1. Best Practices Consortium
Supply Chain
Best Practices Consortium
Effective Fuel Strategies: Hedging, Surcharges and More
Executive Seminar
Track 1, Session F
September, 2006

2. Scope
This session covers performance measurement strategies and trends:
Fuel Costs
Fuel Management Trends
Fuel Strategies

3. Fuel Humor

4. Fuel Expense % of Freight Costs
What percentage of freight costs is attributed to fuel expense?
Truckload
LTL
Fleet
Regardless of transportation mode, fuel costs and surcharges are becoming an increasingly larger portion of total costs.

5. Fuel Trends for Shippers Using Carriers
Trends over the past few years:
Surcharge Peg Rates
NTE Fuel Surcharge?
Carrier Shares Risk?
Peg rates are on the rise, not-to-exceed fuel surcharges are disappearing, and shippers are less likely to believe that carriers are sharing in fuel cost risks.

6. Fuel Trends for Shippers Using Fleets
Trends over the past few years:
Company Pump Fueling %
OTR Fueling %
Fuel Card Program %
Fleet operators are relying more on company pump fueling versus OTR purchases. Use of fuel cards appears to be more common in

7. Fuel Card Programs Fuel Card Programs Profile
From , 12 fuel card programs have been reported by fleet operators.
Of those LTL carriers, the Top 6 most frequently noted carriers account for 70% of the responses.
Top 6
Comdata
Voyager
Wright Express
Penske and Salem
TCH
Unocal

8. Hedging Programs Trends over the past few years:
% of Shippers Using Carriers
with Hedging Programs
% of Shippers Using Fleets
with Hedging Programs
Companies with private or dedicated fleets are more likely to participate in fuel hedging programs. While hedging is still not employed by most shippers, the practice may be on the rise.

9. Your Expectations What would you like to learn from this session?
Important issues?
What’s working? What’s not working?
What’s changing?
Shared good and bad experiences?
Reasonable performance expectations?

10. Potential Discussion Points
What are the top two or three factors in managing fuel costs?
Do you have standard fuel surcharges in place with carriers?
What approach is employed to improve on carrier surcharge based fuel cost drivers such as equipment utilization and routing (for multistops)?
In what ways do you seek to optimize relationships with carriers, equipment lessors, etc., to minimize fuel costs?
Have fuel surcharges affected mode selection decisions?

11. Potential Discussion Points (continued)
For fleet operators, what approach is employed to improve on fuel cost drivers such as equipment utilization, routing, maintenance, tire pressure, idling, driver training, fuel purchasing policies, etc?
What fuel purchasing strategies do you employ?
Do you participate in hedging programs? If so, what impact have you seen?
In what way do you leverage technology to assist in managing fuel costs?
What other strategies are you considering?

12. Important Takeaways
Some important Benchmarking and Best Practices fuel strategy takeaways include:
Develop a fuel management strategy – Despite escalating fuel prices, actions can be taken to at least partially offset cost increases.
Fuel management strategies – These vary from one shipper to another and depend on whether carriers or private/dedicated fleets are employed. But some common features include:
Purchasing and financial strategies – Bulk/terminal purchasing, negotiated truckstop discounts, fuel networks, co- op buying, card programs, rebate programs, fuel optimization software and hedging (pre-negotiated pricing and/or financial markets).

13. Important Takeaways (continued)
Some important Benchmarking and Best Practices fuel strategy takeaways include:
Fuel economy – Vehicle maintenance, idling practices, tire pressure, replacing older assets, equipment modifications, driver training, speed restrictions.
Transportation practices – Routing, equipment utilization, mode selection, delivery schedules, load characteristics (palletized?), transportation management systems and in-cab technology.

14. Questions?

15. Benchmarking & Best Practices References
Information on fuel strategies can be found in the following references: