Fuel is a major part of any fleet’s expenses and, with so many contributing factors, may be difficult to budget for. The first step in managing fuel is to know how much your fleet needs, and even that can be difficult to track without the right system.
“Managing fuel costs extends beyond just monitoring the price at the pump. Do you have a discount with your primary fuel suppliers? If so, are you monitoring them? Are you positively trying to steer driver behavior to ensure as much volume as possible from your preferred fuel supplier network? Are you monitoring and measuring fuel purchasing behavior? Are you considering more than price data and watching other factors such as distance off route, fuel grade, location cleanliness, and amenities provided? They all play a critical role in purchasing behavior,” said Jeff Pape, global transportation product and marketing manager for U.S. Bank.
Technology can help simplify fuel management, with a variety of solutions on the market that allow fleets to track fueling and identify where cuts can be made. But, for fleets to find the right solution for their operation, they must first identify what problems need solving.
Best Value over Lowest Price
Bernie Kavanagh, SVP and GM of North American Fleet for WEX, said the key to an optimized fuel experience is determining the lowest cost for fueling. However, some fleets may confuse this with finding the cheapest fuel, when location and route should also be considered.
“It means finding the most practical fueling locations, prioritizing fuel stops that are on the vehicle’s route, and of course assessing the price point of the fuel itself,” he said. “For larger trucks, fueling presents unique considerations. Things like availability/distance of the sites that support proper canopy height and turning radius come into play. Also, a fuel stop’s proximity to major highways is a key factor, and the size of the truck’s tank determines how far apart drivers can stop to refuel.”
All About Timing
Of course, finding the cheapest fuel is still part of the equation. Fuel prices can change, and the timing of a fuel purchase can make a big difference in spending.
“Implementing a hedge strategy to mitigate exposure to fuel price volatility and achieve targeted budget objectives is crucial for today’s fleets. The ability to turn a variable cost into a fixed cost is underutilized by fleets of all sizes,” said Scott Effinger, southeast government and fleet card business unit manager for PAPCO. “The opportunity to take advantage of market circumstances and lock-in a fixed price or price cap and still participate in a down market is extremely attractive and can have a tremendous impact to the bottom line.”
Kavanagh said one way fleets can mitigate some of this risk is by paying attention to fuel prices and purchasing in bulk when the price is right.
“When managing budgets, many buyers find that they can optimize savings by buying fuel at a certain time of the day or a specific point in the week,” Kavanagh said. “When gas prices are rising, margins are lower, which leads many fleet managers to practice spot buying, or fueling up their fleets in bulk quantities.”
A More Efficient Operation
Fuel costs depend on more than just price. Consumption is another major factor, and fleets should consider vehicle mileage, driver behavior, and vehicle function when looking at their fuel spending.
Joe Basile, VP of Hardware Solutions for AssetWorks, said fleets should monitor driver behavior for speed, idling, hard acceleration, and other behaviors. This can be done with an active or passive GPS system. He also suggested an idle management system for vehicles and/or drivers in duties where idling is common. Fuel use can also depend on the vehicle itself, including how well it is maintained.
A well-maintained fuel management system can also be leveraged to improve other aspects of a fleet operation. Technology options on the market offer more methods of cutting costs.
“Optimize mobile technology to make your drivers safer and your bottom line healthier. Use it to find the best fuel price on each route so drivers don’t have to hunt for it,” Pape said. “Use voice prompts to keep drivers focused on the road and not fumbling for devices. Encourage your drivers to share information about favored service locations.”
Fueling can also play a major role in routing, and fleets must ensure their trucks can fuel up when needed. This is often harder to coordinate with larger vehicles, which cannot be accommodated at every fueling station.
“It’s useful to know where Tier 1 truck stops are located along a driver’s route so that they can get the right service. Routing also comes into play for heavy-duty trucks — staying on the optimized route is critical for larger vehicles traveling long distances,” Kavanagh said. “Data analysis can help overcome these challenges by not only pinpointing the best areas to fuel up but also serving as a de facto tracking service to make sure routes are maintained. Similar challenges exist for lower class vehicles, but the challenges often grow along with the size of truck.”
Fleet Cards and Data
Many fleets employ fleet cards, which can help track fuel purchases. But with more fleets adopting multiple types of vehicles, even tracking purchases can get complicated. The key to staying on top of fuel is employing a system that makes things easier.
Some fuel management systems cater to certain vehicle classes, which are tailored to the user’s application.
However, Pape noted that many companies are transitioning to mixed fleets. This can make fuel management more difficult, as some solutions cannot accommodate light-, medium-, and heavy-duty trucks through a single card.
“Historically the needs of cars and light-duty trucks have been so different from that of heavy-duty, over-the-road commercial rigs that they’ve been served by separate fuel card programs. But today, more and more fleets are mixed and managers often juggle two or more card programs for the same fleet,” Pape said. “Operating multiple types of vehicles can mean managing multiple card programs. Consolidating and analyzing all the data and reporting across programs in a consistent manner can be a nightmare, and making multiple payments on varied credit or payment terms is cumbersome. Further, it is exceedingly difficult to get a holistic and singular sight line for managing and optimizing your fuel costs across retail and private locations. It’s not as easy to take advantage of incentives for volume-based purchasing when spending is spread across multiple platforms. This prevents you from fully leveraging your buying power in the marketplace.”
For mixed fleets, Pape suggests choosing one card system that can cater to a variety of vehicles, offering a comprehensive look at fuel use without having to combine multiple data sources.
Then again, not all fleets need a comprehensive solution. Effinger suggests working with a fuel management supplier to ensure that the fleet’s needs are being met, addressing its specific needs rather than choosing something with blanket coverage.
“It’s about implementing a fuel procurement/purchase program that provides flexible solutions that achieve the overall objectives required to manage fuel for a particular company/fleet. Not all customers are the same, therefore not all solutions are the same nor should they be,” Effinger said. “Fuel distributors can offer multiple fuel management solutions that can be tailored specifically to a customer’s needs, as well as provide accessorial fleet management products and service. Local distributor service providers can offer greater need fulfillment, service, flexibility, and reliability, as well as provide the same level of national card acceptance that the national universal card companies can.”
On the Books
Fleets with on-site fueling must also be sure to stay on top of all records. Basile from AssetWorks recommended that fleets use a complete inventory control system.
“Best practices on controlling the dispensing of fuel would involve a complete inventory control system that consists of a tank level system combined with an automated fuel management system to control in-house fueling and a fuel card for retail fuel purchases,” he said.
For additional security, Basile recommends comparing on-site fueling records with retail fuel purchases to make sure there are no overlaps.
“Most fleets do not get a report from outside credit card companies on a timely basis (usually monthly) and rarely compare them to transactions that occurred in-house. By doing this, you can catch irregularities where a vehicle may have fueled in-house, yet an hour later is fueling again at a retail location,” he said. “Another issue that can be caught when making these comparisons is the ability to question a driver on why he or she fueled retail if he or she was only a few miles from a home base where fuel purchases are generally less expensive.”
Keeping track of every single purchase may seem overwhelming. Thanks to technology, management can receive an alert anytime an irregularity is caught.
“The sheer volume of real-time data now available from card programs and other sources can be daunting to track. One way to cope is to manage to exceptions. You can’t watch everything all the time, but you can set your profile to parameters that say, ‘I want to know when any of these boundaries have been breached.’ Then you can respond and ask, ‘Why did this happen right now and how can we fix it?’” Pape said.