Cash Flow Issues a Serious Worry, especially for Smaller Firms, as some Shippers Say they Cannot Pass along Rising Freight Rate to their own Customers

Surging diesel prices are hitting the bottom lines and especially the cash flow of truckers hard, especially smaller carriers.

Supply Chain Digest Says...   The Wall Street Journal noted that smaller are taking steps such as ordering drivers to limit idling and cutting their speeds. Some are even turning away longer-haul loads to focus on shorter run What do you say? Click here to send us your comments Click here to see reader feedback

It’s one kind of sticker shock to see the price at the pump after a consumer fills up a 16-gallon tank with gasoline.

Now put yourself in a trucker's place after filling up a 200-gallon tank on a big rig with diesel, which like gasoline has recently surged to record levels. The pump is now showing a cost of close to $1000, if not more. This week a TV station in Norfolk, VA reporting a pump reading of more than $1100 at a local truck stop.

It’s costing truckers just a little less than double to fil up a tank versus this time a year ago. It can cost some carriers a dollar per mile just in fuel cost, increases that carriers, especially smaller ones, have trouble passing along to customers in the form of higher rates or fuel surcharges.

The surcharges are based on weekly averages, and generally a week out of synch, which hurts trucker in period of rapidly rising diesel prices. And independent own-operators have long complained they are not getting all the surcharge revenue being paid by shippers to the trucking firms that send loads to the independents.

An executive at JSG Trucking Company in Acampo, Calif., which operates 20 trucks, told the Wall Street Journal last week that shippers have been slow to accept price increases that match rising costs of diesel, forcing the company to delay repairs and other expenses to save money in the short term.

The national average price for “on the road" diesel is up more than $1.50 since the start of the year, according to the US Energy Information Administration’s weekly report.

Larger carriers often have the financial means to weather the delay between when service is provided to a shipper and when they actually get paid 30 t0 45 days later. But smaller carriers awaiting payment in a time of rapidly rising fuel expense may be challenged to manage the cash flow.

"I’m more worried about cash flow as these prices go up, because they’re not getting paid from their customer for probably 30 days or more,” Bob Costello, American Trucking Association Chief Economist, recently told Bloomberg.com.

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In a March 10 letter addressed to President Biden, American Trucking Association president Chris Spear also noted that smaller trucking companies are at risk of total failure because they lack the resources to withstand the increase in fuel costs.

The failure of these small motor carriers, in turn, could unleash “catastrophic consequences for a supply chain that’s already overstressed,” the Spear letter said.

The Wall Street Journal noted that smaller truckers are taking steps such as ordering drivers to limit idling and cutting their speeds to reduce fuel consumption. Some are even turning away longer-haul loads to focus on shorter runs that burn less fuel.

Others are trying to get loads directly with shippers rather than work through brokers, which have at times also been accused of keep a share of the fuel surcharges shippers pay.

Some shippers tell truckers they can’t pay for the rising diesel costs because they are unable to pass on the rising expense to their own customers.

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