Fuel-Surcharges at an ALL TIME HIGH!!!

I wanted to reach out to you to let you know about something that is slipping under the radar at many companies and effecting your bottom line in a big way...FUEL-SURCHARGES ON FREIGHT BILLS!

Fuel has been skyrocketing every week for the last month. Yesterday, the Department of Energy announced that fuel is at an all time high at $3.81 a gallon (diesel national average). That means motor carriers will be charging 29% extra to your freight bills.

To give you an idea of how dramatic this increase is, on Febuary 18th, 2008 the National Diesel Index was at $3.39 a gallon. Now it is at $3.81. That is a .42 cent difference in three weeks.

To put this into dollar amounts, last year the average Fuel-Charge that you were paying hovered around 15%. That means, this new Fuel-Surcharge will be raising your freight expense by 14%. So if you spent $500K last year in freight, you will be spending $70,000 more if this fuel stays where it is at.

What Can You Do?

Any customer of LMI reading this already knows they have nothing to worry about. Because although their fuel-surcharge is going up a little bit because of this spike, they know it will not make that big of an impact in their bottom line. In fact, LMI's fuel has raised to 12.5% this week. This actually our ALL TIME HIGH fuel-surcharge. But when you compare it to 29% that is being thrust upon everyone else in America, our customers can rest easy.

In fact, LMI's "National Account" status with its carrier partners protects its customers from things like outragous fuel-surcharge spikes, mid-year rate increases and unforeseen accessorial charges.

With many financial guru's admitting that we are in a recession, with sales being down around the country, with consumers keeping their spending to a minimum and with the rising diesel prices, IT MAY BE TIME TO LOOK AT ONE OF YOUR BIGGEST COST CENTERS = FREIGHT.

LMI would be happy to offer a FREE Freight Cost Analysis to determine the savings to your company. In 2007, the average savings to companies who spent less than $1,000,000 in freight was over 22% savings.

For a FREE Freight Cost Analysis all we would need is copies of recent 30 day sample of recently paid freight invoices. Withen three weeks, we will be able to tell you how much savings will be available to your company immediately.

LMI's services are a non-contractual way to dramatically cut freight costs and streamline freight billing while improving delivery service to your customers.

Please feel free to contact me for your FREE Freight Cost Savings Analysis or to arrange a meeting at your earliest convenience today!

Sincerely yours,

George Muha
Regional Sales Manager
Logistics Management, Inc

The Actual Impact of a GRI (General Rate Increase)

I don’t want to scare anyone, but freight rates are going up. I am not making this up either; by the end of this month forecasters are predicting that most major trucking companies will have implemented about a 5.5% rate increase to your freight rates. What that means in dollars is that if your annual freight spend is $500,000, you will now be spending $527,500.

Now if you don’t like the sound of that, what if I told you that this is the second increase you will have taken in 9 months. In other words, if in January of 2007 your freight spend was $500,000, your current annual freight spend is $556,516.50. Sound crazy? It actually gets worse than that...read on.

On January 11th, UPS Freight (UPS’ less-than-truckload division) implemented a 5.4% increase off their regular tariff rates. Then FedEx Freight followed suit by implementing a 5.48% increase on January 14th. Now Old Dominion Freight Lines has just announced that they will be taking a 5.4% increase on February 11th. It will be just a matter of weeks before every major common carrier has taken their "annual general rates increases".

Actually they call them “annual general rate increases” but they really should be called "bi-annual rate increases". What the freight carriers hope everyone forgets is that they just implemented an increase in May of '07. That is not even nine months ago. It is amazing that the trucking industry can get away with this especially on top of the outrageous fuel surcharges they charge (that were as high as 25% a few weeks ago).

Here’s where it actually gets worse; these increases are only a “weighted average increases”. This means that you are probably actually realizing a much higher increase. So if the thought of paying an extra $56,000 on a $500,000 freight spend was bad, consider if you were actually taking 10% increases twice a year (which is what you are likely realizing). That turns your $500,000 freight spend into a $605,000 freight spend!

The freight carriers do not highlight the fact that these increases are "weighted average increases". So for your sake, I will. Look at the fine print in Old Dominion’s recent AP announcement of their 5.4% rate increase (I am not picking on Old Dominion...every carriers rate increase announcement says the same thing):


What exactly does this mean? Well, it means that you will be taking an increase higher than 5.4% basically. More specifically it means the carriers will be taking higher increases in longer haul lanes and minimum charges. Many of the carriers will also take higher increases on lower weight shipments. Shipments under 500lbs get hit the hardest. The next hardest hit are shipments between 500lbs and 1,000lbs (which, by the way is probably your average shipment size). And so on...

