Trying to Cut Fleet Costs? Focus on the Fuel

Minimizing costs is central to any business.  And like any keen business owner, fleet managers should be able to review expense reports, identify unnecessary expenditures, and conduct cost analyses.  As if their role doesn’t already come with enough responsibilities, fleet managers are primarily accountable for the financial well-being of their fleet.

Ask any experienced fleet manager, among the top financial concerns year-in and year-out is the cost of fuel.  In fact, even modest fluctuations in diesel prices can have massive impacts on a fleet’s financial bottom line.  Although fuel is the dominant expense in the trucking industry, there are other important factors to consider when minimizing total fleet expenditures.  Let’s take a quick look at some of the major costs—both fixed and variable—that fleet managers face, and then discuss a few practical solutions to minimize their financial impact.

Don’t Forget about the Fixed Costs

For fleet managers and logistics companies, the total impact of fixed costs is dwarfed by variable expenses (note that fuel is considered a variable cost).  Nonetheless, while fixed expenses are relatively small, they still play a part in a fleet’s total cost sheet.  A few of the notable fixed costs include depreciation, insurance costs, and lease finances.

Insurance and leasing finance usually fluctuate with the market.  If managed wisely, these costs can be adjusted to save notable amounts of money throughout the year.  Depreciation, on the other hand, isn’t as malleable.  However, one option to maximize depreciation is though employee resale programs.  If done right, a quality resale program can be a win-win for both manager and employee.

Fuel and Other Variable Expenses

For fleet managers, variable costs are the real “back-breaker”.  This is largely for two reasons: 1) the composite total for variable costs is simply greater than for fixed-costs, and 2) because, as their name suggests, these expenses are variable and difficult to predict.  Variable costs can be grouped into 4 main classes:

  • Cost of Fuel
  • Maintenance/Repair/Mechanical Expenses
  • Costs Associated with Tires
  • Cost of Oil

It’s worth noting that each of these factors will vary slightly by the region, age of the vehicle, condition of the vehicle, and other non-controllable economic variables.  Surprisingly, the cost of fuel accounts for the majority (an impressive 75%) of these variable expenditures.  Depending on the size of the fleet, this can mean tens- to hundreds-of-thousands of dollars in fuel each year.  Obviously, we don’t have the power to adjust energy process; so how can we minimize the financial burden of fuel costs?

 

Saving on Fuel

There are a number of “common sense” policies that fleet managers use to minimize the impact of fuel costs.  Many of these policies simply come down to driver discipline and close driver-monitoring.  For instance, when drivers stop to fuel-up, ensure that fuel is the only item on the receipt.  Drivers could use the fuel card to purchase snacks, beverages, or tobacco—also called fuel fraud.  A quick solution to this is a fleet fuel card program.

In short, fuel cards transfer control to the managers.  They allow fleet managers to track unauthorized fuel purchases and prevent any erroneous gas stations purchases.  Likewise, they’re a valuable resource for tracking costs and preventing potential theft.  An additional advantage to using fuel cards is that they give fleet managers the ability to limit the type of fuel drivers are using. Fuelz fleet cards are accepted at over 50,000 fueling stations. Alabama, Florida, Georgia, Mississippi, South Carolina and Tennessee to name a few.

There are a variety of fuel cards available—such as the Fleet One Edge Card or EFS Fleet and Florida Fuel Card— and most major companies offer their rendition of benefits through “fuel points”.  The best fleet cards offer fuel discounts in conjunction with non-fuel related promotions on food, entertainment, travel, or lodging (since “points” can add-up quickly, these type of discounts can pay real dividends in the long-run).

Additionally, here are a few tips for drivers that (although modestly) increase mileage and save on fuel:

  • Accelerate gradually
  • Maintain acceptable tire pressure
  • Anticipate stops
  • Maintain a clean air filter
  • Avoid long warm-ups in the morning
  • Plan your route efficiently

All things considered, a rigorous preventative maintenance program is always a good idea—not only for maximizing fuel efficiency, but for running an optimized fleet operation in-general.  A strong maintenance program will also provide valuable data for future management strategies, mitigate downtime from equipment failure, and help to retain a high value for fleet resale.

Even with the tips outlined above, fuel will likely continue to be around three-quarters of the fleet’s variable expenses.  For the most part when it comes to diesel and gasoline, managers are at the mercy of economic variables that they have little control over.   Fortunately, new fleet management software can help managers track their fuel costs and maximize their efficiencies.  Even farther in the future, many experts see battery-powered fleets becoming the mainstay in the coming decades.