Refrigerated Hauler Trying To Formalize Extra Fuel Surcharge - It Will Help Those Who Make It Work But…

Implications: Frozen Foods Express has announced that they will be implementing a Temperature-Controlled Surcharge that will be added to their truck fuel surcharge. While it will probably be slower in getting implemented throughout the industry than many wish, it should be a positive for the segment (and for other temp-controlled modes). Another positive is that it has a good chance of working since all of us eat regardless of the economy. It may also make brokers more honest (or squirm more). The bad news is that it will add to the final product cost we all pay.

Analysis: Refrigerated transport companies have the added fuel cost of the refrigeration unit, which other segments don’t have. Some segments however charge extra for pumping off loads, extra stops, loading / unloading, etc, which do get billed. As stated in the article, there are numerous things carriers can do to lower refrigerated fuel costs with new reefer technology, better insulated trailers, better freight flow planning (less time on trailer), etc. One way some do it is just to shut off the unit during the run - then firing it up when close to the receiver location. This leads to all kinds of problems, claims, rejected loads, etc.

When it comes to charging surcharge, some have rolled it into the overall fuel surcharge or say it’s just in the rate, while some don’t know how to do it at all. It’s math, but a good approach to do the same as dry folks do with 6 miles per gallon in the calculation, then instead using 5 miles per gallon for refrigerated - and it gets pretty close. A reefer unit on a Class 8 truck uses about a gallon an hour under high load - and about half that in low load. On-off systems can cut run times in half.

From a fuel cost standpoint, a reefer generally burns 20% of the trucks fuel, therefore overall fuel surcharge should be bumped 20% if currently on a dry freight surcharge schedule. If surcharge today is about $0.50 per mile, this could add up to another dime to the bottom line - big $$$.

I like this approach, as it leads to “full disclosure” - and the shipper / fleet can set up a sensible program to accurately predict their costs. It also puts brokers doing exempt commodities on notice who still today are not really addressing needed fuel surcharge for the truck - let alone for refrigeration for the load. Full disclosure leads to transparency - and better decisions.

In charging this surcharge, it would be nice to include data regarding the product security (seals), box temperature tracking for the total time, any delay-related fuel costs by shipper / receiver, etc. This truly approaches “Full Supply-Chain Security.” Plus, one can tie it to hours on reefers for those with the uplinked data and get even more specific. But of course, getting it noted and billed separately will be a big step.

If this approach is followed, this could also positively affect refrigerated fleets such as Prime, CR England, Marten Transport, Stevens, Swift’s sister Central Refrigerated, Trans Am, Comcar and Navajo. Oh yeah, the ones I am personally in, too!