Channel 19

Todd Dills

O/O challenges: More solutions to high fuel

| August 01, 2012

First, Landstar has a very strong fuel discount program that includes all the major chains and many independent locations. The program offers both retail-minus pricing, which offers highly competitive pricing in periods of rising fuel costs, and cost-plus pricing, which provides highly competitive pricing in periods of declining fuel costs. The cost-plus discounts are often significant when compared to the street price. 

In 2011, discounts off street price from this program totaled nearly $16 million, all of which was passed through to the Landstar owner-operator who purchased the fuel.

Secondly, we negotiate equitable fuel surcharges with our customers and pass 100 percent of the fuel surcharge we collect from customers to our BCOs. In the first quarter of 2012 Landstar invoiced customers for $71.1 million of fuel surcharges that were passed 100 percent to BCOs. 

While alternative fuels are still a long way from the mainstream, especially in the irregular route, long-haul market in which Landstar owner-operators primarily participate, improving fuel efficiency offers the best way to cut fuel costs — after all, the least expensive gallon of fuel is the one you don’t have to buy. To that end, we’ve long offered tips on improving the efficiency of existing equipment — such as the effect of slower speeds and discounts on products like APUs — and have recently launched an effort to help our owner-operators to first understand the advantages of a newer, more-efficient truck and then help them acquire a newer truck through programs facilitated by the Landstar Contractor Advantage Purchasing Program (LCAPP).

Six-truck small fleet owner-operator Thomas Blake
In 2008 — end of November, around Thanksgiving, I had myself shut down. It got to where I was out there and all I was doing was trying to keep my customers happy and haul their [container] loads. When I started looking at the books I was just like, “Oh man, I’m killing myself.” If you’re not paying attention to what things are costing you you’re going to leave a lot of money on the table to where you’re not making a profit. I figured out that I wasn’t really making anything [with the cost of fuel]. I turned around and contacted my customers and said I’ll have to implement a fuel surcharge — I took average fuel mileage and came up with a percentage of the price I haul on the load. Two different charges — one on the short hauls, one of the road hauls, both based on the DOE average. I look every Monday at the average, and my surcharge changes then. I give [shippers] my fuel-surcharge chart and the DOE’s website so they can check on me. 

Further, I’ve got all my trucks governed at 70-72 mph. I’ve got Webasto heaters for the wintertime in each truck, which will burn a gallon of fuel a night versus a gallon an hour. I watch the tire pressure.

Blake has installed EOBRs in all his fleet’s six trucks.

With these computers on the trucks to where I can see how fast they’re going, I’ve found that [the old adage about speed and fuel mileage -- for every 10 mph over 60 you lose a mile per gallon] is true. 

Do you know what your truck costs to run? If you’ve got a truck payment — and insurance payment — without that truck rolling down the road, how much does it cost you? I told a guy leased on to J.B. Hunt…, “You’d be better off driving their truck. You’re probably only making 20 cents a mile after paying their bills.” Owner-operators need to pay attention to what their cost is. If they’re going to deal with all the headaches and they’re not making at least 40 cents a mile in profit they might be better off in a company truck. 

Blake on natural gas trucks: I’m reading about them — there’s nothing [in and around Kansas City-area rail yards, where he runs,] yet in terms of fueling infrastructure. The rail yards in Long Beach have them. Everything I’m reading looks good, but we need infrastructure to be in place before we can really switch to it.  

Stay tuned for more…

  • http://www.facebook.com/james.vincent.100 James Vincent

    IM73 IVE BEEN AROUBND TRICKS OVE60 YEARS I CAN STILL REMEMBE WHEN DIESEL WAS MUCH CHEPER THAN GA. THEN THE MID 70;S T4-75 GA STARTING GOING UP UP DISESEL DIDNT.. TO MY KNOWAGE DUESL WAS A VTHROW A WAY BY PROIDUCT IF GA. NOW WE PY MORE FOR DISEL THSN WE DO FOR GAS. LOOK BACK TO THE 70;S, WHAT WAS THGEVPRICE OFVBA BARREL OF OIL THE COMPARED TO NOW? LOOKNAT THE PROFIT OF ASLLNTHE MAJOR IOL CO., BIG PROFIT TO THEM AT THE EXPENCE OFVTHEV THUCKING INDUSTRUAL.

  • http://www.facebook.com/james.vincent.100 James Vincent

    IT SEEMS THGAT EVERY TIME THE GOVERMENT WANT MORE MONEY UP GOSE THE PRICE OF FUEL OR MIREVTAXES ON TGHE TRUCKER. JAMES VINCENT

  • http://www.facebook.com/lance.hottrod Lance Hottrod

    After 40 years as an OTR driver, I had enough of the cheap freight, I was leased to what used to be a good carrier and had been with that carrier 20 of the 40 years. 4 million miles, no tickets or chargeables, and had never been shut down at a scale. They say they get the correct fuel surcharge, and they do, but then the RATES go down. They used to require their agents have at least 50% of their own freight so there were no brokerage fees with those loads which made the rates good. Now they let “kitchen table” agents book loads, and those ARE cheap because every broker takes some off the top. I refuse to haul cheap freight because all that does is wear out the truck, tires, engine, etc., for nothing. When it got to the point that all I could net per week average was $400, I retired early. Every other industry raises prices at will, but the trucking industry rates are garbage, does not even pay to own a truck anymore. When I can’t make any more money than a Wal-Mart job, it’s time to quit.

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