Transportation Leadership Journal
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Shippers in Canada are accustomed to using the Freight Carriers Association’s (FCA) Fuel Index which publishes weekly fuel surcharge percentages. Shippers typically consider this surcharge in addition to their base fuel price as a mechanism to reimburse their carriers for fuel.
This manner of calculating fuel costs distorts the realities of each individual freight movement. Implementing Breakthrough Fuel Recovery enables Canadian shippers to uncover the true cost of fuel and allows for fair and accurate reimbursement to carriers.
The FCA Fuel Index publishes a weekly fuel surcharge percentage. In reality, the price of fuel fluctuates daily, meaning a weekly price update is an outdated and inaccurate input to fuel reimbursement calculations.
Fuel should be reimbursed as a pass-through expense, meaning the reimbursement amount matches what was incurred at the pump. The common fuel program used in Canada is a percentage of linehaul, though, which is not representative of the true cost of fuel on a movement.
In addition to common taxes expected at the pump, many Canadian provinces implemented a carbon tax which puts an additional tax on a litre of diesel that will rise each year. An index-based program that provides an average price point across provinces cannot account for this variance in taxes.
The commonly used FCA Fuel Index produces a weighted average of reported fuel prices in just two provinces. Using a price point that is not representative of where freight is actually traveling creates major distortion in fuel reimbursements between shippers and carriers.
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