When you think of fuel costs, do you think of the price per gallon or do you think of the importance of each trip you make? Have you ever thought that your company appears to be keeping busy, but company growth is not reflecting the activity level?
GPS tracking technology promises to reduce the number of miles your fleet vehicles drive. But it's less about reducing miles or the most efficient trip—it's about valuing the quality of the stops you make.
A distributor plans a 64-mile route—32 miles out, 32 miles back—to make an $80 delivery with a $20 profit margin on the goods being delivered. The minimum fleet cost to deliver any product or service on a 64 mile trip is $0.50 per mile, so this trip has a net loss of at least $12.
The distributor just paid the customer $12 to deliver the product to them.
Action Step: Create a Customer Profile
Profile each customer into a "customer type" and assign a priority on a scale of 1 to 5. Single piece, low margin, but frequent order customers can be grouped and served at greater net profit inclusive of the physical delivery costs.
A national field service organization has several branch offices. Each branch office has an average of 16 vehicles. The company decides to deploy a GPS system to measure activity through the day, the number of customer stops, the duration of each stop, the distance between stops, the total miles driven, the starting time in the morning and the arrival time at the end of the day.
Before deployment, each vehicle drove an average 987 miles per week and made 20 customer stops (Chart 2). After deployment, the vehicles average 1,060 miles per week and 25 customer stops.
As the fleet manager, you care that these vehicles are driving more than they did before GPS and are therefore costing more in fuel. But consider this—the average mileage to serve each customer dropped by about seven miles by deploying measurement-based GPS technology. It is costing the company at least $3.50 less on average for each customer visit at $.50 per mile. Who has their eye on the ball for the company—the person wanting to reduce overall miles or the person managing miles and customer activity together?
Action Step: Measure Average Miles per Customer Visit
By valuing fuel and activity together, your company can best see the impact of fuel combined with mileage and customer visits.
Include Engine Diagnostics
Using asset management tools with engine diagnostics capable of reading VIN, mileage, voltage, oil and active engine faults will enable you to extend the maintenance of your fleet to a cycle of health-based maintenance. By monitoring the vehicle's engine health, you can keep your fleet running at the lowest preventive maintenance costs possible.
The Big Picture
"You can't manage what you don't measure." In good economic times, measurement technologies that include GPS with engine diagnostics, driver safety and mileage recording technology are often used to improve driver safety and reduce fleet operating costs.
Today, measurement technologies are even more needed to plan and make strategic decisions on where and how to direct field resources, sales, technical, support and delivery–everyone you've got.
Action Steps: Set Goals Based on Priority Customer Visit
- Record, measure as much as you can.
- Review how time is spent including commuting to work, while driving and with customers.
- Set goals based not solely on daily miles driven but on reducing the average number of miles per priority customer visit and measuring fuel consumed per customer trip.
- Monitor goals and communicate positive results with employees.
- Repeat steps 1 to 4.
Colin Sutherland is vice president, sales of Geotab Inc. (www.geotab.com), a leader in developing tools using GPS, engine diagnostics, and driver safety information for companies in North America.
Originally posted on Business Fleet