When margins tighten and freight rates spike, every mile matters
For steel service centers, flat-rolled coil may be the product—but logistics is the engine that keeps the machine moving. As freight rates fluctuate and fuel surcharges eat into margins, the Vice President of Purchasing must weigh more than just steel price per ton. Shipping dynamics can make—or break—deal profitability, especially when lead times are tight, lanes are congested, or capacity gets scarce.
1. Understand the Freight Equation
Before you can manage freight, you have to understand what’s in the bill:
Base freight rate: Usually quoted per mile or per ton.
Fuel surcharge (FSC): Volatile and indexed weekly, based on DOE fuel averages.
Accessorial fees: Charges for detention, lift gate, tarping, or redelivery.
Lane premiums: Certain regions (e.g., Northeast urban zones or remote Western sites) carry consistent surcharges.
Negotiating steel coil contracts without factoring logistics is like buying a car without checking insurance costs.
2. Segment Suppliers by Shipping Strategy
Not all suppliers should be treated equally when it comes to freight:
Local mills (under 250 miles): Consider FOB mill and arrange your own freight.
Regional suppliers (250–800 miles): Evaluate delivered pricing vs. in-house freight rates.
National/international sources: Use CIF or DDP terms when possible to mitigate risk and delay.
Ask each supplier whether their freight quote includes FSC indexing, and lock in your preferred fuel baseline during periods of low volatility.
3. Monitor Fuel Index Fluctuations Weekly
DOE fuel indexes shift every Monday. Set a process to review them weekly and adjust your projected freight rates accordingly. If diesel prices rise $0.40/gal over two months, and you’re moving 1,000 tons of flat-rolled coil per week, you could be bleeding tens of thousands in surcharges. Predictive tracking tools can alert you when to re-price freight-in costs or renegotiate FSC thresholds.
4. Build Regional Freight Maps by Product Type
Not every product travels equally. Hot-rolled coil, often purchased in bulk, travels best in long-haul flatbeds. Galvanized coil, prone to surface damage, needs more careful handling and often rides better on dedicated lanes. Construct product-specific regional maps that show:
Preferred carriers per region
Average transit time
Accessorial risk zones
Lane congestion alerts
Knowing how each type of steel behaves in transit helps you match freight strategy to material sensitivity.
5. Consolidate Loads to Avoid Partial-Rate Penalties
Partial truckloads kill margins. Work closely with operations and sales to consolidate orders across product lines and customers. Even better: implement load planning software that batches shipments by zone, tonnage, and due date. It’s better to wait 24 hours and ship a full 48,000 lb load than pay 75% of the cost for 50% of the truck.
6. Build a Carrier Portfolio That Includes Niche Players
National carriers offer consistency, but niche regional haulers often provide better service on short and mid-range lanes. Build a mix that includes:
Core carriers: For regular, high-volume lanes.
Spot carriers: For overflow or surge demand.
Niche haulers: For high-risk or specialty coil shipments.
Evaluate them quarterly on cost per mile, on-time performance, and claims ratio.
7. Use Delivered vs. FOB Pricing as a Strategic Lever
Many buyers default to FOB mill and arrange their own freight—but that isn’t always the smartest move. In tight capacity markets, shift some orders to delivered pricing and make the supplier eat the logistics risk. In soft freight markets, go FOB mill and take advantage of your own negotiated rates. Flexing between both options lets you extract value depending on macro conditions.
8. Track Detention and Delay Fees Like KPIs
Your freight invoices often hide the silent killers: detention charges, late loading fees, and delivery delays. Monitor these fees as key performance indicators (KPIs) and assign root-cause ownership. If a customer causes 50% of delays, renegotiate their delivery windows. If your own yard is causing driver wait time, fix the dock scheduling. Every minute over an hour can cost you—and your relationship with the carrier.
9. Maintain Freight-in as a Separate Line Item in Cost Models
Too many centers blend steel cost and inbound freight into one CWT figure. Separate them. Freight-in deserves its own tracking so you can see which suppliers or products are inflating logistics costs. Use this data to redirect volume to better-performing lanes or justify customer-specific freight surcharges.
10. Develop a Freight Surge Protocol
When freight capacity evaporates—during storm seasons, diesel spikes, or economic rebounds—you need a playbook. Create a freight surge protocol that includes:
Approved emergency carriers
Pre-cleared premium rates
Customer communication templates
Tonnage prioritization guidelines
This lets you act swiftly during disruptions, protecting both customer service and internal cost controls.
Conclusion
In the flat-rolled steel world, what you pay for the coil matters—but how you move it may matter more. As fuel prices swing and freight lanes tighten, logistics becomes a core pillar of purchasing strategy. For the VP of Purchasing, mastering freight means mastering margin. It’s time to see logistics not as overhead, but as a competitive edge you can actively control.
