The Fuel Surcharge is NOT the enemy…

Fuel. That wonderful stuff that allows us to run engines. It is incredible to think of what a world without any sort of fuel would look like; we as humans rely so heavily on fuel for our everyday life. Industries rely heavily on fuel and the relevant cost of fuel; we feel this every day in trucking. Being relatively new to the trucking side of the transportation industry, I have little knowledge of the origin of fuel surcharges, but I can understand the logic that led companies to put them in place.

Over the course of the last year, like most people, I have noted the price per litre at my local 7-11 when I fill up my little Civic to get to work. I have seen gasoline prices as high as $1.30 per litre and as low as $0.79 per litre. I recognize diesel prices differ from that of gasoline; however, I feel that the point remains: fuel prices fluctuate. A fuel surcharge in essence allows the carrier to be compensated when fuel prices increase, and then in turn allows the carrier to pass savings on to the customer when prices decline. Like so many systems, this is a great idea… in theory…

The problem with fuel surcharge really is not the surcharge or the concept of the fuel surcharge in itself, but rather the lack of accountability so inherent with fuel surcharges. Most carriers maintain their own fuel surcharges and update them as they see fit. Many do not post their fuel surcharge, but rather show it to you on your quote or your bill. Some even leave it out and let you add your pre negotiated surcharge to the rates yourself. How do you know if your fuel surcharge is competitive? One carrier’s rates may be higher than another carrier’s rates, but what if their fuel is out by 10%? The lack of accountability with fuel surcharges makes pricing in the transportation industry just that much more frustrating and yet intriguing.

Ultimately, shippers, receivers, and carriers can work together to ensure that there is both integrity and accountability in how the fuel surcharge is used so that the benefits are evident to both sides. Common ways to create accountability with fuel surcharges include using a suggested fuel surcharge posted by a third party such as the FCA, or NTS fuel surcharges. The only struggle with these surcharges is that they are trying to mitigate for all of the fluctuation in fuel prices across the whole country. This may be sufficient for national carriers, but the challenge comes for smaller, regional carriers that are heavily influenced by smaller provincial shifts in pricing. Encouraging local transport associations, such as the AMTA in Alberta, to post a recommended fuel surcharge may be a viable solution. What are your thoughts?

The Easiest Step Towards Safer Roads

The roadways are many different things to many different people; for some it is a way to explore the world, others see it as a method of visiting family or friends, for others it is a way to escape, yet others use our roads simply to commute back and forth as they grind through life. For companies, our roadways are the arteries that keep products flowing between plants, manufacturers, wholesalers, distributors, retailers, jobsites – an endless list really.

What is interesting to me, as someone who works in road transportation daily, is that many people fail to recognize how vulnerable they are every single time they get behind the wheel. Whether it is an aged driver whose perception may be slowed only slightly less than their processing and reaction time, a youthful driver oblivious to the power they are now licensed to drive and all of the inherent risks involved, or the family van – full of distractions long before texting was on the radar; there are a number of challenges on the roads that make it a near miracle every day that you get home safe.

As governments try to regulate common sense in an effort to improve road safety, I am continually frustrated by the seeming lack of courage to do the right thing to really improve road safety. The transportation industry has been asking for it for a long time, and there is a move in Alberta and across Canada to lobby government to make meaningful improvements in road safety. An easy fix really, we have asked the government to simply required commercial drivers to receive training and certification in order to be legally allowed to operate as a commercial driver.

I understand that businesses rarely ask for more regulation, but in this case it makes sense. While the rest of us may put miles on our vehicles, we still spend many hours daily otherwise occupied in our careers. For professional drivers, their day IS driving. Their exposure to the risks I mentioned above are significantly higher than for the rest of us. When they are sick, tired, mentally stressed, or whatever else, they still drive. Through all types of weather, surrounded by all skill levels of drivers (with some it should not be called skill), driving on both familiar roads and areas they have never seen before, all with some sort of pressure to perform their job in a safe, professional and timely manner, these professionals experience pressures of driving beyond what 90% of us ever will. Yet, the government does not seem to want to agree that they (professional drivers) should be required to have any special training or certification.

