Managing the Financial Side of Commercial Fleets

5 Things You Can Do Now to Reduce Fuel Expense

Fuel costs remain “public enemy No. 1” for fleet managers. Fuel continues as the single largest, and, by far, most variable expense related to fleet vehicles. Here are five tips fleet managers can implement right away to reduce fuel costs.

January 2014, by Bob Cavalli

It’s interesting how fuel prices today are nearly $2 per gallon more than they were only two years ago, and roughly the same as they were back in 2008, when the U.S. Congress summoned the CEOs of major oil companies to testify why they were so high. It’s also interesting how the public (generally) has become inured to $3 per gallon gasoline.

Fleet managers, however, have not. Because fuel remains 70 percent or more of variable costs, it also remains the No. 1 target for fleet managers’ cost-reduction efforts, and rightfully so.

The industry has seen a number of technological marvels arrive on the scene in the past 30 years. From front-wheel-drive/transverse engines to electronic fuel injection to today’s alternative-fueled vehicles to computerized engine technology, cars and trucks are more fuel efficient than ever before, and there is more on the way.

But, instituting serious changes in the makeup of a fleet, particularly if they involve using alternative-fueled vehicles, takes time, careful analysis, and sometimes major changes in drivers’ routines. Fortunately, there are actions fleet managers can take right now to get control of and reduce fuel costs.

Awash in Alternatives

The aforementioned technologies are all the rage in the fleet industry. They run the gamut from fuels (e.g., E-85, clean diesel) to alternative-fueled vehicles themselves. Some alternative-fuels don’t require too much adjustment from either fleet managers or drivers. Some, however, do, particularly when they require fuel sources that go beyond the traditional, such as compressed natural gas (CNG), propane autogas, and all-electric powered vehicles. Even so, the industry is awash in articles, case studies, and advertisements for such new technology.

All of them are, at the very least, interesting, and worthy of further consideration. At best, they can provide substantial benefits. Seasoned fleet managers, however, know that introducing alternative-fueled vehicles into a fleet isn’t a simple process; they need things they can do right now that provide fuel cost savings.

Here are five ways fleets can see savings, while working on implementing the alternative solutions:

1. Find the Best Prices

Most drivers today have smartphones, and access to websites or mobile apps that can direct them to the lowest pump prices in the area while they’re in the field. Websites, such as www.gasbuddy.com, can be bookmarked and used to pinpoint local pump prices.

Better yet, most fleet fuel card providers offer a smartphone app that includes such assistance. (Of course it should be emphasized that apps should not be used while driving in line with the fleet safety policy.) Some of them even offer alternative-fuel site locations, such as EV charging stations, propane autogas, CNG, and E-85.

But, are the apps worth it? Let’s assume a fleet’s four-door, mid-sized sedan achieves 20 miles per gallon. Let’s also take a particular zip code: 10019 in New York City. As of press time, www.gasbuddy.com showed prices ranging from a high of $5.29 to a low of $3.59. Assuming the $5.29 is an outlier (and, looking at the other prices, it is), the range is $3.59 to $3.89, a 30 cent-per-gallon spread. Drivers not using the app could be grossly overpaying for their fuel.

Now, at 20 mpg, and driving 24,000 miles per year, the driver purchases 1,200 gallons of fuel in a year. Saving just 5 cents per gallon reduces fuel expense by $60 for each car $30,000 for a 500-unit fleet. And, it won’t cost the fleet manager a dime to implement. Train drivers to seek the lowest cost fuel, wherever they may be, and the savings are quantifiable and can be substantial.

2. Fight ‘Slippage’

Slippage is a term that refers to dollars posted to a fleet fuel expense category that aren’t dollars spent on fuel. For some time now, the majority of fueling locations have been connected to a convenience store, or, at the very least, a station that sells items such as food, beverages, and tobacco products. Drivers can choose to “pay inside,” and, when time comes to do so, purchase these items rather than paying at the pump.

How does a fleet manager prevent this? If using a fleet fuel card program, a good start is to set the cards up as “fuel only,” which will prevent the purchase of non-fuel products. Some fleet managers prefer to allow drivers to purchase vehicle-related items, such as car washes, wiper blades, and additional oil. Some fleet fuel cards allow the locking out of individual product codes, leaving the above items available.

One way drivers sometimes attempt to circumvent these controls is to pay inside, asking the clerk to ring the entire purchase up as fuel. It doesn’t always work, but if it does, and the driver does it too often, exception reports will show the vehicle’s fuel efficiency below the average. What kind of savings might a fleet manager see?

Let’s look again at our 500 unit fleet example, which averages 20 mpg and 24,000 miles per year, and an average cost of $3.25 per gallon per vehicle.

Total annual fuel expense would be $1.95 million:

500 X 24,000 = 12,000,000 miles year.

12,000,000 / 20 = 600,000 gallons.

600,000 X $3.25 = $1,950,000

If slippage adds another 3 percent to the total (a reasonable amount, most fleet fuel card providers will agree), that’s another $58,500. Managing slippage down to a third of that will save $39,000 annually. Using fleet card controls and keeping an eye on exception reports, and the fleet can save nearly $40,000 each year, again, at no cost to the fleet or the company’s bottom line.

3. Hit the Brakes on Idling

Another fuel burner that can be reduced is idling. Fleet drivers have a number of different missions — some drive to sales calls, some to service customers, still others to deliver product. At some point in every driver’s day, the vehicle they drive will be idling, using fuel without getting any use out of it. Other than a hole in a gas tank, there are few greater wastes of fuel.

