Buying fuel
Diesel is the largest cost that moves with the market. When and where it is bought, and how much is hedged, sets much of the cost per mile.
Freight and logistics · Fleet cost per mile and freight margin
More margin from every mile.
Fuel, freight rates and capacity can change by the hour, while most freight contracts are set once a year. Vadar Alpha helps shippers, carriers and brokers price each load, lane and gallon of fuel against today's market.
- For
- Shippers, carriers and brokers
- Decisions
- Fuel, dispatch, lanes, hedging
- Measured as
- Cost and margin per mile
- Start
- Days, not months
The problem
Costs move by the day. Freight rates move by the year.
Many freight contracts are set once a year, while fuel and spot rates can move by the day. For a shipper, that gap decides what each delivery really costs. For a carrier, it decides whether a lane earns or loses. For a broker, it decides the spread between the rate charged and the rate paid.
- 01
Fuel bought at the pump price
Diesel is often bought as trucks need it, at that day's price, with little of it hedged.
- 02
Empty miles go unpriced
Trucks return empty, or run routes set by habit, because the return leg was never priced.
- 03
Lanes priced on averages
A blended cost per mile hides the lanes that lose money, whether you charge a customer for them or compare them with a carrier's rate.
- 04
Sold at contract, bought at spot
Brokers sell many lanes at contract rates and buy the trucks at spot rates. In a tight week, a booked load can lose money before it moves.
How it works
Price each mile before the truck moves.
Each day, Vadar Alpha prices each lane against today's fuel, driver and equipment costs, loaded and empty. When a load, a route or a fuel purchase can cost less, dispatch or procurement gets an instruction: the saving in dollars, and the point at which it stops paying.
| Plan | Without | With Vadar Alpha | Plan range (low) | Plan range (high) | |
|---|---|---|---|---|---|
| Jan | $2.10 | $2.10 | $2.10 | $2.05 | $2.15 |
| Feb | $2.10 | $2.14 | $2.11 | $2.05 | $2.15 |
| Mar | $2.10 | $2.19 | $2.12 | $2.05 | $2.15 |
| Apr | $2.10 | $2.24 | $2.13 | $2.05 | $2.15 |
| May | $2.10 | $2.21 | $2.11 | $2.05 | $2.15 |
| Jun | $2.10 | $2.16 | $2.09 | $2.05 | $2.15 |
| Jul | $2.10 | $2.12 | $2.07 | $2.05 | $2.15 |
| Aug | $2.10 | $2.15 | $2.08 | $2.05 | $2.15 |
| Sep | $2.10 | $2.22 | $2.10 | $2.05 | $2.15 |
| Oct | $2.10 | $2.27 | $2.12 | $2.05 | $2.15 |
| Nov | $2.10 | $2.23 | $2.10 | $2.05 | $2.15 |
| Dec | $2.10 | $2.18 | $2.08 | $2.05 | $2.15 |
Three steps
- 01
Connect loads, lanes and fuel
We read your loads, lanes, fuel purchases and contracts from your transportation systems.
- 02
Price against the market
Each lane, load and fuel purchase is priced against today's fuel and freight rates.
- 03
Act, then measure
Dispatch, procurement and pricing get instructions. We score cost and margin per mile against the agreed baseline.
| Without | With Vadar Alpha | |
|---|---|---|
| Midwest | 34% | 52% |
| Southeast | 28% | 47% |
| Northeast | 31% | 44% |
What it earns
Fill the return leg at the right price.
Our fleet profitability white paper describes models suggesting 2 to 6% lower transportation costs for large fleets that price and forecast their capacity. Much of it comes from return legs that now earn.
In depth
A closer look at fleet cost per mile
Cost and margin per mile are the clearest single measures of freight performance. The decisions below move them most.
Dispatch and empty miles
Which truck takes which load, and whether the return leg is loaded, decides how many miles earn nothing.
Pricing lanes
Each lane has its own cost. Pricing it from that cost, not a blended average, shows the lanes that earn and the lanes that drain.
Hedging fuel
A hedge sized to the fuel the fleet will really use protects the year's cost per mile from a price spike.
Brokerage margin per load
For a broker or 3PL, the margin on a load is the rate charged to the shipper minus the rate paid to the carrier. Contract rates are set for months, while trucks are often bought at spot. Vadar Alpha tracks that spread lane by lane, with fuel surcharge recovery on both sides.
Air and intermodal fuel
Jet fuel and the fuel in rail and intermodal rates follow the same energy markets as diesel. The same method sizes each hedge to the fuel each mode will really burn.
What your team sees
One instruction. One owner. One number.
Every decision arrives as a plain instruction, with the dollars at stake, the reason, and the point at which it stops paying.
Measured as- Cost per mile
- Margin per mile
- Empty miles
- Fuel cost per mile
Lock in 50% of next quarter's fleet diesel at today's price for Q1.
+$210,000 protected
- Owner
- Fleet and risk
- Why
- Diesel for Q1 delivery is 9 cents a gallon below today's price. This stops paying if fuel use falls 20%.
- Measured as
- Fuel cost per mile
TakeOverride
Questions
Questions we hear most.
What is a truck's cost per mile?
The total cost of running a truck divided by the miles it drives, including fuel, driver pay, equipment, maintenance and insurance. Vadar Alpha prices each lane against its own cost per mile, loaded and empty, so you know what a mile costs before dispatch.
How do you price a lane?
From its own costs, such as fuel, driver and equipment, and the chance of a paid return leg, at today's prices. A shipper can compare that with a carrier's rate. A carrier can compare it with the rate it quotes. Either way, the lanes that lose money stand out.
Can we hedge diesel?
Yes. Diesel can be hedged with futures, swaps or fixed price supply contracts. Vadar Alpha sizes each hedge against the fuel your fleet will really use, and shows what it protects in dollars.
How is a fuel surcharge calculated?
A common method takes this week's diesel price, subtracts the base price in the contract, and divides by the truck's miles per gallon. At $3.85 diesel, a $1.25 base and 6.5 miles per gallon, that is $0.40 a mile. Vadar Alpha compares what the surcharge recovers with the fuel each lane really burns.
We are a broker, not a fleet. Does this apply?
Yes. A broker's margin on each load is the rate charged to the shipper minus the rate paid to the carrier. Vadar Alpha prices both sides against today's market, so you see which contract lanes are losing to spot rates before you book the next load, and how much of the fuel surcharge you recover.
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