I hope you understand that the trucking industry is asking for this regulation. I have spent hours upon hours in committee meetings and industry consultation hearing how important this is to improve road safety for both professional drivers and the motoring public. What we need now is for politicians across this country to get off their hands and make some real strides in the right direction. As roadways get more and more congested, and our cities get larger and larger, we need to begin to recognize that safety is not going to happen by itself. We need the people who are on the roads the most to be properly trained and certified to ensure safer roads for all users.

The Value Of Guarantees

What is the value of a guarantee when there are 15 pages of conditions and exceptions?

Do you remember ‘back in the day’ when a guarantee was a guarantee? Do remember when pop was a nickel and a satisfaction guarantee meant you would get your money back if you weren’t satisfied? Then came the day when that same satisfaction guarantee meant that if you weren’t satisfied, you could be guaranteed that you would be completely frustrated by how the company did nothing to help.

The innovators saw the issue and went all out. They introduced us to the 100% Satisfaction Guarantee. I guess the theory was that if you were 90% satisfied before, they could live with that 10%… not any longer! Phew! What a relief! So now they tell us that their guarantee covers us any time we are not 100% satisfied… I want you to know that is pretty much false…. I always strive to be a little dissatisfied, simply to help improve the experience, but being able to point out how things could be better apparently doesn’t mean you were not 100% satisfied… If you are not lost yet, hang in there, I am sure you will be soon enough!

So then I ask them what I get if I am not 100% Satisfied. What does your guarantee give me? Most of the time – nothing. It is almost as though we are right back to being guaranteed that we will not be satisfied anytime that we are not 100% satisfied… I told you it wouldn’t get any easier…

The real go-getters now issue a ‘Money-Back’ Guarantee. Which, I have found out, does not guarantee that they will give you your money back. In fact, they tell me there has to be an issue first… so much for getting my stuff for free… So I now understand that if I am not completely satisfied, these folks will give me my money back. YAY! But wait. There are 8,397 double sided pages in size 8 font of terms and conditions. Please complete our 13 page form, outlining each of the conditions that you have adhered to, the exact reason why you are not satisfied, and submit the form within the allotted 12 seconds or else the guarantee is not valid.

I want a company that will clearly identify what they are guaranteeing. I want a company that will put some skin in the game to stand behind what they say. I want a company that will do away with all of the terms and conditions that make the so-called guarantee worthless. Show me the company that will give a guarantee and stand behind it without making me feel like I am the problem… and I will be your customer for life!

Why is there still a fuel surcharge?

Recently a couple of shippers have contacted us concerned that, even with fuel prices below $1.00/litre, they were still being subject to a Fuel Surcharge. In conversation with other carriers, I recognize that more and more shippers are questioning this same thing. I wanted to take the time to discuss a few points on this issue and explain why a shipper SHOULD WANT to pay fuel surcharges, but should maybe begin to focus on accountability in how it is calculated vs. just being concerns that it exists at all.

The fuel surcharge system came into effect when fuel was at $0.39 per litre simply as a means of mitigating the fluctuating costs of fuel.  It was the early 1990’s when fuel surcharges became widely used and it was primarily due to the price volatility that resulted from the Gulf War. Because of this, shippers will likely continue to see fuel surcharges applied until the price of fuel drops below $0.39. For a long time, I have lobbied the industry to increase the base price of the fuel surcharge formula on the basis that the price of fuel will likely never drop down that low again. However the push-back has been that it is very difficult to know what the base should raise to, and to know exactly how low the price of fuel might go in the future.

A mindset change and shift in our paradigm might be helpful to fully appreciate how beneficial the fuel surcharge is to both shipper and carrier. Fuel Surcharges should not be considered as an ‘addition’ to the rate, but rather as a ‘floating’ portion of the rate. The reality is that if we no longer had a fuel surcharge at $1.00, the customer would no longer receive price relief when the price of fuel continues to drop. As long as there is a fuel surcharge, the customer will continue to experience price reductions that correlate to the price of fuel. If the fuel surcharge is not in place, the shipper loses that benefit.

The real issue is one of accountability. How can a shipper be certain that they are being charged fairly?

