Caught in the Middle of the Energy Crunch
Reprint Permission by Author: Donna Dukes-Huston, Seaford Star Newspaper
Most economists may not be ready to say that this country is in a recession, but we can all agree that since the price of fuel has increased dramatically, the price of almost everything else we buy has gone up as well. This has made the job of transportation brokers even more difficult.
“It is the main job of a broker to find trucks of all shapes and sizes to move freight for its portfolio of customers,” said Dan Dobson, Manager of the New Business Development Unit at Trinity Transport, Incorporated of Seaford.
“We’re a lot like e-harmony.com,” he added. “We’re essentially matchmakers.”
While the job of a matchmaking service is to set up a connection with two parties, the role of a transportation intermediary, such as Trinity, is far more complex. As the “middleman,” Trinity must try to meet the needs of both its customers and its carriers. This task has become increasingly more difficult with the surge in diesel fuel prices.
Since truckers must pay for their fuel upfront, brokers must try to ensure fair compensation from its customers for these price increases. One way which Trinity tries to take care of the carriers is to provide a fuel surcharge based on current fuel prices.
According to Dobson, some customers dictate the surcharge; for those who do not, Trinity determines this charge.
Each week Trinity’s marketing department produces a newsletter which contains updated fuel pricing which they receive from the Department of Energy. From these numbers, the surcharge that Trinity offers is determined. As the price of fuel fluctuates, the surcharge does as well. This week’s surcharge might be 37% of the line haul (freight rate per mile), which is what Trinity charges the customer. This charge was under 20% a year ago.
Dobson said that this surcharge is passed on either as part of a total rate quote to the carrier or as a separate line item to the carriers. Trinity provides its carriers a contract which is broken down into line haul charges, fuel surcharges and any other accessorial charges which could include unloading and stop charges.
It is also the responsibility of the broker to protect its customers who may also be suffering due to the increase in fuel prices.
“Fuel is affecting both sides of the equation,” Dobson added.
Depending on the type of business in which a customer is engaged, that business may also be incurring more costs to operate due to fuel increases. For example, one of Trinity’s customers is a clam business. This company owns 30 plus ships which all run on diesel fuel which is now costing more to operate, thus decreasing their profit margins. This company must rely on its brokers to keep those margins from decreasing further.
“They negotiate with Trinity to get a better deal on their end,” Dobson said.
Every transaction (load) is negotiated with the carriers, according to Dobson. No standard rates are offered to carriers due to the fluctuations in the marketplace which obviously include fuel.
The change in the economy has also led to changes in the trucking business. The supply of trucks is currently greater than the number of goods being produced that need to be shipped. Dobson said that, as a result, many trucking companies are selling parts of their fleets to foreign businesses.
“Overseas companies are attracted because their currency is strong against the dollar,” he said.
Dobson said that Trinity’s business has managed to remain steady despite these obstacles, but it has not seen the geometric growth of late that it has experienced in the past.
“We’ve had to tighten up and look for new ways to do business,” he said.
Dobson said that some carriers are attempting to bypass the broker and go directly to the customer to arrange shipment in order to allegedly cut costs. Dobson said that cutting out the broker can actually cost the customer more money in the long run if the carrier he uses is not reliable.
Before Trinity matches a customer with a carrier, its Carrier Compliance Department has thoroughly investigated the carrier using its Motor Carrier Authority number.
“Trinity only deals with carriers who have a Motor Carrier Authority Number (aka an MC Number),”
Dobson said. “That way we can ensure that our customer is dealing with a legitimate, solid trucker who we have a way of checking out thoroughly.”
Dobson feels that Trinity adds value that saves the customer time and money.
Trinity’s customer sales department does not simply take the freight order and pass it on to the carrier. Representatives also make appointments for the customer and determine if the customer’s and carrier’s delivery terms are feasible. Dobson said that going through a broker can also save customers money by not having to staff its own traffic department with people to do the things Trinity does for them.