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The U.S. Energy Information Administration (EIA) has begun releasing some data products but has stated they will not be able to release the national or regional on-highway diesel prices this week. These prices inform the DOE index. The EIA is working diligently to restore systems. Read the entire press release.

June 27, 2022 - Original Post

The U.S. Energy Information Administration (EIA) discovered a voltage irregularity on Friday, June 17, and the issue has not been resolved. The EIA has replaced equipment and is in the process of transferring data from backup systems to the new servers. They did not release a timeline of when they expect to backdate reports and fully resume operations. Read the entire press release.

For shippers and carriers who rely on the DOE index (DOE), it creates an interesting dynamic of how to calculate base rates and fuel surcharges. The DOE is one of the many metrics included in the Gasoline and Diesel Fuel Update calculated weekly. With fuel costs recently becoming the number one input cost of moving freight and the fluctuation in the market, the DOE not being published is a significant event in transportation network strategies. Shippers can either choose to wait until the report is backdated, use the most recent number published, or move to a market-based approach that does not use the DOE.

For a market-based approach, consider Breakthrough’s Fuel Recovery solution.

Breakthrough will continue to monitor the situation and provide updates upon release to this blog.

Shippers are experiencing upward fuel pressure across geographies and sectors, triggered by an increasingly volatile energy market. In April 2022, shippers paid 76% more in fuel prices than at the same point in 2021, with the diesel wholesale average jumping by $2.01. But despite this heightened pressure, many shippers still rely on fuel surcharge schedules developed around outdated base rates and the Department of Energy (DOE) index — creating operational inefficiencies, fuel overpayments, and major transparency hindrances.

Without a reimbursement program reflective of real-time market movements, shippers can’t identify the true costs of their fuel spend. This makes accurate fuel reimbursement between shippers and carriers impossible to achieve.

It’s time to re-examine your base rate and fuel program to ask whether it meets the needs of today’s evolving market.

The cost of using a base rate in 2022

Carriers originally implemented fuel surcharges as a protective mechanism against soaring fuel costs during the 1979 oil crisis. Over four decades later, the same base rate informs the majority of shippers’ fuel surcharge schedules despite being wildly out of touch with today’s market.

An outdated base rate bakes fuel prices into linehaul rates, preventing a true transparent pass-through line item accessorial. Namely, these factors result in shippers routinely overpaying for fuel when they can’t isolate fuel vs. linehaul rates. This lack of transparency makes it difficult to build trusted partnerships between shippers and carriers — and it makes accurate fuel reimbursement nearly impossible.

To create fair and equitable fuel reimbursement, shippers can introduce market-based fuel reimbursement programs. When shippers lean on reimbursement programs that more accurately reflect real-time market conditions, they ensure their reimbursement costs move with each cent of fuel cost fluctuations (even when prices go below typical base rate levels). Designing a fuel reimbursement program around current market trends also results in fewer gallons of diesel fuel used — ultimately lowering costs and increasing fuel efficiency metrics for shippers.

3 tips for transitioning to a market-based fuel reimbursement

A market-based fuel reimbursement program ensures shippers leverage reimbursement metrics that follow energy market trends. This critical connection offers shippers ongoing access to real-time diesel fuel forecasts, making it easier to apply market insights to their fuel management strategies.

As you move away from a base rate-dependent surcharge schedule and instead design a market-based fuel reimbursement strategy, here are three tips to keep in mind.

1. Design a thoughtful transition. Design a thoughtful, multi-phased approach with your carrier relationships in mind. This will help your team understand the value of eliminating base rates and increase stakeholder buy-in throughout the transition process. Leaning on an outside partner can boost education initiatives and facilitate a smooth transition to a market-based reimbursement model.

2. Prioritize transparency. As you transition from a base rate and DOE index-informed program to one reliant on market-based metrics, don’t underestimate the importance of transparency. Educate carriers and logistics partners on how you calculate fair fuel reimbursements and how operational practices will change. Sharing daily, granular insights with carriers for each of your individual freight movements will be critical in streamlining processes and maintaining connectivity in the fuel program.