Beyond simply trusting their carrier based on their established track record, I would make two suggestions:

1. Establish rates between shipper and carrier that are based on the FCA publicly posted Fuel Surcharge.

  • The FCA is based in Ontario and currently do not offer a Western Canada FSC. This means that the shipper will likely have higher rates because the carrier will need to protect themselves from the variance between eastern and western Canada fuel prices, which can be significant.
  • These FSC rates can be found at: http://www.ntscanada.com/CFS.asp

2. Establish rates and a fuel surcharge formula based on average fuel prices in Alberta as posted by the Government of Canada

  • This is a transparent system because the fuel pricing is based on averages and posted by the Government of Canada
  • The data is historical, so it is not based on the actual price of fuel at the time freight moved, however it is close.
  • This information can be found at: http://www2.nrcan.gc.ca/eneene/sources/pripri/prices_bycity_e.cfm?PriceYear=0&ProductID=5&LocationID=10&dummy=#PriceGraph
  • This information can be automatically sent to both shipper and carrier via RSS feed link on the page so everybody is on the same page
  • The carrier will apply the agreed FSC formula, and the shipper can double check it if there is a concern.

Why Your Phone System Only Makes Sense for You

I am amazed at how many of the items we humans employ to make our lives more efficient and easier actually do the opposite. Our society is full of examples. All of our processing power should save us more time and make us more productive; yet, we waste more time than ever on our devices and struggle to find time for the people we love and the things we enjoy. There are constant technological distractions throughout our days, and I marveled at how often my computer likes to freeze solid to really give my productivity a kick. One example that gets on my nerves quite often are the automated phone systems that businesses utilize.

This is fresh in my mind as I literally just got off of the phone. I was trying to contact a local organization to find out if they have a certain product in stock at one of their locations here in Edmonton, Alberta. I got the automated answering service, listened to the menu options, pressed the appropriate numbers, and found that wonderful hold music. I waited for several minutes, the phone would ring and then go straight to hold – no one ever answered or asked me to hold. After some time, the automated service simply said “goodbye” and it hung up on me. At this point, I did something rare: I tried to call the same organization again (a different location however…) and was greeted with the same automated service. Long story short, I ended up hanging up before they kicked me off their automated merry go round for a second time.
Though your automated phone answering service seems to make sense for you, it really may be a greater deterrent to your business than a benefit. You may lose more money in the long run if individuals simply choose to deal with different vendors because of their painful experiences in trying to reach someone who can help them accomplish their goals. It is common to hear about the importance of a first impression in our personal lives, and I tend to think the same goes for your business. In many cases, how phone calls are answered and directed plays a large role in determining how your customers and potential customers view your organization. It may just pay in the long run to have a human answering and directing calls.

Do Freight Companies EVER Pay Claims? Part 2

WARNING: Do not use to dry pets! (Microwave) – Dang, you mean I have to use a towel?

WARNING: Do not hold rotating end! (Chainsaw) – But I was just trying to put more pressure on it.

WARNING: Do not iron clothes while wearing! (Clothes Iron) – But now I can’t see where the wrinkles are!

Sometimes I feel like the warning labels on many products are ridiculous or even stupid. However, the manufacturers are aware that if they do not clearly make you aware of the hazards, they can be held liable for an injury that really was not their (or their products) “fault”. They put the warning labels on to protect themselves from frivolous lawsuits. Understanding this position, in regards to freight companies, helps me navigate through the loop holes they may throw my way. (Believe it or not, some people knowingly try to file claims that are not legit. Shocking, right?) Because these ‘upstanding citizens’ try take advantage of the claim process, regulations were put in place to protect the freight companies. Unfortunately, sometimes the pendulum swings too far and they end up declining everything based on a ‘technicality’. My goal when filing a claim is always to prove that my freight claim is legitimate and to remove any doubt on whether I should be reimbursed. Here are a few more things I do to ensure my claim gets paid.

Marking damages at the time of delivery. I have learned “Subject to Inspection” just doesn’t cut it. Many freight companies don’t believe the damage was caused by them unless some indication of the damage is noted at the time of delivery. The key is to clearly indicate the state of your shipment when you sign for it. This does not mean you have to open every box and inspect each item at the time of delivery. But if a box is crushed or torn, or the shipment is in rough shape in any way, mark your delivery receipt accordingly. You can inspect for damages later and follow up with the carrier if you do discover something is damaged. “Box crushed”, “carton torn”, “wet”, “punctured”, etc. are all going to be honored at the time your claim is being processed.  Feel free to add “subject to inspection” after whatever kind of damage you have already indicated, but do not only mark “subject to inspection”.

