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Fuel Surcharge Management

What is Fuel Surcharge Management?

Fuel surcharge management maintains dynamic fuel surcharge calculations that adjust transportation rates based on current diesel fuel prices. Most carrier contracts and many customer agreements include fuel surcharges that fluctuate with the Department of Energy's weekly fuel price index. TMS.ai's fuel surcharge tables store the calculation methodology (base fuel price, price brackets, surcharge percentages) and automatically add the appropriate fuel surcharge to base rates when quoting or rating freight. This ensures your pricing reflects current fuel costs without manually updating every rate in your system every week.

Fuel surcharges protect your margin from fuel price volatility. When diesel prices spike, your costs increase. If you're locked into flat customer rates without fuel surcharges, you absorb those cost increases and your margins shrink. With properly configured fuel surcharges, your customer rates adjust automatically as your carrier costs increase, maintaining consistent margins regardless of fuel price fluctuations.

How Fuel Surcharge Management works:

  1. Navigate to Rating and select Fuel Surcharges. Access the fuel surcharge management area where you'll build and maintain your fuel surcharge calculation tables for both customer and carrier fuel surcharges.
  1. Click "Create Fuel Surcharge Table" to build a new calculation. The creation interface opens where you'll define the surcharge name, base fuel price, price brackets, and surcharge percentages that apply at each bracket.
  1. Name the fuel surcharge table descriptively. Use names that clearly indicate what this surcharge applies to, like "Standard Customer FSC - DOE Index" or "Carrier ABC FSC Schedule." If you have different surcharge structures for different customers or carriers, distinct naming helps avoid confusion.
  1. Set the base fuel price for the calculation. Enter the fuel price baseline that triggers zero surcharge. For example, many surcharges use $1.20 per gallon as the base. When the actual fuel price is at or below this base, no surcharge applies. When prices exceed the base, the surcharge kicks in.
  1. Define price brackets and surcharge percentages. Create a table showing fuel price ranges and the corresponding surcharge percentage for each range. Example structure: $1.21-$1.30 = 2% surcharge, $1.31-$1.40 = 4% surcharge, $1.41-$1.50 = 6% surcharge, and so on. This stepped structure is standard in the industry.
  1. Choose the fuel price index to reference. Select which Department of Energy regional diesel price you'll use (U.S. average, East Coast, Midwest, Gulf Coast, Rocky Mountain, or West Coast). This determines which weekly fuel price the system references when calculating the current surcharge.
  1. Set the update frequency and lag time. Specify how often the fuel price updates (typically weekly on Monday following the DOE release) and if there's a lag between price publication and application (many companies apply the DOE price with a one or two-week delay to smooth volatility).
  1. Save the fuel surcharge table. Once configured, save the table and set its status to active so it's available for use in customer rate tables and carrier tariffs.
  1. Link fuel surcharge tables to customer rates and carrier tariffs. When creating or editing a customer rate table or carrier tariff, select the appropriate fuel surcharge table in the fuel surcharge field. This tells the system to add the calculated surcharge to base rates from that table.
  1. The system applies surcharges automatically during rating. When the rating engine pulls a base rate from a table with a linked fuel surcharge, it calculates the current surcharge based on this week's fuel price and adds it to the base rate. The line item breakdown shows the base rate and fuel surcharge separately for transparency.

What it means for you:

Your pricing stays current with fuel markets automatically. When diesel prices jump 30 cents per gallon, your customer rates adjust upward through fuel surcharge recalculation without manually updating hundreds of rates in your tables. Your margin stays protected because you're passing through fuel cost increases that your carriers are also passing to you.

This automation also ensures consistency between what you charge customers and what carriers charge you. If both your customer FSC and carrier FSC reference the same DOE index, they move in lockstep. Your fuel surcharge revenue from customers matches your fuel surcharge costs from carriers, and the base rate margin stays stable regardless of fuel price swings.