Other naming: Fuel index, fuel model, diesel surcharge, diesel index
A fuel surcharge is a charge that is applied on top of the base freight rate in order to cope with the variability of fuel prices. The fuel surcharge is a percentage [%] of the base freight rate. During the freight tender process it is common to split out fuel from the base freight rates due to:
High variability - As fuel (and especially diesel) prices can fluctuate with the market, the agreed freight rates can remain fixed.
Large component of cost - Fuel prices are generally a large proportion of the total freight cost (especially in road transport)
The fuel surcharges can be calculated in various ways and will be part of the price agreement between carrier (or forwarder) and shipper. Most common, the carrier enforces its own fuel model onto the shipper, but for larger shippers, it can be the case they enforce their fuel model onto all their carriers. The calculation behind the fuel surcharge can vary, but will always depend on some economical (price) indicator. For example: the maximum diesel price in a country, a consumer index or a function thereof.
As the market fluctuates, so does the indicator and hence will impact the fuel surcharge percentage. Generally, the owner of the fuel model will give an updated value to its partners at the end of the month.
As an example:
The carrier is issuing a fuel model that tracks the German maximum Diesel prices. The benchmark point of the diesel was 2016 with a value 1 corresponding to a surcharge of 2%, now the diesel price is 4, resulting in an updated surcharge of 8%.
Transmate's automated tracking
Transmate allows you to automate the diesel surcharge tracking. Transmate tracks various indicators and automatically calculates the fuel index for you based on your rules. Subscribed partners get a notification email with the modified fuel model attached.
Also, all rates are updated so the automated invoice auditing is using the correct values. This saves time in calculation, communication and freight auditing.