File your claim in time. If your shipment moved 13 years ago and you are finally getting around to filing your claim, don’t be upset if it gets declined. Obviously, no one would expect payment after that kind of time but you do need to be aware that there is a time frame. You have 60 days from receipt of your shipment to give written Notice of Intent to Claim. You then must file the actual claim within 9 months of the shipment. I find the sooner I submit my claim, the easier it seems for the freight company to investigate it and my chances of approval for payment goes up.

My third and final post on this coming soon!

Hundredweight Rates… The Confusion

Mid 2014, I was offered a job with a trucking company. Like any young lad desiring to prove his value to the world, I jumped at the opportunity. “We have a position opening up in our pricing and rating department; would you be interested?” Of course I was interested! Oh had I known what I was in for. It turns out that pricing in transportation is much more difficult than some of the basic examples given in my university classes. For example, consider the hundredweight rating system.

From my limited experience, it seems as though the hundredweight rating system is the most common form of pricing in less than truckload (LTL) transportation. The individual desiring to move his or her freight is given a price per 100 lbs of freight to move the desired goods from origin to destination. As the weight of the freight to be shipped increases, the price per hundred decreases to keep the numbers from getting a little out of hand and to allow carriers to tailor their rates to favor larger shipments. Having 100% variable rates would be tedious and challenging for all involved, so carriers and freight companies have come up with weight breaks. If your shipment is between weight x and weight y, the price per hundred pounds is z. Take a look at the below example:

Freight Rates from Origin x to Destination y

ORIGIN: x

Min.

L5C

500

1M

2M

5M

10M

y

99.13

38.54

26.80

23.30

20.86

17.48

11.65

The minimum column applies to any shipment where the weight in hundreds of pounds multiplied by the corresponding rate per hundred comes to less than the minimum ($99.13 in this case). So a parcel weighing only 30 lbs would move at $ 99.13 because 30 lbs/100 = 0.3, 0.3*$38.54 = $11.56.  $11.56 is less than $99.13 so the $99.13 charge is applied to this shipment.

The L5C column picks up as soon as a item weights more than the minimum charge. In this case, that weight is ~257 lbs. The 500 column applies to freight weighing between 500 and 999 lbs; the 1M freight between 1000 and 1999 lbs; 2M, 2000  to 4999 lbs and so on and so forth.

If this was all that there was to hundredweight pricing, things wouldn’t be too bad! However, because the rates are decreasing to give shippers more favorable rates as the weight of shipment increases, there is a point in each weight break where it becomes less expensive to ship at the lowest point of the next category. Take for example the below shipment:

1 Box – 925 lbs

Pick up: x

Delivery: y

The box weighs 925 lbs meaning that we should use the column of our rate table labeled “500”. If we do this, we get the following equation:

925 lbs / 100 = 9.25

9.25 * $26.80 = $247.90

We convert the weight of 925 lbs into hundreds of pounds, and then multiply by our corresponding rate to come to a total of $247.90. If however, we were to decide to move this box from x to y and bump up the weight to 1000 lbs, we would see the below changes.

1000 lbs / 100 = 10

10 * $23.30 = $233.00

We end up saving $14.90 by sending our box at a higher weight. For this reason, it is important to consider both the weight of your shipment and the lowest cost of the next weight break when finding your price. Generally, freight companies will take the lesser of the two rates and computer software will be used to determine the price quickly and efficiently.

The hundredweight rating system certainly keeps the pricing side of the transportation industry interesting and often makes those of us involved enjoy those days where we get to work with flat rates or skid rates for a change. If nothing more, I hope that this shed a little light on the topic of hundredweight rates and gave you a taste of my adventure in the transportation industry.

