Managing Fuel Costs and Maximizing Efficiency

Jan. 13, 2009
The most effective way to manage fuel is to gain transparency through an ongoing, easy reference of a company's overall management and logistics.

Regardless of one's industry, the cost of fuel is always top of mind. One day it's up, one day it's down, all the while leaving the general public waiting with bated breath to see what direction it heads in next. What many fail to realize, however, is that the true cost of fuel could be lowered significantly with the implementation of a fuel management system.

Think about it: Companies have systems in place to manage operations and human resources but when it comes to fuel -- which eclipses labor as the highest operating cost for many businesses -- a similar system is usually nonexistent. While there are many variables to consider, the first step to fuel management is to treat fuel as an investment as opposed to a cost. With this mindset, companies should be demanding a return from their fuel and with that come metrics, management and control.

First, consider what the true cost is. It's not just the price at the pump: It's the price at the pump PLUS the labor costs, impact on productivity, how much fuel is used to get more fuel, theft and so on. These variables then need to be addressed and measured. Begin this process by getting a detailed understanding of the equipment that uses the fuel, their fuel performance and their fuel efficiency to ensure the fuel is being utilized properly.

The main culprits of fuel misuse are excessive idling, hard revving, speeding, jackrabbit starts and improper equipment maintenance; if anything is outside normal operating parameters, however, they can be targeted, addressed and managed. The same goes for theft: Right now, with people trying to squeeze every cent they can, theft -- anything from filling an additional tank on the company card to selling excess fuel for profit -- has significantly increased. Up to 10% of annual fuel costs can be attributed to this kind of internal misallocation. These actions directly affect a company's bottom line and as soon as they are harnessed, the difference will be noticed immediately.

Next, if a company is being tasked to do more with less -- as most are -- assess the ways to best maximize resources. For example, it takes about 20 minutes to fuel a commercial vehicle according to industry averages. And that estimate might even be on the low side when factors like driving time to the pumps, grabbing a bite to eat or making a quick phone call are added in. It might not seem like a big deal but if a company has a fleet of 30 delivery trucks, that's 600 minutes or 10 hours out of a day in which no deliveries are being made and no work is being done. By employing a service that fuels equipment on-site during idle or off-peak hours, companies get back that once-wasted time. And when this on-site fueling is paired with a system that records each transaction down to the volume, price and piece of equipment, the return on their fuel investment can be calculated more accurately.

Lastly, the most effective way to manage fuel is to gain transparency through an ongoing, easy reference of a company's overall management and logistics. Recognize there is a problem and take action. One of our clients, a national fast-food chain with a fleet of 70 trucks and 120 trailers, began saving over $300,000 per year in fuel costs and has increased productivity over 187 hours per week. Another client, a national discount retailer with a fleet of 160 trucks with an annual volume of 1.8 million gallons of fuel per year, eliminated 90 trips to commercial fueling stations each day which saved the company roughly $100,000 per year. These results aren't atypical and return on investment will vary depending on the company's size and their industry but they would be nonexistent if these businesses did not address their fuel issues.

As fuel prices continue to fluctuate, more and more businesses are evaluating the fuel they purchase, need and waste. While many factors can be attributed to its misuse, maximizing fuel productivity and efficiency can be done through effective management.

Norm Bogner is the vice president of international development for 4Refuel, the Langley, British Columbia-based franchised fuel management business specializing in on-site diesel refueling, fuel logistics, automated fleet management and biodiesel solutions for any company that uses diesel or biodiesel as its fuel, including those with fleet vehicles or operating equipment in industries such as transportation, construction/earthmoving, government and municipalities, power generation, industrial, rail and marine.

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