Sourcing to Mitigate Surcharges
Jul 31, 2019
A couple of years ago I was at United Airlines where I heard a presentation from their chief revenue officer about the importance of surcharges to airlines (e.g. fees for checking bags, changing reservations, etc...). When he noted that the airlines had taken in over $20 billion in the previous year, it underscored the importance of surcharges on airline profitability.
As I was listening to this presentation, I couldn’t help but think about the motor carrier industry. The motor carriers for years have been using things like fuel surcharges to address the rising cost of fuel. But what we really find interesting right now is that as carriers are facing a challenging market with increasing costs and lower rates, we’re seeing them look at increasing the types of surcharges to address critical issues.
For example, Illinois recently passed a significant tax increase on fuel and if you have trucks traveling through Chicago, you’re likely to experience congestion issues. As a result, we’re seeing carriers create surcharges for shipments into or out of Illinois.
But it doesn’t stop here. Shipments into or out of other states such as California, Rhode Island, New Jersey or New York that have challenges of their own are also now facing surcharges.
If you’re conducting a truckload sourcing event in the near future, this is something to have on your radar.
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