How the Trucking Industry is Managing Oil Price Spikes

oil-prices-1Daily Spikes In Oil Prices Effect How The Trucking Industry Operates

The trucking industry, similar to many other transportation-sector businesses, must operate among uncertain fluctuations in one of its most significant cost categories – fuel. Trucks cannot run without gasoline or diesel fuel, and the daily movement in fuel prices leads to problems for those who move goods for a living. Trucking companies watch oil and fuel prices on a daily basis, and must adjust shipping charges to accommodate these fluctuations. With trucking emerging as an in-demand and highly competitive industry, minor variations in price can lead to substantial gains in terms of market share. Most customers who contract with trucking companies cite price as a main reason to continue the business relationship. For this reason, trucking companies today must keep a keen eye on the price of fuel, as well as the margins that they are levying on the client.

Technology and Innovation Helps The Trucking Industry Amid Oil Price Spikes

Most leaders in the trucking field agree that the latest transportation technology has allowed them to run leaner operations and also deliver enhanced overall service and reliability to the end user. These companies frequently enlist the help of sophisticated trucking management software, as well as interactive trucking networks that allow for better communication and quicker load management analysis. Simply put, computerized systems permit better loading, management, and transportation of goods and allow for easier communication among trucking industry partners.

Non-Asset Based Shipping Companies Help Move Goods Efficiently

Non-asset based shipping companies are those who choose to facilitate the movement of goods across the nation – without owning or leasing their own equipment. Non-asset based companies don’t own trucks, trailers, shipping containers, or any other transportation implements. Rather, they contract through existing trucking companies and are more acutely focused on the logistics side of the business. This allows for a harmonious relationship with major trucking companies and allows the non-asset based group to focus on the efficient management of the entire shipping process. As fuel prices go up, the trucking companies must increase their prices. Non-asset based shipping companies are able to seek out trucking companies that can meet the targeted price points that maintain overall profitability.

Booming oil graphFuel Surcharges Keep Profit Levels Consistent When Oil Prices Jump

Most trucking companies operate on a fixed and variable cost basis. The fixed costs of a trucking business are those that would be incurred whether the truck was actively working or not. An example of a fixed cost would be the monthly payment on the actual truck. Variable costs include: tires, fuel, driver salary, maintenance, and repair costs. The more a truck is driven, the higher these costs will be.

When oil prices jump, trucking companies may seek to change their driving habits or pricing structures to provide insulation from these additional costs. For instance, many companies add fuel surcharges based on the daily price of gas or diesel. By passing this extra charge along to the customer, a trucking company is able to maintain an acceptable profit level. Most customers are understanding of these charges, and the actual increase in cost is usually pretty manageable.

Some trucking companies seek to minimize the impact of fluctuating oil prices by modifying routes or adding fuel-conserving enhancements to each truck.  A reduction of as little as 0.2 miles per gallon can add up to several thousands of dollars per year in fuel savings. This is a great way to remain competitive among spiking oil prices because lower variable costs allow for either a lower charge to the customer (keeping the company more competitive) or a higher net profit margin.

By blending technological enhancements with clever packaging and routing of goods, trucking companies are well poised to weather the fluctuations that are inherent to the oil industry.  And, by establishing symbiotic networks among trucking companies and logistics providers, the movement of goods across this nation is becoming more and more efficient each day.

 

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