Does the price of Fuel impact Print Production costs?

The national average for the price of gasoline today is $2.81 per gallon. But the price of gasoline has nothing to do with the equation. It is the price of diesel fuel that has an impact on print production costs. The average price per gallon of diesel fuel is $2.92, an $0.11 per gallon difference. And the price is higher today than it was a year ago by $0.067. Now that doesn't seem like much but it is significant because prices are on the rise and winter is coming.

Economics 101
Sorry for the economics lesson but in order to understand the significance let's consider just a couple of factors. Fuel Prices are already high in the mid-west and IF we have a bad winter (meaning lot's of cold and snow) combined with a shortage of refineries and lot's of competition from overseas markets for fuel oil (Asia and Europe) the price of diesel fuel will continue to rise to all time highs. Now throw in just one hurricane in the Gulf of Mexico (that shuts down production and refineries) and we will be toast. Here endth the lesson.

OK so why is diesel higher than gasoline it didn't used to be?
That's very true diesel prices before 2004 were always lower than gas. For this I will give you the Department of Energy's explanation;
Until several years ago, the average price of diesel fuel was usually lower than the average price of gasoline. In some winters when the demand for distillate heating oil was high, the price of diesel fuel rose above the gasoline price. Since September 2004, the price of diesel fuel has been generally higher than the price of regular gasoline all year round for several reasons. Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe, and the U.S., putting more pressure on the tight global refining capacity. In the U.S., the transition to low-sulfur diesel fuel has affected diesel fuel production and distribution costs. Also, the Federal excise tax on diesel fuel is 6 cents higher per gallon (24.4 cents per gallon) than the tax on gasoline.

Alright so let's put it all together...
The cost of fuel is high, it is going to remain high, and if foreign competition is will to pay more per barrel for oil, then we are going to lose out.

So what if I buy my print in Asia?
Cost of fuel is still high, but labor and living conditions are low so it balances out you can only work a human for low pay for so long...ever here of sweat shops? I don't think it is a win to print in Asia, and with all of the substandard products coming out of that part of the world are you really willing to sacrifice cost for potential hazardous chemicals?

What can I do?
The best thing to do in today's market is to look at suppliers that can produce your job close to the destination thereby reducing freight costs. If the job is shipping to two locations seriously look for split production not split shipping. The cost of production may be higher BUT you may save overall, by reduced freight. Print Buyers should seriously evaluate freight cost first when determining production then look at the total cost for the job not just production price not just freight but the total. In today's market it is extremely important to consider freight. I have stated in an earlier post that I had a customer that routinely evaluated freight and made production decisions based on that. Now if you are using a procurement system it should have the ability to break freight out as a separate line item in pricing and to go one step further it should also be able to sub-total your production costs and your freight costs. If your procurement system doesn't allow for freight as a line item then get a new system! I am betting the cost savings in freight alone will pay for a GOOD procurement system. If your suppliers are not breaking freight out then ask them too. Don't let them give you excuses either because if they think they might lose the job because of their freight price they will hesitate to provide it. Also, now is the time to be supplier shopping. Look at your shipping destinations closely and then start looking for suppliers that are in those areas that can provide the same services that Charlie down the street is providing, just at $250.00 per shipment more. A little trick that the big boys have learned is...When a large print supplier is involved and you know the companies I am talking about, they have figured out that, if you have a job that is shipping to Cleveland and your quoting with the plant in Dallas they will get the quote from the Dayton plant and then estimate freight from Dallas for the quote. Then when you order they will produce in Dayton and charge you for shipping from Dallas. So another question I would be asking your suppliers in the quote is; where is the producing facility located? If you ask that question and get a response of; "Why is that important? OR it doesn't matter! OR my favorite...we haven't determined that yet. (Yeah right) They knew EXACTLY where they were going to produce this the minute that quote came in the door!! With the press operating systems that these major printers have they know when the pressman is on coffee break and when he will return to the press halfway across the world.

Summary
There are lot's of options available to help you cut freight costs and you need to be taking advantage of each and every available option. I also encourage you to share those little tips and tricks with your peers. If you have an idea as to haw to save money or save on freight costs post a comment to my blog. I will share all ideas with the rest of the readers. If you want to know more about diesel fuel costs go to the DOE website located here.