Fuel Price Volatility...
and the Implications for Dairy Processors
Fuel price volatility has intensified with questions about long-term oil production, Asian industrialization, and recent global economic uncertainty. This intensification has been marked by a spike in diesel to $4.76 per gallon in July 2008, followed by a plunge by early 2009 to the lowest levels seen in several years. Persistent supply and demand uncertainties imply that the only thing predictable about fuel prices is that they will be difficult to predict, so controlling freight costs in this volatile environment has become an imperative for dairy companies.
When fuel prices rose, haulers implemented rate increases and a variety of fuel surcharge programs (some fair and some that bore little relation to the actual incremental cost of fuel.) Now that fuel prices have fallen sharply, it is incumbent upon shippers to ensure that their freight rates are competitive and fuels surcharges are appropriate. Most companies, though, lack the staff to systematically market test and rationalize their freight contracts. Dairy.com can help.
Dairy.com’s Strategic Transportation Service
Dairy.com has a track record of providing innovative transportation solutions to the dairy industry. Its Transportation Spot Exchange has enabled shippers to cover loads dramatically more quickly and easily, and often at phenomenally low rates. By conveying load postings instantaneously to hundreds of the most experienced dairy haulers, Dairy.com has enabled them to more easily source loads that fit their operational needs—including backhauls, which have become essential to turning empty miles into revenue. Dairy.com has added a dedicated senior transportation procurement expert to leverage Dairy.com’s extensive data on dairy commodity flows, its hauler community, and its historical rate database to help shippers find the right set of haulers that can move their product at the lowest cost and with the highest reliability.
Results
Dairy.com’s Strategic Transportation Service has generated impressive wins. With well over a thousand bulk tanker lanes re-contracted in the past 12 months, Dairy.com has achieved savings for customers of over 20%--more than $200 per load. Savings on packaged moves (e.g., dairy powders) have averaged 30% over several hundred re-contracted lanes. (Case studies are available upon request.)
Methodology
A systematic approach to helping customers optimize their freight procurement has been a key to success. First, Dairy.com seeks to fully understand existing hauling contracts (rates, FSCs, etc.), lane volumes, and document any special location needs (e.g., drop trailers).
Second, Dairy.com analyzes and benchmarks the current contracts and works with the customer to develop the optimal approach for constructing and disseminating bid packages.
Third, Dairy.com sends out bid packages to all (or selected haulers) as determined in consultation with the shipper, and then compiles and analyzes the responses and packages them for review.
Fourth, Dairy.com and the shipper jointly develop the path to a final contract for each lane, which may include further rate negotiation, keeping the business with the current hauler, bid acceptance, solicitation of additional bids, or relying on spot coverage. Dairy.com also helps facilitate agreement on final terms—including fuel surcharges, service expectations, drop trailers, etc.
Finally, in most cases the shippers choose to implement (at no additional fee) automated hauler scheduling on Dairy.com which tenders loads automatically to the contract hauler on each lane, enables the hauler to accept the load via the internet, and instantly provides confirmation (including the contracted rate) to the origin and destination plants and to the hauler.
Dairy.com works to ensure a smooth transition to the new hauling contracts and resolves any operational service issues, billing questions, etc. Dairy.com’s 24x7 service desk responds to any problems that emerge over the life of the new contracts.
Most dairy procurement managers have full plates dealing with their commodity activities, so Dairy.com takes on as much of the work as possible. At all times, Dairy.com works under the direction of the contacting parties.
Fees
If, as a result of this process, the shipper and hauler elect to form a new contract then Dairy.com charges each side $.06 per mile ($30 minimum) on each load. With shippers saving an average of more than $200 per load through this service, Dairy.com has delivered a great deal of net benefit to the industry—with NO upfront fees and NO risk.
Getting Started
Sign up today or call (214) 360-0061 to learn more. Dairy.com can also facilitate communication with other companies who have used this service so they can share their experiences. Dairy.com helps customers through each step of the process.
