Fuel Prices and Heavy Freight | What Shippers Need to Know
ByJenny Vander Zanden
March 22, 2018
Not all truckloads are created equal, and every load has a unique set of characteristics and considerations that impact fuel prices and efficiency.
One of the core concepts behind Breakthrough is that using actual fuel price data on specific lanes provides a much clearer picture than a national average. That’s why we help shippers manage the price they pay for the fuel that moves goods to market, bringing transparency and accuracy to fuel reimbursements.
Brett Wetzel, senior manager of Applied Knowledge at Breakthrough, has a simple explanation for why shippers who need to transport heavier freight should approach fuel management with a different perspective than others.
“It’s simple physics,” he says. “Heavier freight, or less aerodynamic freight, means lower fuel efficiency and more gallons that shippers have to pay for.”
Heavy freight takes many forms. Each heavy freight industry has specific considerations that shippers need to take into account.
“Heavy freight might mean shipping a lot of paper products and nearing the current 80,000-pound limit,” says Wetzel. “Or, it could relate to shippers moving large items, such as farm or construction equipment, on the back of a flatbed. There are also clients moving bulk liquids in tankers and hopper trailers full of grain.”
While each of these freight types is cosmetically different—comparing grain and heavy machinery for example—their heavy freight profiles all face similar challenges.
5 Fuel Management Challenges with Heavy Freight
1. Rising Fuel Prices and Higher Consumption
Topping the list is the challenge of rising fuel prices. While it’s an issue for any organization that moves goods to market, increasing diesel prices hit carriers at the pump, but financially burden shippers on the back end. This added cost is even more pronounced for shippers of oversized freight and heavy cargo.
As Wetzel already explained, shipping heavy freight typically means more fuel is consumed, which means a spike in prices will affect those shippers more than others. Similarly, the vehicles used to transport specialized goods are yet another factor.
“These are the types of equipment that use the most fuel,” says Wetzel. “Therefore, when diesel costs rise, they’re the most impacted by the price increase. If fuel isn’t being managed properly, costs can be unfairly distributed to the shipper or the carrier. This creates a situation where fuel reimbursement has a winner and a loser, instead of a transparent pass-through of cost.”
Shippers that need to transport cargo on an open flatbed trailer, rather than a typical enclosed dry van end up reimbursing carriers for a larger amount of fuel due to the effect of added air resistance.
“With open deck car carrier trailers, for example, wind hits the equipment and creates additional drag compared to the aerodynamics of an enclosed trailer, which leads to diminished fuel efficiency,” Wetzel explains.
He adds that in conjunction with aerodynamics, landscape along certain lanes is another factor that impacts fuel efficiency. More fuel will be used moving heavy freight up a steep grade in the mountains than travelling through plains states.
3. Specialized Carrier Networks
When specialized freight doesn’t fit conveniently in a traditional dry van trailer, you also need a different type of carrier.
“That means shippers of heavy freight have a smaller pool of carriers to work with,” says Wetzel. “Not every carrier provides flatbed transportation and even fewer are approved to handle bulk liquid, which may include a hazardous material designation. So, there are unique challenges, even outside of fuel.”
Fewer carriers with the ability to serve your network needs—with minimal dead head and finding natural turns in your network—can result in price premiums due to increased competition for space and drivers. Breakthrough has a Network Intelligence tool that utilizes a vast network of data and carrier information to help our clients identify and optimize the right carriers for their network to mitigate challenges associated with specialized freight.
4. Deadhead Miles
A challenge that’s somewhat unique to shippers of heavy or specialized freight is the issue of reimbursing carriers for fuel used to cover miles when the trailer is empty. Since less common equipment is often being used for transportation, it’s not always easy for carriers to drop something off in one city and then easily find their next pickup location nearby.
“Many times, shippers are not only paying for the miles traveled to transport goods, they’re paying for a higher number of empty or ‘deadhead’ miles,” Wetzel says. “It could be 100 percent of the distance, or a certain percentage of the fuel costs to get the truck to the next job.”
Wetzel describes how Breakthrough’s Fuel Recovery program can provide value to the shipper.
“Transparency and accuracy are important with deadhead miles,” he says. “When you stop to think about it, your fuel efficiency is going to be much better with an empty trailer than one that’s fully loaded.”
5. Outdated or Complex Rate Structures
Wetzel says Breakthrough is always helping shippers that are unable to identify the true cost of their transportation fuel because of antiquated fuel surcharge schedules.
Shippers of heavy freight may also encounter different structures for line-haul rates depending on the carriers with which they work. Some may have the same fuel surcharge for all types of freight, while others operate separate fuel programs.
“Sometimes we run into organizations using the same fuel program for lightweight goods as they are for heavy freight, and that’s not going to be as accurate as it could be,” he says.
Other times, fuel programs may account for different types of freight. But instead of a rate-per-mile program, some carriers have a fuel surcharge that is a based on a percentage of the line haul rate.
“Percentage-based fuel programs may make sense at the time they are established, but line haul rates can change drastically over time. Eventually, shippers could find themselves paying more for fuel even if the price at the pump remains consistent,” says Wetzel.
Wetzel explains that, in those cases, shippers are likely paying far more than the DOE Index or retail price for diesel fuel.
How a Customized Fuel Recovery Program Can Help
Heavy and specialized freight create unique considerations for a shipper. For some companies, managing these rarities requires specialized teams. In these cases, fuel could take a backseat to other priorities while a transportation team is preoccupied keeping freight moving and fleets active.
Yet, Wetzel says there’s a lot to be gained because fluctuations in diesel prices will have a greater impact on those types of movements.
“There’s a huge opportunity for shippers moving heavy freight to capitalize on an improved fuel management strategy,” he says.
Breakthrough uses its in-house experts, experienced client services team, and access to a wealth of transportation data to develop customized programs for each client. Calculating the nuances that contribute to the total cost buildup of diesel fuel has the potential to get complicated, but shippers can trust Breakthrough to create the right plan.
“The good news is, we can handle the complexity and work with our clients to bring as much of that into Breakthrough’s hands as they are comfortable with,” says Wetzel. “We have a lot of flexibility in what we can offer shippers without overcomplicating things.”
After launching a Fuel Recovery program, your dedicated Breakthrough® team of experts will continuously look for ways to bring improvements to your strategic roadmap on a daily and yearly basis. The return on investment for a fuel management strategy comes quickly thereafter.
In 2017, the typical first-year Breakthrough client saw a truckload fuel spend reduction of 23 percent, and the savings start on day one.
Read a case study about how a global healthcare company saved 34 percent on fuel in its first year with a Fuel Recovery program, or check out our infographic explaining how our market-based approach is superior to index-based fuel reimbursement programs.
You can also view our Client Success Stories page to see how some of the nation’s largest shippers work with Breakthrough.