Different driver missions result in different levels of idling. A sales rep, for instance, is usually driving to a prospective customer’s place of business, where the car is parked and the customer is met in his or her office. Others might be delivering product, and a vehicle left idling while the delivery is made. Still others might be marketing reps, who visit customers, stock product, and bring point of sale materials, and a vehicle might be left idling for 10 or 15 minutes or more. Whatever the circumstances, excessive idling is a fuel waster like no other, and reducing it can save money.

But, what exactly is “excessive”? It takes very little fuel to start a car, only fractions of a gallon. Thus, idling for more than a few seconds will use more fuel than that needed to start the car, so drivers should, in the vast majority of cases, shut the engine off rather than keep it running. Again, some job functions are more prone to idling than others, so the savings that can be had by training drivers to reduce idling will vary widely. But, an idling vehicle uses about one gallon per hour total idling (depending, of course, on the engine size and other circumstances, such as accessory use). Using this average, we can do some more arithmetic.

Say of our hypothetical 500 unit fleet’s vehicles idle an hour a week, total not including idle time in traffic, at lights, etc. Each vehicle would then burn 50 gallons of fuel each year (factoring each driver having two weeks’ vacation). At an average of $3.25 per gallon, that adds up to $162.50 per year in wasted fuel, or $81,250 for the entire fleet. Knocking that in half would save $40,625 each year.

4. Put Fleet on a Diet

The physics are simple. The heavier the vehicle, the more fuel it takes to move it. Fleet vehicles carry things — people, product, paper, materials — and that’s unavoidable. But, there is often unnecessary weight involved, and reducing that weight will result in burning less fuel and reduced fleet fuel costs.

Drivers often try to carry (or simply do carry) more items in a car than they actually need to perform the day’s work. This can include product, brochures, files, and other paperwork. It’s convenient to keep, for example, a box of product brochures in the trunk, even though the driver may only have four or five sales calls in a day. Field managers can be instructed to have drivers only carry what they need for a day, or if on an overnight trip, for those days, and no more than that.

Personal items can also add weight. A set of golf clubs and a bag can weigh 30 pounds or more, and the rest of the golfer’s accoutrements (shoes, balls, etc.) a few pounds in addition.

Then, there is snow. Drivers who live in areas where it snows should make sure their vehicles are completely free of snow; not just the windows, but the entire car. Dry, powdery snow weighs about 7 pounds per cubic foot, wet snow double that (15 pounds). The 10 or 15 cubic feet of snow that can cover a car thus adds anywhere from 70 to as much as 225 pounds to the car’s weight. Overall, it is certain that some or all of a fleet’s vehicles are carrying more weight than necessary, and reducing that weight will provide savings.

Once again, some simple arithmetic: For every 100 pounds of weight removed from a vehicle, fuel efficiency can increase from 1 to 2 percent. Let’s say half of our 500 unit fleet carries half of those 50 additional pounds. Removing that weight will increase the average of 20 mpg to between 20.1 and 20.2 mpg; we’ll split the difference and call it 20.15:

12,000,000 miles / 20.15 improved mpg  = 595,533 gallons annually. 

This is a savings of 4,467 gallons, which, at $3.25/gallon is a cost savings of $14,518.

5. Stay Inflated

The primary cause of “drag” in a vehicle is the tires. They are (or certainly should be) the only contact with the road, and the resistance they create can have a serious impact on fuel efficiency. Today’s tires are engineered to minimize that resistance, not to mention to channel water out from under the tread to reduce hydroplaning. The sidewall and bead (that part of the tire closest to the rim) contains a wealth of information, including the minimum and maximum tire pressures the tire can safely and efficiently handle (tire pressure can sometimes also be found on a sticker inside the door jamb).

Keeping tires properly inflated is a critical aspect of tire care. This prevents premature wear, reduces the possibility of tire failure, and maximizes fuel efficiency. For every 2 psi each tire is underinflated, mpg is reduced by 0.6 percent; four tires underinflated by 2 psi each equal a 2.4 percent hit to gas mileage.

Back to our 500 unit sample fleet: a 2.4 percent reduction in the 20 mpg average brings it down to 19.52. At 12,000,000 miles per year, that’s an additional 14,756 gallons of gas which, at $3.25/gallon, is a waste of $47,957. Conservatively, if only half of that is saved, that’s $23,979 in savings.

But Wait, There’s More

The above are five actions fleet managers can take to provide immediate fuel savings, without making any serious changes in the fleet, and that won’t cost a penny to implement. There are more, of course, than five. Here are some of them:

  • Today’s cars are made to start “cold,” that is, they don’t need to warm up before driving. Drivers should be told to simply start the car and drive.
  • Train drivers to drive sensibly; hard acceleration, braking, and excessive speed not only can be dangerous, but they hit fuel mileage hard.
  • Use the cruise. Cruise control helps maintain a steady speed, far more efficiently than a driver can. Steady speeds save fuel.
  • Repair body damage. Anything that disrupts the air flow over the vehicle will reduce fuel efficiency.
  • Ensure drivers know where they’re going; many cars are (or can be) equipped with GPS, which will help drivers avoid getting lost, or driving around looking for a destination. Lacking that, have drivers map out their day before leaving.

There are literally dozens of other ways drivers can maximize fuel efficiency. Many of them involve driver behavior, which is the single largest contributor to fuel waste. Most drivers know them all, but, like safety, don’t always think about them. Make fuel efficiency part of every driver communication.

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  1. 1. Mrigaen [ August 24, 2015 @ 07:53AM ]

    I think it's worthwhile to make use of vehicle management apps like Fuel Buddy (www.fuelbuddy-app.com). They really help in monitoring and controlling costs.

 

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