In 2018, Shearer’s Foods adopted a strategy to cut transportation costs and position the organization to make ongoing efficiency improvements to its supply chain.
By implementing Breakthrough’s Fuel Recovery program, Shearer’s saw a 19 percent gross cost reduction in their fuel spend in the first year of their program. This resulted in $913,073.61 in fuel savings. Additionally, their ROI was realized in less than 12 weeks. This cost-avoidance was made possible by ditching their prior US Department of Energy (DOE) index-based fuel surcharge program.
Read more about the distortions associated with this outdated pricing mechanism here.
Making Million Dollar Savings a Reality
Shearer’s and Breakthrough first analyzed Shearer’s existing network parameters, determined the scope of implementation, and choose optimal timing based on their strategic goals.
Once a plan was in place, they focused on managing carrier relationships through the transition.
A primary objective throughout the Fuel Recovery implementation process was ensuring that a reduction in fuel spend would not translate to a concurrent increase in carrier linehaul rates.
Prior to go-live, 70 percent of Shearer’s loads were hauled by carriers already using Fuel Recovery with other Breakthrough clients. To ensure carrier alignment, Breakthrough team members educated the remaining 30 percent of Shearer’s carrier base about the Fuel Recovery system, calculation, and data exchange processes.
Once all parties had a better understanding of the program, Shearer’s and their carriers could be confident that they were being made whole on fuel costs. As a result, linehaul rates remained unchanged.
“I was expecting higher rates when transitioning to Fuel Recovery, but that didn’t happen,” Marcum says. “It was great to see that our carriers were actually very honest and straightforward with where we wanted to go because they were experiencing the same prices and market changes.”
Read more about the implementation process here.
Every Penny Counts Over Thousands of Shipments
With over 33,000 shipments executed per year, Shearer’s Foods Director of Transportation Nicole Marcum says, “We knew we were leaving a lot of money on the table with our previous program. The DOE Index is extremely inflated not only from a retail perspective but with a lag in time when the market drops.”
That money being left on the table totaled nearly $1 million in distorted fuel costs. This savings number is specific to the actual freight moving in Shearer’s network but is not unfamiliar to dozens of the world’s leading shippers who made the switch (see below).
As evidenced in the chart below, shippers with transportation networks of all sizes typically experience significant savings on Fuel Recovery compared to the index-based alternative.
To understand how savings of this magnitude add up, it is helpful to look at Fuel Recovery’s impact on a single shipment from one of Shearer’s top lanes.
Traveling from Perham, Minnesota to Phoenix, Arizona, Fuel Recovery resulted in a cost reduction of $77.31 based on pricing information on March 19th, 2018—the first day on the program. On this lane, fuel costs decreased by almost 18 percent. When considered in the scheme of a full network, the savings stand to be significant.
“With market-based fuel reimbursements you get an immediate capture as the fuel market changes, and your team can react better to opportunities or risks.”
Their previous process cost them in other ways as well. According to the U.S. Environmental Protection Agency (EPA)’s SmartWay program results, for every ten percent decrease in truck weight, fuel consumption is reduced between 5 and 10 percent. As snack distributors, the low weight of their shipments meant Shearer’s carriers achieved a higher MPG than is typical of similar moves with heavier cargo—ultimately consuming less fuel.
Ongoing Strategic Alignment
“Breakthrough has become a strategic partner. Not only from the work they have done in the past, but also the ideas they bring for the future. They have a very strategic plan with Shearer’s to move us beyond the year-one new normal,” says Marcum.
In addition to accurate and transparent fuel reimbursements, Breakthrough’s fuel forecasting capabilities have enabled Shearer’s to predict how market changes will affect their network in the future, providing an indicator for how the strategic choices made now may affect future budgeting practices.
“Breakthrough is always asking, ‘How can we go above and beyond to get you more savings than you anticipated and continue to improve year after year?’” Marcum says.
With over one billion gallons managed in North America, Shearer’s is among some of the industry’s leading shippers in transportation innovation.
Ready to ditch the DOE and start saving? Contact us to learn how you can bring accuracy and transparency to your transportation strategies.