- THE MAGAZINE
After weathering 2012, an expensive year for transportation fuel costs, many companies used 2013 to seek new approaches to managing fuel prices. Heading into 2014, companies are looking for even more options, including alternative fuels, new reimbursement methods and unbundling price volatility and variances associated with diesel fuel.
"Although diesel prices are down from their 2012 highs, they are more volatile than ever," said Craig Dickman, CEO of BreakthroughFuel. "In 2014, we expect fuel prices to edge downward, but remain a significant factor in the overall cost of transporting products."
For many shippers, up to 40 percent of their freight cost comes from fuel costs. "Stabilizing and managing energy costs will be a prime focus for supply chain professionals," explained Dickman. What should they do? Here are some suggestions:
- Develop a market based fuel strategy instead of using a fuel surcharge approach. This creates transparency and eliminates distortion in fuel costs; allowing companies to make better consumption decisions and achieve supply chain savings.
- Understand volatility and variance. Local and state taxes impact diesel fuel prices. Supply disruptions and geopolitical risk factors create significant price volatility. The dynamics of traditionally high and low cost regions have changed and if you don't include this in your fuel management strategy, you are losing margin.
- Look to alternative fuels and modes of transportation. Compressed Natural Gas (CNG) is less costly and has more price stability, along with the added benefit of lower emissions. Intermodal transportation also offers savings. Successful companies are adopting strategies that include these options.
As for 2014, Dickman says, "Everything we're seeing, and our research is showing, there should be a slight downward trend in fuel prices. But, outside factors can change that overnight. That's why it's important for businesses to understand their costs and develop strategies to manage those costs."
BreakthroughFuel, based in Green Bay, Wisc., is a supply chain management and transportation energy advisory firm helping shippers understand and manage transportation energy lifecycles and costs. That process begins with a comprehensive assessment of each customer’s fuel behavior through a benchmarking analysis to get a true picture of how they are currently managing fuel. BreakthroughFuel uses this insight to develop a customized Fuel Management Strategy aligned to achieve business objectives.