3. Consider a zero-base rate strategy. Though it’s possible to use base rates in a market-based fuel reimbursement strategy, converting to a zero-base rate approach offers greater visibility into fuel prices and reimbursement metrics. By completely separating fuel costs from freight costs, a zero-base rate clarifies the true cost of moving goods to market — enabling fuel management processes that accurately capture fuel consumption across all freight movements in your network.

Need help tailoring your fuel reimbursement program to today’s market demands?

To learn more about transitioning to a market-based fuel reimbursement plan, consider Fuel Recovery — our transportation fuel management solution.

Analyzing your transportation network provides a natural foundation for your overall emissions reduction strategy. Because transportation networks generate data via suppliers, carriers, and strategic partners, the information you need to begin your transportation emissions analysis is more accessible than you may think. And since transportation produces more emissions than any other sector, reducing your scope 3 transportation emissions is a critical step toward achieving your organization's larger sustainability goals.

The biggest hurdles to measuring sustainability impact

As shippers aim to implement sustainability initiatives, many find that incorporating sustainability in company decision-making is a muscle they’re not used to flexing — and strengthening it takes time.

In particular, shippers often struggle to understand which operational decisions offer the most value to their overall sustainability impact. Business leaders may also feel unsure about how to consider sustainability in areas where cost savings and efficiency have historically been the most important priorities. Additionally, shippers may not know the nuanced differences between scope 1, 2, and 3 emissions sources — or how to use data to track the output of different sustainability and emissions reduction strategies.

Because sustainability decision-making is a new practice at many organizations, shippers may lack clarity about which team members are responsible for different aspects of sustainability operations — from gathering data and implementing measurement strategies to communicating with outside partners. This leads to sustainability KPIs fundamentally disconnected from the transportation teams responsible for upholding and reporting these metrics. Without granular KPIs, communications, and processes, it’s difficult to delineate tasks, ensure oversight and accountability, and reach sustainability milestones.

As the sustainability market matures, these challenges are exacerbated by constant changes in governmental emissions regulations, reporting requirements, and data and measurement methodologies. In particular, science-based targets and global reporting standards are growing increasingly stringent — creating challenges for shippers that lack a nimble approach to emissions measurement and data collection processes. If shippers don’t design their emissions reduction plans with flexibility as the cornerstone, they’ll struggle to adjust and optimize their strategies to meet evolving marketplace standards.

Transportation emissions: 3 steps to start measuring scope 3

While the challenges to measuring and reducing scope 3 emissions are complex, your transportation network provides an actionable and familiar starting point. As you design your analysis and reduction strategy for scope 3 transportation emissions, here are 3 steps to lay the groundwork.

1. Evaluate your existing data. The data you have in-house can help your team understand the kinds of information you need to design effective measurement methodologies and achieve long-term sustainability KPIs. Conduct a thorough intake of the data already at your fingertips to inform your data collection strategy. Additionally, create a taxonomy of data you lack in-house and find ways to obtain it.

2. Specify transportation KPIs. Getting granular with your transportation emissions initiatives is essential to changing day-to-day behaviors and ensuring sustainability is included in all operational decisions moving forward. Design manageable and specific KPIs to help your organization inform a realistic path for identifying potential reduction targets and set clear expectations about sustainability priorities. Granular KPIs will also lead to the development of broader reduction opportunities over time.

3. Leverage trusted partnerships. Because scope 3 emissions largely occur outside of your organization's infrastructure, much of your transportation network’s emissions data is likely owned by outside partners. Lean on strategic partnerships with your suppliers, carriers, and advisors to gather this data and inform your emissions reduction plan. There will likely be an adjustment period as you learn to manage multiple data systems, but don’t be deterred — data collection processes will improve as cross-organizational communication becomes more streamlined.

And to learn more about measuring sustainability impact and designing your scope 3 emissions reduction plan, schedule a demo of CleanMile — our transportation emissions management solution.

Breakthrough provides innovative transportation technology solutions and market insights to the world’s most reputable brands. With our cutting-edge Network Intelligence solution and FELIX platform, we create transportation strategies that improve transportation network efficiency, reduce cost, and establish stable networks. Contact us today for more information.