Fuel Surcharge
In the current economic climate we have witnessed volatile changes to fuel prices. To protect our customers from constant fluctuations in their transport rates, we are injecting some stability into our fuel surcharge procedure.
From 22nd June 2009 we started adjusting our fuel surcharge every month based on the average of the previous month's costs.
The majority of rate schedules are set on a base cost of 0.78 pence per litre + VAT. Major account customers however have individually negotiated surcharges which may differ from those illustrated below.
| Pence (per litre) | 78 | 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fuel surcharge (%) | 0.0 | 0.5 | 1.0 | 1.5 | 2.0 | 2.5 | 3.0 | 3.5 | 4.0 | 4.5 | 5.0 | 5.5 | 6.0 | 6.5 | 7.0 | 7.5 | 8.0 | 8.5 | 9.0 | 9.5 | 10.0 | 10.5 | 11.0 | 11.25 | 11.5 | 11.75 | 12.0 | 12.25 | 12.5 | 12.75 | 13.0 | 13.25 | 13.5 |
Fuel costs reached nearly £1.122 pence per litre + VAT in July 2008, but have dropped significantly in recent months.
We have traditionally worked on the basis that every one pence per litre difference in fuel impacts on overall costs by .5%. However, if fuel costs escalate to over 100 ppl there is a slight proportionate reduction in how these increases affect operating costs. Therefore, where fuel costs are above a bulk buying cost of 100 ppl, our corresponding fuel surcharge is adjusted to .25%.
Why do we have a fuel surcharge?
No-one can have failed to notice that every time they fill their car up, it costs more and more. As consumers we tend to mentally offset the higher prices against the convenience of being able to transport ourselves when and where we wish. Only every now and then, are fuel prices placed at the forefront of the public's mind when dramatic newspaper headlines or pictures of strike-bound holiday-makers focus attention on this issue.
Direct cost implications
But for anyone who distributes goods on a daily basis, fuel prices have direct cost implications on the transport movement.
Fuel now represents up to 44% (May 2009) of Shipley Transport Services operating costs - we use over 35,000 litres per week and the increases in fuel costs between the same period in 2007 means that we are now paying an additional £ 2380 per day. (50% of this is in tax).
Manufacturers quote fixed prices
Manufacturers frequently quote their customers fixed prices and we understand that constant increases due to fuel surcharges do erode margins. However road transport is no longer the cheap element in the supply chain.
Not only does fuel cost more, we actually pay for diesel on 20 day terms, but receive settlement of our invoices on 30 day terms (at best), effectively acting as the Government's Tax Collectors at our own expense.
Should STS absorb the cost?
You may think that Shipley Transport Services, as a company, should absorb all these increased costs. This however would mean we would have to reduce the amount we spend on maintenance, insurance and health & safety and halt any investment in training, IT resources, vehicles or other equipment. We would not be able to offer the high level of service that our customers have come to expect from us. Within a very short period, we would find ourselves in a downward spiral from which it would be very difficult to recover.
The reality
The reality is that we have absorbed as much as we possibly can. We have reviewed procedures, applied innovative systems and we strongly believe that we are a lean, efficient business. We think that all hauliers who will not compromise the integrity of their service, and who intend to still be in business next year and the years to come, must impose fuel surcharges or recover their increased costs accordingly.
What we can do is ensure that our customers understand the implications for future haulage costs, so that they can budget realistic figures and additionally that they, in turn, can educate their customers about this topic. We hope that the information on fuel here helps you.