What can I do for my company? Well, nothing. Unless you are owned by General Electric and are taking advantage of their multi-gazillion dollar freight spend and their nationally negotiated corporate freight contracts. Either that, or (here comes the sales pitch) solicit the services of Logistics Management, Inc. (LMI).

I really try not to sell too much on this blog, but when this topic comes up the value of a company like ours is immeasurable. LMI customers actually have nothing to worry about with all this increase talk. In fact, we have not allowed an increase (with most of our carriers) since the end of December of 2006. So that means if your freight spend was $500,000 at the beginning of January 2007, it will still be a $500,000 at the end of December 2008. That extra $105,000 goes right into your companies pocket.

LMI's Top 10 Account Status with all of its carrier partners (Top 5 with most), allows LMI to protect its customers from things like multi-year rate increases. In fact, LMI's contract rates are frozen on a calendar year basis. So their is no way our customers could be hit with a mid-year increase(s).

Every January 1st, LMI customers are subject to an increase, however, it is usually half of what the carriers increase their rates. Most year's when the carriers take two 5.5% increases, LMI actually only takes one 2.5% rate increase...and when LMI takes their increase, it is an increase right off the previous years base rate. So when LMI announces a 2.5% rate increase, it is 2.5% across the board (it does not vary on weight or lane).

But, like I said above, this year LMI did not feel the market warranted an increase. So when it came time to negotiate with our carrier group, LMI was able to avoid an increase for its customers this past January with most of them.

A good analogy of working with a company like LMI is like if your company was bought by General Electric. Immediately your freight expense would go dramatically down because you would be taking advantage of their corporate freight tariffs. Then your freight deals would be protected from unforeseen increase by GE's corporate traffic council who are always looking to ensure they have the best freight deals.

So if you want a great way to reduce your freight cost and lessen your exposure to unexpected rate increases you can do one of two things: 1) You can try to see if GE will buy your company or 2) you can contact me to have LMI perform a complementary Freight Cost Containment Review on your freight expense.

I can be reached at (908) 879-2978 or gmuha@lmiservices.com.

CFO's Lead the Charge in Lowering Freight Costs

By Timothy Walsh, VP Sales, Logistics Management Inc.

Taking a lead role on freight cost management and business processes in this cost center is often off the radar screen for most CFO’s and Controller’s, and probably is as interesting to a finance manager as G/L accounting is to a shipping manager.

You know that your company wants to deliver your orders to customers and move raw materials at the lowest cost, without loss, damage or exceptions. However, CFOs, Controllers, and finance managers do not typically get involved in this area, even though it can often be a TOP 5 cost center they preside over.

At most companies, freight cost reduction and associated business process management decisions are logically entrusted to the shipping or operations staff. This "gray area" of financial control is assumed to be objectively scrutinized by the shipping and purchasing departments who make the daily decisions over the costs generated on the movement of inbound, outbound, and drop shipments.


The expectation of the finance department is that the shipping/traffic department has the knowledge, initiative, objectivity and company interests in mind when spending hard earned dollars on transportation purchases. This assumption and lack of strict accountability and transparency over freight spending, can cost many companies dearly in unnecessary freight expense and administrative costs.

Of course, every company wants to achieve the optimum combination of best service at lowest cost, and these decisions are obviously made by the shipping and purchasing people based on the requirements at hand. At face value, it many not seem necessary for the financial manager to be involved in such operational issues, as they do not directly affect them.


However, a large and growing number of financial executives are interjecting themselves into the logistics and freight cost management business process. In particular, they want to insure that every effort is being made to maximize the overall corporate benefits that can be achieved by benchmarking this non core-competency, by engaging the services now available from logistics outsourcing firms.

The logistics cost center is too significant for controllers or CFOs to ignore. Many have found that they can easily secure tens and even hundreds of thousands of dollars in immediate cost savings by outsourcing routine logistics functions and by leveraging lower rates and fuel surcharges through group purchasing facilitated by a high quality logistics service partner.


Like every other major cost area within the company, CFOs, Controllers and senior financial managers are benchmarking this cost center and if benefits can confirmed, engaging reputable freight cost management services to significantly reduce freight costs, freight administration and payment functions. Companies can also secure enhanced expertise and technical resources to enhance controls over freight spending.


