Freight costs and fuel surcharges can be volatile and unpredictable, making it challenging to quote customers fairly and accurately. If charges are too high, you risk losing business—too low, and you cut into your margins.

A fair and transparent approach ensures that customers understand the charges, you recover your costs, and pricing stays competitive. In this blog, we’ll break down how to calculate freight costs, apply fuel surcharges, and communicate pricing fairly.

Why Freight & Fuel Surcharges Matter
Freight and fuel costs fluctuate due to:

⛽ Fuel Price Volatility – Diesel and gasoline prices change frequently.
🚛 Carrier Rate Increases – Trucking, rail, and air freight costs shift due to demand.
📦 Weight & Distance Factors – Longer hauls and heavier shipments cost more.
🚦 Supply Chain Disruptions – Seasonal demand, weather, and global events impact pricing.

💡 Example: A company shipping steel sheets across the country sees fuel costs spike due to rising diesel prices. To maintain profitability, they need to adjust the fuel surcharge accordingly.

How to Calculate Freight Charges Fairly
Freight costs depend on distance, weight, mode of transport, and fuel prices. A fair quote should include:

✅ 1. Choose the Right Freight Calculation Method
There are three main ways to price freight:

✔ Flat Rate Pricing – Fixed price per shipment, regardless of distance.
✔ Weight-Based Pricing – Costs increase with shipment weight (e.g., per hundred pounds).
✔ Zone-Based Pricing – Different rates based on distance from shipping origin.

💡 Example: A distributor shipping aluminum coils may charge $2 per mile for deliveries within 300 miles and $3 per mile beyond 300 miles.

✅ 2. Factor in Freight Class & DIM Weight
Carriers classify freight based on size, weight, and handling requirements:

✔ Freight Class (NMFC Codes) – Determines pricing for LTL (Less-Than-Truckload) shipments.
✔ Dimensional Weight (DIM) – Used for lightweight, bulky items where space matters more than weight.

💡 Example: A shipment of lightweight tubing may be priced higher than heavier steel sheets if it takes up more space on a truck.

✅ 3. Compare Carrier Rates & Negotiated Contracts
To ensure fair pricing:

✔ Check multiple carriers (UPS Freight, FedEx Freight, regional trucking firms).
✔ Negotiate bulk discounts for frequent shipments.
✔ Pass on savings to customers where possible.

💡 Example: A company that regularly ships stainless steel bars can secure a discounted freight contract and pass partial savings to customers.

How to Apply Fuel Surcharges Fairly
Fuel surcharges help offset rising fuel costs without constantly changing base freight rates. These surcharges are usually tied to national fuel price averages.

✅ 1. Use an Indexed Fuel Surcharge Model
Most companies base fuel surcharges on:

✔ U.S. Department of Energy (DOE) Diesel Price Index
✔ Carriers’ own fuel surcharge tables (FedEx, UPS, major freight providers)
✔ Percentage-based adjustments (e.g., 5% surcharge per $0.25 fuel increase)

💡 Example: If fuel prices increase by $0.50 per gallon, a trucking company may adjust its fuel surcharge from 10% to 12%.

✅ 2. Use a Transparent Formula for Customers
Instead of a flat fuel charge, calculate a fair surcharge:

✔ Fuel Surcharge = (Fuel Cost Per Mile) × (Total Miles Traveled)
✔ Or use a percentage of the base freight rate (e.g., 8% of total freight cost).

💡 Example: A shipment traveling 500 miles with a fuel surcharge of $0.30 per mile would add $150 to the total freight cost.

✅ 3. Adjust Fuel Surcharges Regularly, But Fairly
✔ Update surcharges weekly or monthly based on fuel trends.
✔ Avoid drastic increases without explanation.
✔ Provide a breakdown on invoices so customers see why they’re charged.

💡 Example: Instead of a sudden 15% surcharge increase, a distributor gradually adjusts from 10% to 12%, explaining that diesel prices have risen by $1 per gallon over three months.

How to Communicate Freight & Fuel Surcharges to Customers
Clear communication builds trust and helps customers plan costs.

📄 List Freight & Fuel Charges Separately – Avoid lumping them together.
📈 Show Surcharge Adjustments Over Time – Provide historical data on changes.
📞 Offer Alternative Shipping Options – Expedited vs. standard rates.
🤝 Explain Contracted Carrier Discounts – If customers qualify for lower rates.

💡 Example: A supplier includes a fuel surcharge chart on quotes and invoices so customers understand fluctuations.

Final Thoughts: Fair & Transparent Pricing for Freight & Fuel
Pricing freight and fuel surcharges fairly ensures profitability while keeping customers happy. By calculating freight costs accurately, using indexed fuel surcharges, and communicating pricing transparently, businesses can build trust and long-term customer relationships.

🔹 Key Takeaways:
✔ Use fair freight pricing models – weight-based, flat-rate, or zone-based.
✔ Apply indexed fuel surcharges – based on national fuel price changes.
✔ Communicate pricing clearly – separate freight and fuel charges on invoices.
✔ Regularly review carrier rates – to stay competitive and pass on savings.

📦 Need to quote freight and fuel charges accurately? Follow these best practices to ensure fairness for your business and customers! 🚛💰