-win-at-the-shipping-game/#more-375

    Janie, I`m not sure if this helps you with your product as I`m not sure how "storable" it is; but, it is one way to reduce shipping costs.

    Nate
    w/ Shipwire

    ---
    ecommerce order fulfillment service for growing businesses.
    Shopping Carts with Order fulfillmentfrom Shipwire.
    FREE TRIAL
    AFFILIATES WANTED

    • 9 posts
    July 28, 2008 7:44 AM EDT
    Bert,

    Great thoughts.

    Consolidated Shipping can really be a saver for some merchants especially if they can`t geographically locate inventory globally. 

    I really agree with you that the time is ending when shipping costs are just passed on to the customer without consideration.  Buyers are factoring in shipping costs in their buying decisions and merchants must look at the entire item + purchase (+ International Tax + customs when international) when looking at whether there products are competitively priced.

    Just yesterday I price shopped an item online and chose to buy from a  merchant with a little higher item price because that merchant had more reasonable shipping and handling prices. 

    Today merchants are struggling to find ways to bundle shipping in with purchases ("Free Shipping").  Its often easier for merchants with larger ticket items to move the cost of shipping into the product.  However, for international shipments, I think (my own opinion) they really need inventory in country to cost effectively offer Free Shipping. 

    Thanks for the conversation Bert!

    Nate

    ---
    ecommerce order fulfillment service for growing businesses.
    Shopping Carts with Order fulfillmentfrom Shipwire.
    FREE TRIAL
    AFFILIATES WANTED