Fuel Surcharge Mistakes Costing Carriers Money on Every Load
Fuel Surcharge Gaps: What Carriers Miss on Every Load
Fuel surcharges are intended to protect carriers from sharp changes in diesel prices. But according to Matt Cartwright, CEO and founder of Magnus Technologies, many fleets are not recovering the full cost of the fuel used to move each load.
The problem is often not the absence of a surcharge provision. It is the gap between how the surcharge is calculated and what the truck actually consumes during a trip. Without load-level visibility, carriers may invoice using a standard formula while overlooking differences in mileage, routing, idling and operating conditions.
“A lot of times there’s an education consideration for their customers,” Cartwright said. The purpose of a fuel surcharge, he explained, is to help neutralize fuel-price risk so carriers do not shoulder the entire burden when diesel prices rise.
Magnus tracks published fuel indexes, including data from the U.S. Energy Information Administration, to provide a benchmark for carriers and shippers. Those indexes can serve as a common reference point, but Cartwright said a benchmark alone does not show whether a particular load generated enough fuel recovery.
The missing calculation is often the difference between expected fuel cost and actual fuel use.
Magnus’s system uses operational data such as truck location, pickup and delivery points, miles driven and idle time to estimate the fuel consumed on an individual load. It then compares that cost with the amount recovered through the applicable fuel surcharge, customer contract or index-based formula.
That comparison can reveal gaps that are difficult to see in a fleetwide average. A truck that spends additional time idling at a customer, encounters an inefficient route or travels more miles than initially expected may burn significantly more fuel than a basic surcharge calculation anticipates. If the invoice does not reflect those conditions, the carrier absorbs the difference.
Cartwright said some fleets also have contractual flexibility that they have not used. The issue, he said, is that many carriers lack software capable of applying changing surcharge rules automatically and consistently. As a result, a carrier may have the right to adjust its charge but fail to do so during the invoicing process.
For drivers and fleet managers, the effect is ultimately tied to the economics of each load. Fuel is one of the largest variable expenses in trucking, and small unrecovered amounts can accumulate across many trips. A carrier may appear to be collecting a fuel surcharge while still losing money on the fuel portion of the operation.
Magnus describes its platform as a quote-to-cash transportation management system. In addition to fuel calculations, it combines order management, electronic data interchange integrations, fuel-card data and invoicing. The goal is to connect what was quoted, what the truck actually did and what the customer was billed.
That connection can also give carriers a faster response when diesel prices move. If a surcharge is tied to an index, software can help update the applicable rate and carry it through the billing process. If the contract uses a customer-specific formula, the system can apply those terms while preserving the operational data used to support the charge.
Magnus began in automotive transportation, with Cartwright tracing the company’s roots to United Road in 2001. The company remains a major software provider in vehicle freight, but it is now expanding into for-hire dry van and general freight markets.
The expansion is aimed in part at smaller carriers. Cartwright said roughly 90% of U.S. fleets operate 10 trucks or fewer, a segment he characterized as underserved by enterprise transportation technology. Smaller fleets often have fewer administrative resources, making manual fuel calculations, contract reviews and invoice adjustments more difficult to manage.
For those operators, the issue is not necessarily adopting more complex processes. It is gaining a clear view of whether the process already in place is recovering the cost of operating the truck. Load-level reporting can help identify recurring problems, including excessive idle time, inaccurate mileage assumptions or surcharge terms that are not being applied as written.
The company is also seeking to reduce its exposure to the automotive sector by serving other freight markets. Cartwright cited the concentration of large original equipment manufacturers and other major customers in automotive freight as a reason for diversification. A carrier that depends heavily on a small number of customers can face significant disruption if one relationship changes, he said.
Magnus also promotes continuous shipment visibility through GPS timestamps, QR-code gate controls and a driver-facing mobile application. Cartwright said the app is branded for Magnus rather than for a shipper or broker. He connected that structure to legal questions about driver control and agency, referencing a Dallas County case involving a borrowed-employee finding in which the use of a C.H. Robinson-branded app was discussed.
Cartwright said a company-branded driver application is intended to facilitate work without asserting control or agency over the driver. The broader purpose of the system, he said, is to provide a consistent chain of custody and operational record from pickup through delivery.
For carriers, the fuel-surcharge issue comes down to measurement. A contract may establish how fuel recovery is supposed to work, but the carrier still needs accurate miles, fuel use, idle time, index data and invoicing controls to determine whether the formula is protecting the load’s margin.
Without that information, the gap can remain hidden in aggregate financial results. With it, fleet managers can identify where recovery falls short and determine whether the cause is a contract term, a billing error or the actual way a load was operated.
