When Fuel Prices Rise, Network Inefficiency Costs More

The U.S. average price for on-highway diesel rose to a record $6.285 per gallon for the week ending September 14. That was an increase of 31.8 cents in one week and $2.546 from a year earlier, according to the U.S. Energy Information Administration.

For shippers already managing tight margins, changing demand and rising service expectations, higher diesel prices are the current disruption their transportation networks must absorb.

Shippers cannot control what happens at the pump. They can control how efficiently their transportation network responds.

Higher fuel prices expose the weaknesses in a transportation network. Unnecessary miles, poor route sequencing, underutilized equipment, and outdated minimums and frequencies may already be increasing transportation costs. When diesel rises, those existing problems become much more expensive.

That is why a fuel increase should prompt more than a review of the fuel surcharge. It should prompt a closer look at the network itself.

See what rising fuel costs may be exposing in your transportation network.

Why Higher Diesel Prices Expose Network Inefficiency

We’ve said for years that networks degrade over time.

A transportation network may have been well designed when it was created, but the business around it does not stand still. Customers change. Volumes move. New facilities open. Service expectations increase. Minimums and frequencies are adjusted. Routes, modes and delivery schedules that once made sense may no longer be the best fit.

These changes rarely happen all at once. They accumulate gradually, making the resulting network inefficiency difficult to see. Freight continues to move and customers continue to receive their orders. On the surface, everything may appear to be working.

Underneath, however, the network may be adding miles, dispatching equipment before it is fully utilized, relying on outdated delivery sequences or absorbing detention and accessorial charges that have become routine.

Higher diesel prices do not create these problems. They expose them, and make them harder to ignore.

How Fuel Costs Affect the Entire Transportation Network

A fuel increase affects the entire transportation network. The opportunity is not simply to identify a few expensive lanes. It is to understand which operating decisions are increasing the network’s total exposure.

Start with the miles being driven. Are routes still sequenced around current customers and volumes? Are trucks traveling unnecessary miles between stops? Are delivery territories creating avoidable overlap?

Then look at minimums and frequencies.

The minimum order required for delivery and the frequency of those deliveries directly affect equipment utilization, route density and total miles. If those standards were established years ago, or granted customer by customer without considering the network as a whole, the business may be moving smaller orders more often than necessary.

We stress minimums and frequencies because they are among the most practical levers a shipper can evaluate. Adjusting them does not automatically mean reducing service. It means using the data to determine whether the current service model still makes operational and financial sense.

A small adjustment to a delivery schedule may create a better consolidation opportunity. A revised minimum may help fill equipment more effectively. Aligning customers within a delivery area may reduce miles while preserving the level of service that matters.

Private fleet utilization should also be evaluated alongside outside capacity. The right answer is not always to place more freight on the private fleet, or to outsource more of it. The answer depends on cost, equipment availability, geography, customer requirements and the way demand changes throughout the week.

Recurring detention and accessorial charges deserve attention as well. Across an entire network, they may point to a facility, scheduling or process problem that is adding cost week after week.

This is why cost-to-serve visibility matters. Freight expense should be understood by lane, customer, supplier, case, pound, mode and equipment type. Without that visibility, it is difficult to know which operating changes will make a measurable difference.

Why Lower Lane Rates Don’t Fix Network Inefficiency

When transportation costs increase, the natural reaction is to renegotiate rates. But the rate paid on an individual lane may be one of the smallest levers available to a shipper. The larger opportunity is often in how freight moves across the entire network.

A lower rate will not eliminate unnecessary miles, improve route sequencing, increase equipment utilization or correct outdated minimums and frequencies. It may reduce the price of an inefficient move, but it does not remove the inefficiency.

The same principle applies to changing carriers, adding trucks or buying new technology. Those steps may eventually be appropriate, but they should not come first.

Analysis should come before execution.

How Network Analysis Helps Shippers Control Costs

A network analysis brings shipment, route, facility, customer, service and cost data together. It helps the business understand what has changed, where current practices no longer align with demand and which improvements should take priority.

The analysis should answer practical questions:

• Where are we driving miles that are no longer necessary?
• Are routes and stops sequenced efficiently?
• Do our current minimums and frequencies support effective consolidation?
• Are we using the right mix of private fleet and outside capacity?
• Which detention, accessorial or service issues keep recurring?
• What can we change without weakening customer service?

The goal is not to produce another report. The goal is to identify the opportunities that matter, prioritize them and execute the changes.

At NT Logistics, NTelligence™ provides the cost-to-serve visibility needed to diagnose the network and measure the results. Our people then help put those findings into practice through managed transportation, brokerage and ongoing execution.

Technology can reveal the opportunity. Experienced people still have to make it work.

Control the Network’s Response

No shipper can predict exactly where diesel prices will go next. Waiting for certainty is not a transportation strategy.

The better response is to understand how the network is operating today and address the inefficiencies that become more expensive when fuel rises.

You cannot control the price of diesel. You can control how efficiently your network responds.

See what rising fuel costs may be exposing in your transportation network.