and Airborne Express are watching carefully as the cost of diesel
(both for their trucks and for their jets) hits a 51-week high.
To avoid making frequent changes to shipping charges, these major
small package carriers find the fuel-surcharge approach preferable.
and shippers have found that implementing a fuel surcharge is
a more suitable approach than having to modify their shipping
charges with frequent changes in fuel prices," said Satish
Jindel, a transportation consultant at SJ Consulting Group, Pittsburgh,
in an interview with the DM (Direct Marketers) News. "This
approach helps with auditing charges and eliminates extra IT work
involved with changing rates in the manifest systems."
United Parcel Service Inc. and FedEx Corp. announced a plan to
raise their fuel surcharges Oct. 7 as a result of an August increase
in the national average of highway diesel fuel prices reported
by the U.S. Department of Energy. Customers probably won't see
these increases retreat for a while. On-highway diesel prices
hit a 51-week high according to average prices released Sept.
16 by the Energy Information Administration.
on-highway diesel was reported at a national average price of
$1.414 per gallon. The last time the national average hovered
around the $1.40 per gallon mark was the first week in October
2001. The national average has risen more than 10 cents per gallon
in five weeks, according to the weekly EIA reports.
FedEx and Atlanta's UPS adopted index-based fuel surcharge calculation
methods last year based on fuel prices published monthly by the
Energy Department. Changes to the surcharge take effect the first
Monday of the month.
are not happy about the change, but [the way it is calculated]
is very fair, and it's the lowest in the industry," said
Steve Holmes, a UPS spokesman, told the DM News. "We have
nothing to be ashamed of, and while we know that our customers
would not like to have an increase at all, this system works well
for both us and for our customers. It gives our customers some
level of predictability, and they can realize the benefits when
the fuel prices go down."
Express does not base its fuel surcharges on the Energy Department,
but tracks the rise and fall of fuel costs and makes regular adjustments.
On Oct. 7, it will raise its surcharge from 2.9 percent to 3.5
percent for all air express shipments moving through its transportation
cost of fuel, especially jet fuel, has increased significantly
in recent months," Carl Donaway, chairman/CEO, Airborne Inc.
told the DMNews. "Our company uses millions of gallons of
jet fuel each year; the higher price causes a considerable increase
in our operating expenses that cannot be fully absorbed or mitigated
by our ongoing cost-reduction efforts. We will continue to monitor
fuel trends carefully and make additional changes to the fuel
surcharge as warranted."