Fleet managers can be certain of one thing: fuel price volatility. Fuel prices have been on a roller coaster that continues to climb with increasing volatility into the foreseeable future.
As a recent example, fuel prices rose 21.3 cents per gallon for gasoline and 16.9 cents for on-highway diesel from July 30 to August 13, 2012 (according to the US Energy Information Administration) after several months of declines. This volatility makes a fleet manager’s job even more difficult. Managing fuel costs to annual budgets is no small feat these days.
Unfortunately, fuel price volatility is not the only problem facing people who manage fleets for long-haul transport companies. Driver retention and driver shortage issues continue to plague the industry. The economic downturn also has left many fleet managers with aging vehicles that require more attention and maintenance over fleets that have had vehicles replaced within the standard time frame.
It would seem fleet managers are on their own when it comes to solving these complex problems. However, there is a solution that merits their attention because of its ability to address each of these problems systematically.
When compared with other expenditures, fuel costs are second only to payroll for most transport companies. Therefore, it is vital that firms manage fuel costs proactively, as it is the only way to manage them effectively. These facts are not news to fleet managers and those responsible for operational budgets. However, there may be options that can help them tackle these problems successfully, but are not as well-known.
Options to save Fleet managers use a number of approaches to address rising fuel prices and volatility. They sign purchase agreements with fuel retailers and issue fleet fuel cards to drivers for use once their vehicles are on the road. But for the majority of fleet managers, optimizing bulk fuel provides them the largest opportunity to save money. For example, using outsourced fuel management to manage bulk fuel has led to savings of around five cents per gallon in many instances.
Because the savings have the potential to be so great, many fleet managers are outsourcing management of the bulk portion of their portfolio. Fuel management techniques used by these fuel experts can yield more savings than many fleet managers can realize on their own. Outsourced fuel management companies are often able to leverage their expertise and industry network to obtain advantageous supply contracts. They are also able to more fully take advantage of fuel price volatility and lessen its impact with advantageous spot purchases in conjunction with these supply agreements.
In addition to better and less volatile pricing, many outsourcing companies also provide fuel invoicing verification and reconciliation for customers. Fleet companies can also benefit from optimized fuel inventory levels that reduce the working capital tied up in fuel inventory and enables them to more fully take advantage of load shifting (moving a scheduled fuel load either forward or back a day to take advantage of market movements) and spot market opportunities. Using load shifting techniques, companies can save hundreds of dollars on a single load of fuel.
All these advantages lower overall bulk fuel costs for fleet managers. Just how much savings can be realized depends upon the fleet and volume threshold.
Smoother operations In addition to saving money, outsourcing fuel management helps fleet managers get their arms around the other problems they face regularly. With an outside team of experts handling their bulk fuel management, fleet managers can spend more time, energy, and some of the money they are saving on increasing driver retention. The happier the drivers are, the greater the retention, which in turn improves overall operations. According to figures published in Refrigerated Transporter earlier in 2012, retention stands at roughly 88% for large truckload fleets—a small decline from the previous quarter’s 89%—and it remains a problem.
Some of the savings made possible by fuel management outsourcing also can be used to reinvest in the fleet itself or used for infrastructure investment in other areas. When invested back in the fleet, it can also yield benefits such as reduced maintenance costs for the fleet’s vehicles. Newer and upgraded vehicles will also help improve driver retention and overall operations. This makes fuel management a win-win situation for fleet managers and their companies.
By first addressing an area of their business that has one of the biggest potentials for savings—bulk fuel—transport companies can spend more time tending to other aspects of their business. Of course, these savings can also be applied directly to the bottom line, depending on factors within the organization.
Gain instant access to the ebook!