| Truckers pass the fuel buck |
|
|
|
|
http://atlanta.bizjournals.com/atlanta/stories/2005/05/09/story2.html EXCLUSIVE REPORTS Truckers pass the fuel buck At today's gas prices, a trucker hauling a load of 800 pairs of shoes from Atlanta to Los Angeles would shell out $900 for diesel fuel, 31 percent more than a year ago. When arriving in LA, he would then charge the recipient a surcharge -- about $1 extra a pair. If gas prices don't go down soon, some believe, it may only be a matter of time before that extra charge is passed on to the consumer buying the shoes. "That's our fear -- inflation heating up," said Larry Sellers, president of Lithonia-based Volume Transportation Inc., one of the biggest trucking companies in Georgia. "If it costs $300 extra to move a load across the country, somewhere it has to be passed along in the retail price -- whether it's tennis shoes or diapers. They can't eat these surcharges forever." And if retail prices go up and consumers buy less, the ripple effect could very well be felt around the globe. "Everything from source to consumption is being affected by rising fuel prices," said John Huntz, chairman of the Metro Atlanta Chamber of Commerce's Logistics Innovation Council. Not all trucking operations can pass costs on to customers with ease, though. Atlanta-based Haverty Furniture Cos. (NYSE: HVT), for example, which uses a combination of contracted trucking, its own fleet as well as rail, reported May 2 that higher fuel prices hurt its earnings for the first quarter. Haverty's inbound freight costs rose and transportation fuel costs increased $400,000 on a period-over-period basis. As a result, the company is analyzing modifications to its routes and may raise the fee it charges customers for delivery. The only thing keeping trucking companies afloat is that manufacturers are manufacturing and buyers are buying, said Ed Crowell, CEO of the Georgia Motor Trucking Association. If the economy were not doing so well, he said, truckers could not get away with passing fuel prices on to the customer. Delta Air Lines Inc., in contrast, is absorbing nearly all fuel cost increases to get as many people on board as possible. Delta spent $884 million on jet fuel during the first quarter, compared with $574 million during the same quarter in 2004, a 54 percent increase. "Trucking is mostly a business-to-business transaction," Crowell said. "We're not in the retail environment that Delta is in. We have strong demand right now. Delta, of course, does not have that situation. They aren't flying with a full plane every time. If they did, they could pass on the prices." Volume Transportation specializes in shipping retail goods and auto parts, and has 160 tractors and 700 trailers in Georgia. Sellers said the company is spending between $625,000 to $650,000 a month on diesel fuel at the May 3rd price of $2.26 a gallon. That's about $197,000 more than a year ago. As a result, Sellers said, the company and many others are charging between 20 cents and 22 cents extra for every mile driven. In 2004 -- when gas prices were approaching $2 a gallon -- there was a virtual shakeout in the trucking industry. Only those that could optimize logistics most efficiently survived, Sellers said. For example, although many contracts allow surcharges for high gas prices, truckers cannot generally charge customers for "dead-heading," the miles driven with no shipment on board. The high prices have forced trucking companies to squeeze every ounce of productivity out of their routes. Trucking companies also have had to skillfully renegotiate fuel contracts with the suppliers, being careful not to either underestimate or overestimate themselves out of profit. But all the optimization in the world won't change global politics and macro economic conditions. After labor, fuel is generally the second-biggest expense for trucking companies. "It's awfully tough to manage your business when your No. 2 cost is out of control," Sellers said. As high as Sellers' costs are, though, they don't come close to Atlanta-based logistics giant United Parcel Service Inc. (NYSE: UPS). During the first quarter, UPS spent $390 million on fuel for its 88,000 vehicles and 500 aircraft fleet, for a 30 percent increase from the same quarter in 2004. For the entire year, UPS spent $1.4 billion on fuel, an increase of 35 percent from 2003. Although not specifically fueled by rising gas prices, UPS, like any successful corporation, is looking to save on both fuel costs and man-hours. The company has ramped up research and development of a new version of its Delivery Information Acquisitions Device, a handheld computer that all UPS drivers carry that optimizes their routes. UPS spokeswoman Susan Rosenberg said such technologies have drastically improved efficiency. "What happened before, we might have had a package out of order and had to double back on the route," she said. In addition, UPS recently changed a small procedure in how its ground fleet is maintained. That change, Rosenberg said, saved 330,000 quarts of oil in 2004 -- or about $3 million. Although the bigger shippers like UPS buy fuel in bulk, which is cheaper than buying in normal quantities, the prices still are a threat to the bottom line of every logistics company. Reach Rubner at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it © 2005 American City Business Journals Inc.
Share our Articles!               |
FAIR USE NOTICE:
