Fuel Surcharge?

I can see where you’re coming from Simon but is there really any need for “fuel surcharges” when every transaction between us is negotiated separately anyway? People are free to adjust their prices to a suitable level at any time so why complicate things with a fuel surcharge mechanism?

The reason the likes of DHL and TNT apply fuel surcharges is to give them freedom to adjust their contractually agreed rates (and their published tariffs) to allow for increased fuel prices. If they didn’t have contractually agreed rates or published tariffs then there would be no need for the surcharges – they could just increase their rates instead.

By all means put a mechanism like this in place for your customers, and for subcontractors that work for you regularly on an agreed ‘pence per mile’ basis but please don’t encourage people to adopt this as a standard on here. Apart from confusing the hell out of everyone it will increase the amount of time spent on admin and increase those little disagreements where one party claims that a surcharge had been agreed and the other claims that it hadn’t.

I’ve just had an invoice from a ‘Network’ supplier who’s started applying a fuel surcharge on every job. I’ve no problem at all with him increasing his prices but his £20 minimum charge has now become £21.60 and the £181 job he did for me now costs £195.48. Call me picky but it’s a lot easier, and less likely to result in an input error, for me to enter £22 or £196 onto our systems.

So by all means PUT YOUR PRICES UP if you think that it’s right for your business but PLEASE don’t f*** about adding percentages onto every job.

Posted under Courier Financial Issues

Posted by Alec at 8:12 pm, April 21, 2008

6 Comments so far

  1. Alec added on  April 22nd, 2008 at 09:42

    It’s always been a balancing act between what we can charge the customer and what we can afford to pay the drivers though hasn’t it?

    The problem is we’re not operating in a cosy closed market with fixed rates. While I’d love to pay everyone 75p/mile for a small van, the harsh reality is that I can’t. TNT, DHL and the like are still paying their subbies the same rates that they’ve been on since fuel was less than 40p/litre. It’s companies like that that really set the pricing level that the market will stand. I lost a good account to one of these recently – they went in at 68p/mile, how can we compete with that and still pay a fair rate to the subcontractors? In this case I laughed and walked away rather than trying to compete but it meant £1000pw lost revenue. None of us can afford to lose accounts like that on a regular basis.

  2. Alec added on  April 23rd, 2008 at 10:10

    I’ve just added a Rate Increase Calculator if anyone’s interested.

  3. Alec added on  April 23rd, 2008 at 10:23

    It saves me having the same conversation time and time again, so it was 30 minutes well spent.

  4. Alec added on  April 23rd, 2008 at 17:03

    No need to sell it for £25.99 – with all you lot eagerly clicking on the ‘How to be a Courier’ and ‘Driving Jobs Here’ adverts on the site I’ll be a millionaire by this time next week.

    Seriously though, Jack says thank you for the £86p pocket money that you’ve all earned him today.

  5. Alec added on  April 25th, 2008 at 18:39

    Thanks for all the praise – it’s only a simple calculation really, 2 minutes with a pen and paper.

    It does occur to me that the calculator only maintains a consistent ‘earnings per mile’, all it does is subtract your fuel cost (at the old price per litre) from your price per mile then adds it back on adjusted for the new cost. This is fine if you’re an owner-driver wanting to make sure that you make the same amount of profit for your trip to London now as you you made 6 months ago for the same journey.

    I suppose it’s also ideal for a company to work out a fair rate to pay their subbies, but I assume that most companies would want to increase their CUSTOMER prices enough to not only account for the rise in fuel prices but to maintain a consistent profit margin? Use of this calculator wouldn’t allow for that and over time your profit margin would decrease slightly.

  6. Alec added on  June 26th, 2008 at 21:05

    We’re still getting stupid low prices that don’t seem to take any account of the cost of fuel and stupid high prices which seem to be based on £3/litre fuel prices.
    Look at your actual costs, set your prices accordingly and MAYBE you’ll still be around this time next year.

    And please realise that if you’re going back that way anyway your fuel and labour costs are probably close to NIL. Pure profit.

    Work smarter not harder.

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