Wednesday, 8 March 2017

Rising fuel prices will feed into freight and logistics costs for UK importers and exporters

It's one of those very gradual changes that you may have only just begun to notice - but here in the UK, unleaded petrol fell to £1.00 per litre at the end of 2015, as crude oil prices fell to a seven year low.

Unleaded petrol falls to £1.00 per litre!

Since then the price has been inching up, to the point where we're now over £1.20 per litre - pretty annoying if you use your car to do a daily commute - but also remember that these increases are already feeding into logistics costs. I took this photo only this morning here in Warrington where our company Straightforward Consultancy is based.

With ocean freight, we are seeing rises in bunker adjustment factor (BAF) a variable surcharge applied on top of core ocean freight rates and this is at the same time that the US dollar is at a historic all time high - circa USD 1.20 - why does that matter?

Because freight rates and surcharges for ocean are constructed in USD so there's a double whammy going on here. Even after your container has landed (or before it's loaded for export) fuel surcharges linked to container collection and delivery costs are being affected as most shipping lines and freight forwarders will have a base delivery price (lump sum) with a variable factor for fuel surcharge, so another area where fuel prices are increasing your costs.

On the air freight side, fuel surcharges are affected as jet fuel prices have a direct link to the price of crude and again, most air freight rates are constructed in US Dollars.

So, do yourself a favour and find out exactly what you're being charged by your logistics provider - and if our experience since 2010 is anything to go by, you're probably paying around 35% more than we could achieve and you may not have proper controls in place to ensure your freight costs remain market competitive. 

Why do I say that? Because we see this, month on month and it's a shame, because you really should ensure that you have a tight control on this area, not just because of basic financials, but also from a Customs compliance angle too - you could be wasting money on unnecessary import duties because of a loose or out of date process. Or worse, under-declaring to HMRC and risking a large fine.

Andy Cliff is an industry professional who launched his own logistics consultancy, Straightforward Consultancy Ltd (SCL) after a 30 year career in international logistics, working for companies such as DB Schenker, Kuehne & Nagel and DHL Global Forwarding in operational, sales and management roles. 

Andy was part of the judging panel for the 2016 Global Freight Awards, his second year in this prestigious role. The awards recognize quality, innovation and performance in the field of international logistics. 

Andy felt that in an increasingly complex and confusing world of logistics, UK importers and exporters needed a company alongside them which could help them to reduce costs, lessen their workload and provide expert advice and support day-to-day.