Retailers should take advantage of the diesel price drop to cut costs

By Camila Affonso, partner at Massimo Consulting

Retailers are facing an opportunity to reduce logistics costs thanks to the drop in diesel prices, which fell 34% over the trailing 12 months, according to July data from Brazil's National Agency of Petroleum, Natural Gas, and Biofuels (ANP). Since diesel accounts for 30% to 35% of road freight transportation costs in the country, according to the National Association of Cargo Transportation and Logistics (NTC & Logística), the potential to renegotiate freight rates can benefit not only retail companies but also be reflected in the final price of products.

However, the benefits of this cost reduction are not automatic. Transportation prices set in contracts more than 12 months old reflected more expensive diesel, but in general, there are no clauses adjusting rates according to fuel price fluctuations. This is the ideal moment for companies to revisit negotiations and run open bidding processes to contract carriers.

Renegotiating with current suppliers has the advantage of keeping an experienced team in that operation, but the disadvantage of less significant price reductions. On the other hand, by running a bid and attracting several companies interested in the contract, the retailer may be able to secure more competitive costs. In this case, they will need to implement the supplier change, stabilize the operation, and develop it until it reaches the ideal point.

To design an efficient bid, it is necessary to consider the needs of each type of retailer. It's not enough to look at price alone: depending on the product being transported, certain safety requirements must be met, or specific licenses may be needed, such as for refrigerated cargo or chemical products. In addition, high-value-added brands need to invest in logistics that guarantee the required service level. That's why the first step is to map out which transportation providers have the capacity to meet the company's requirements.

It is also essential to have an appropriate methodology to make the bidding process more efficient. Among the main points are: gathering qualified carriers and applying targeted questionnaires to assess various items that score and rank the participating suppliers. The study should evaluate not only the costs and services included, but also warehouse locations, which can directly impact tax planning, among other factors.

Massimo Consulting's work also covers negotiation (a phase in which mastering the logistics cost structure is essential), contract drafting, and the implementation of the new supplier, from stabilization through the operation's ramp-up. Beyond transportation, the methodology is also valid for logistics operator and warehousing bids — areas in which Massimo Consulting has extensive experience across Brazil and Latin America, with indicators appropriate to each region and market best practices.

Impartiality and deep operational knowledge, combined with an understanding of how the operation fits into the client's positioning strategy, are Massimo Consulting's main differentiators, whose focus is to provide the agility and peace of mind needed for this type of transition.

*Camila Affonso is a partner at Leggio Group, Director of the Infrastructure Department at FIESP, holds a Master's in Corporate Finance from the Université de Bordeaux, a Specialization in Finance from COPPEAD/UFRJ, and degrees in Production Engineering and Mathematics from UFRJ.