Check out our first in a series of videos on important logistics topics of interest to chemical shippers.
Stephen Hamilton, Managing Director of ChemLogix Global, discusses how BulkTainer ISO tanks offer enhanced safety and security for shipping chemicals by taking chemicals off roadways and reducing the incidence of accidents. Click Here.
Why? Fuel surcharge formulas are based on a loaded mile formula. All empty miles run between the terminal and your loading site, such as miles from the carrier’s last delivery to you or miles to the terminal for equipment repairs or tank cleaning, are not included in the fuel surcharge calculation. As a result, the carrier has added fuel costs for those empty miles. Sure, when you contracted with the carriers, they built in some fuel recovery number for empty miles. However, recent fuel cost increases (the time from when you negotiated your contracts until now) are not included in those calculations.
What does this mean to you? Let’s review a few examples. Say, during the time of your last contract negotiation, fuel costs increased by $1.50/gallon. What added cost does that represent? The average truckload carrier – either dry van or bulk – wants a minimum per-truck revenue of $200K to $225K. Assuming a modest 10% empty mile to loaded mile ratio for TL van freight and 20% for bulk freight, unrecovered fuel costs is $2,769 for dry van carriers and $5,538 for bulk truck carriers. (Click View Graph below for more)
How do you effectively negotiate during any price increase discussion? Know your carriers empty mile ratio and average truck miles per gallon before you meet. Also, look back at your current contract effective date. Knowing what the fuel price was during your last contract renewal, along with your carrier’s empty mile ratio and average MPG/truck, will enable you to calculate your fuel cost impact on your carriers. You can also be a good partner to your carriers by putting actions in place to minimize empty miles and fuel waste. As example, initiate a no idle rule at your plant during wait time to load.
Why is Freight Payment, the payment of carrier invoices, so often considered an afterthought? When asked many transportation managers are not at all happy with their Freight Payment service, but consider it a necessary evil. As long as the service is inexpensive (cheap), they’ll deal with the problems as they come, even if this means hiring the services of full time or temporary personnel to mask the inefficiencies of the process. In addition, many companies hire Post Audit firms to verify the payment accuracy.
Carriers apparently feel the same when it comes to the subject of billing accuracy. Many of the problems created in the Freight Payment process are due to inaccurate billing. But yet, it seems that there are many more people employed by carriers whose job is to collect money rather than ensure that the billing is accurate. In addition, carriers will employ Collection Agencies to resolve past due invoices. Carriers are also masking the inefficiency of their billing process.
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What these attitudes have created are inefficient and costly processes, driving high transaction costs to resolve all the inaccuracies. Wouldn’t it be wiser and ultimately less costly to pay a little more up front to improve the processes? Would companies jeopardize the quality of their product by not making the investment in technology and manpower? Clearly the answer is “NO”.
The time has come for carriers and shippers to invest in freight settlement processes. Investments in technology, trained personnel, and attention paid to the processes will result in a more seamless and problem free environment with lower transaction costs. Plus the cost of Collection and Post Audit firms can be eliminated. “Cheap” will convert to “Cost Efficient” freight payment services.
When was the last time you went to a bank to address your transportation needs? It may sound like a silly question, but in reality, banks are playing an increasing role in transportation and logistics.
Swordfish on dvd You wouldn’t go to a 3PL 007 Casino Royale divx to open up a savings account, yet chemical companies trust their freight payment needs to banks like JP Morgan, Cass and US Bank. Banks may be good at paying invoices but their focus is primarily on transactions, hence they lack the experience and domain knowledge necessary to help companies maximize savings on their transportation expenditures. This problem is compounded in the chemical industry where transportation in many cases involves multiple modes.
If there is one thing the current banking crisis should have taught us is that banks should stick to what they do best. Sooner or later, the banks will unceremoniously exit these services without regard to the impact to the businesses they serve.
Children Shouldnt Play with Dead Things full movie Remember, being a good dentist does not qualify one to be a dental surgeon. Processing chemical companies’ freight is not the same as processing a telephone bill, utilitiy or a truckload of tomatoes from the local farmer. Chemical companies should turn to qualified transportation and logistics partners with intermodal capabilities to handle their freight payment and associated needs. In doing so, they’ll realize maximum savings on their transportation expenditures and may just avoid being part of the next banking crisis.