Financial managers often become aware of inefficiencies that may have been swept under the rug or ignored inadvertently without senior management visibility. Finance managers better understand opportunities that may be available by sharing logistics information and costs across the various enterprise departments (sales, marketing, customer service, purchasing) to achieve higher levels of profitability and sales with an increased understanding of how logistics costs effect each area.


For example, can your sales force, quote a complete price including shipping and a delivery date, or do they have to get back to the customer later? Does your marketing department understand the impact of different "free shipping" offers on average order size and associated shipping costs?

Finance managers should take the lead role in freight cost management because it is a major cost center and they have the objectivity and analytical skills necessary to insure that every cost reduction and business process improvement opportunity is investigated and implemented. They also have the authority to minimize cross departmental resistance to business process changes that can benefit the organization.

Also, in contrast to financial executives who routinely investigate solutions to reduce costs throughout the company, I have found (during 20 years selling 3PL services), that shipping and traffic mangers often dismiss the opportunity to discuss freight cost containment and business process outsourcing. They often will not even entertain an appointment with a solutions provider, even when ROI is significant and they know that other companies are benefiting from such outsourcing programs.

This is why business process outsourcing companies, who specialize in freight cost management, target controllers and CFO’s. Furthermore, it is common for the shipping staff to have strong personal relationships with their preferred trucking companies causing a loss of objectivity and incentive to investigate any other options for cost reduction or process improvement. It is not hard to make carrier relationships, rates and tariffs seem overly complicated in order to insulate themselves from accountability or questions from financial managers.

My experience over the past 20 years at a logistics outsourcing firm has confirmed that cross-departmental benefits, savings and process improvements are best understood and implemented by the financial management of a company. Controllers and CFOs understand the bottom line impact of both soft and hard savings that an outsourced business solution can offer.

The unique skills that financial executives routinely use to analyze and implement process improvements can be used in the transportation area, with great savings as the prize. Don't be scared off by the strange vocabulary and terms. A quality outsourcing firm can quide you through the process to improve your understanding of this major cost center and to identify opportunities.

TIM WALSH has worked in the transportation industry for over 25 years. For the last 20 years, as VP of Sales for Logistics Management, Inc., he has helped companies understand and more effectively manage their North American transportation needs. You can contact him at 908-879-2940 or by email at twalsh@lmiservices.com

Speed Up Your Cashflow Today!!!

Recently I was visiting a potential customer who is disobeying the number one commandment in business, "Thou shalt not slow down thine own cash flow." It really amazes me sometimes how unfocused companies can get. You don't need a business degree to know that getting paid should be your number one priority. Slowing it down should get people fired. But enough companies are aparently asleep on this topic that I thought I would write about it.

In this particular situation, the company I visited was slowing down their cash flow by not billing for their goods until they received an invoice from the freight carrier. Years ago, this might have been a common practice. Sometimes an unforeseen accessorial charge would be in a freight bill that the company did not estimate for (such as a liftgate fee). So it was worth waiting to get the correct charges rather than being forced to collect on an additional fee from the customer (which we know how that usually works).

This company told me they invoice their customer 5-7 days after the shipment went out. This is because they wait until they get the bill, then it sits for a day or two until the billing clerk gets to it.

But there is NO REASON to operate this way anymore. Not in 2008. The trucking companies have made their websites so resourceful (they actually have been doing this for years but for those slow pokes we'll act like its new) that you can get anything you want from them. You can pull a bill of lading or a delivery receipt. You can find out tranist times, terminal locations and freight rates. You can even create a bill of lading from these sites. That's right, you don't have to buy pre-printed bill of ladings anymore. (I apologize for putting you to sleep, but beleive me some people have no clue about these efficiencies)

These websites are great. And the best tool for speeding up your cashflow most carrier websites have a detailed report of all the shipments that went out for the day which also includes the freight rates. Yep, believe it. At the end of the day, most major carriers will post all the shipments for that day and the charges that go along with them.

See freight charges on far right hand corner.

This allows companies to get their invoices to their customers out the same day or the day after a shipment goes out. There is no need to wait for the paper copy to come in the mail anymore.

If your company is waiting for a freight invoice from a trucking company before you invoice your customer, lets get with it. Change it today and add a week to your cashflow.

The company I met with, which was the inspiration for this article, almost kissed me at this novel idea. This was FREE information I gave to them, so I am passing it along to you for FREE as well.

This is just another tip from the Freight Savings Guys! If you want freight savings tips emailed to you as they come out just subscribe to the RSS Feed at the top of this blog.