DC Velocity - March 2016

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American Baler_DC Velocity Magazine.indd 1 2/9/2016 11:22: 23 AM 48 DC VELOCITY MARCH 2016 www.dcvelocity.com and beneficial discipline on carriers to improve their operations.

Caplice added that 99 percent of
the industry still uses a peg, although
several high-profile companies and
huge shippers like Charlotte, N.C.-
based Chiquita Brands International
Inc. and Chicago-based Kraft Heinz
Co. have adopted the zero-peg for-
mula. Dickman offers a different
view: About 68 percent of its shipper
customers don’t use a peg, up from

7. 5 percent in 2011, he said.

Real-time pricing visibility and
transparency, which can only be
realized through information tech-
nology, is critical to distance the industry
from the peg formula. Today, sophis-
ticated tracking software can update
diesel prices each day—sometimes mul-
tiple times a day—across a network of
thousands of truckstops and service
stations. At Breakthrough Fuel, ship-
pers transmit their daily lane activity,
which Breakthrough then runs through
its systems to produce real-time fuel
price data at all truckstops appearing on
every requested lane. Breakthrough ana-
lyzes how fuel taxes, which vary from
state to state, affect overall prices and
provides market intelligence to accompa-
ny the data.

Dickman acknowledged that even sophisticated shippers have said its system takes some getting used to. Eventually, though, they gain better visibility into the role that fuel plays in their cost structure, he said. Dickman said his model goes a step further than a “zero peg” approach by creating a “surcharge free” mechanism for fuel reimbursement based on real-time rates that are sensitive to time, geography, and taxes. A carrier is fairly and accurately reimbursed for its costs based on the way it purchases fuel and pays applicable taxes, he said.

Lee of ProMiles said his firm’s database, which can be updated every half hour, covers about 5,000 truckstops and service stations each day, compared with EIA’s survey of 400 truckstops and service stations each week. Lee added that ProMiles’ surveys exclude truckstops that also pump automotive diesel because those prices tend to skew the overall price trend higher. As a result, the average truck diesel prices in ProMiles’ database are usually 2 to 6 cents a gallon below the average EIA prices, he said.

Advocates of the “zero peg” approach said the shift would not save shippers money. Carriers will be paid the same, whether it is in the form of higher fuel surcharge revenue or increased line-haul rates, they said. What will happen, they argued, is that shippers will have the confidence of knowing their fuel costs are exactly what they think they should be, and that both shipper and carrier will gain if fleet and network efficiency are improved.