Why You Should Tell Your Customers That You Cannot Help Them

Have you ever called a particular vendor or store and had the daring person on the other end of the phone tell you that he or she is afraid he or she cannot help you? Sometimes there is nothing more painful than knowing you have wasted precious time on hold, sifting through phone menus looking for human contact, only to find out you get to do it all over again. Now there are two topics presented in that scenario… the phone answering menu, and being told that the individual you finally reached cannot help you. I will leave the automated phone menu for a different rant and suggest that though it may be frustrating… I have had great success telling my customers that I cannot help them.

The trucking industry seems at times to be viewed by those involved as an industry lacking some key ingredients, namely integrity and honesty. Customers are constantly bombarded with increasing rates, fuel surcharges in excess of 30%, accessorial charge sheets miles long, and trucking companies who want to be everything to every customer. Well sometimes you just can’t.

A couple weeks back I was attending a business mixer for WeBa, our business association here on the west end of Edmonton, and ended up chatting with a jolly fellow maybe only a couple years older than I. He asked what I did, and I told him. “I work for a trucking company!” He proceeded to question me about how I would ensure that when I moved his freight, it would deliver on the truck of the company that he had hired. Initially I was rather confused, but soon realized that this gentlemen was concerned about how we carriers often interline freight or use service agreements that leave his valued goods in the hands of those other than whom he had contracted.

This experience, coupled with many sales calls and phone conversations where I have honestly told customers that I would be interlining their freight has led me to believe that sometimes you should tell your customers what you cannot do. “I can’t service that area at the moment, I can get a rate for you; I would usually contact company xyz. If you would like to call them, you may be able to get a better rate as there would be less cross docking/fewer mark ups.”

Now some of you may think it is ludicrous to suggest that you send your customer to another company, I mean, what if you lose the account?! It’s true; there is risk; they may leave, or choose to use someone else. But, my experience has been that when most of your customers experience such a level of honesty and integrity, they will gladly use you where it matters to you the most.

I feel that being honest about what you can and cannot do as a company are key elements to ensuring that your customers keep on coming back year after year. Helping them understand your specific service network will allow them to get the service quality that they need and keep freight moving to you in the lanes you service direct.

Do Freight Companies EVER Pay Claims? Part 1

I don’t know if you have ever had to file a freight claim, but if your experience was anything like mine, you decided then and there you would much rather do something else. Anything else! Sometimes it felt like the freight company was finding any and every reason under the freakin sun to decline or delay paying my claim. Seriously, all I wanted was to be reimbursed for something they obviously damaged! Why all the hold ups?

Unfortunately (or fortunately, depending on how you look at it), I have gotten very good at filing claims with other carriers because of my position at our company. Here are some keys I have learned over the years. Hopefully they will help you, should you ever have the ‘pleasure’ of having to file a freight claim yourself.

1st, ensure you are the proper party to file the claim. There is no point even filing if you are not the ‘proper’ party. Why would a freight company pay anyone who did not have a legal right to even ask for money? The key you need to know is this; while a shipment is in the custody of a freight company, it is legally ‘owned’ by the party that pays the freight charges. Prepaid shipments are ‘owned’ by the shipper, and collect shipments are ‘owned’ by the consignee. It is very easy to get confused on this point.

 

Say you ordered something from a company in a city 400 kms from you. That company informs you that they will pay for the shipping as long as you pay for the product up front with a credit card. You agree, the transaction is completed and the shipment is sent. But unfortunately the shipment is completely destroyed by the freight company before it gets to your door. Who should file the claim? Because the shipment was prepaid (paid by the shipper), the shipper is the one who should file. Even though you may have already paid for the product! How does this make any sense? It is because when the shipment is prepaid, it is not considered to have been ‘possessed’ by you until you rec’d it from the carrier. On collect shipments, the reverse is true. A shipment is considered to be ‘possessed’ by the consignee at the moment the shipper turns it over to the freight company.

Many companies will not even respond to a claim filed by the wrong party. While a company with even a tiny bit of integrity would contact you and inform you of the error so you can have the claim filed properly, many of them just leave it in limbo. Legally, they have no obligation to respond to a party that does not have a legal right to their grievance. Remember to ensure you are the party who should be filing, and you will be one step closer to getting your claim approved.

Keep an eye out for my next post. I will share more keys to getting your freight claim resolved!