Is it possible to create a fuel surcharge program that is consistently fair to shippers and carriers? As we have seen over recent months, the cost of motor vehicle fuel is a national preoccupation. Perhaps this is one reason why rising prices at the pump, and mechanisms such as fuel surcharges that are designed to spread the pain between shippers and service providers equably, attract so much attention.
One reason why this subject sparks lively debate is that some believe surcharges are not always used to fairly distribute the costs between shippers and providers. The challenges of such programs are highlighted in research carried out recently at the Massachusetts Institute of Technology (MIT). The graduate students in the MIT Supply Chain Management (SCM) program at the MIT Center for Transportation & Logistics point out that when a shipper modifies a fuel surcharge, “the carrier will counter with an adjustment to the line-haul bid. This means that ultimately line haul rates and FSC (fuel surcharge) schedules are compensating.” This “revenue neutrality” means that “it does not seem possible for a shipper or carrier to establish a new FSC or modify their existing FSC in order to significantly reduce costs (shipper) or increase revenue (carrier),” according to the researchers.