Fleet managers know fuel amounts to some 70 percent of fleet variable costs, more or less, depending on fuel prices. They also know the key to managing that huge expense category is the detailed data each transaction generates. Finally, they know if they can capture odometer readings from every fuel transaction, their entire cost reporting process will be up-to-date and as accurate as possible.
In recent years, however, other company functions have become involved in the selection of fleet programs, most notably strategic sourcing and purchasing. These functions bring their own goals, and those goals don't always mesh with those of the fleet manager. The use of a corporate purchasing card is one area of expertise sourcing and purchasing staff often attempt to bring to fleet, and with it, some advantages and disadvantages.
Fleet Needs Prompt Fuel Card Program Development
Fleet fuel card programs came about some 25 years ago in response to several needs:
■ Wide card acceptance.
■ Expense data (level III).
■ Controls on use.
■ Incorporation into fleet program.
There may have been others, but these were the primary needs. The difficulty fleets had in capturing critical odometer readings made a universal fleet fuel card program a godsend. The bottom line on fleet fuel card programs is they have become expense management tools, rather than simple payment solutions.
Purchasing Cards Offer Data & Online Tools
Purchasing cards (P-Cards) have been around far longer than fleet fuel cards. Based on a credit card or charge card platform, purchasing cards are used for any number of business needs:
■ Office supplies.
■ Office equipment.
■ Meeting expenses.
And more. Purchasing cards offer the user Level III data - not only the purchase dollar amount, but the merchant, type of purchase, date, employee, etc. The card is used as not only a purchasing solution, but a management tool as well.
Purchasing cards offer online tools for reporting, universal acceptance (figuratively), and often a level of issuer revenue sharing (rebates) based on volume or average transaction size.
Fuel & Purchase Cards Differ in Data Provided
The primary difference between a P-Card and fleet fuel card is in the data. Fleet fuel cards - because they developed as a specific solution to a specific need in a specific industry - offer improved Level III data on all transactions. In general, rather than just providing a date, merchant, and purchase amount of transaction, fuel cards provide the following critical data:
■ Odometer reading.
■ Unit number.
■ Card number.
■ PIN or driver ID number.
■ Driver name.
■ Number of units (gallons).
■ Cost per unit.
■ Fuel grade (unleaded, premium, etc.).
■ Time of day.
■ Day of week.
All this data is important (some categories more so than others) in managing fleet's largest variable expense.
P-Cards may provide Level III data for the types of transactions they are configured to conduct; however, they generally do not offer such detailed data for fuel purchases. Not knowing, for example, the fuel grade, number of gallons, or the unit number of the vehicle, or not capturing the odometer reading limits a P-Card's effectiveness as a fleet fuel solution.
Lower Fleet Fuel Transaction Amounts Impact Rebate Totals
Both P-Card and fleet fuel card programs often provide rebates, or revenue sharing, based on volume. Some P-Card programs add another criterion: average transaction size. When this transaction size is required, using a P-Card as a fleet fuel solution may not be the best financial decision.
Purchasing cards generally are used for transactions much larger fleet fuel purchases. The average transaction in a P-Card program is usually more than $150 and can be as high as $300 or more. Fleet fuel transactions generate smaller purchase amounts, even when pump prices are very high (the summer of 2008, for example). The average fleet fuel purchase usually amounts to no more than $60 and generally remains in the $30-$45 range.
Thus, using a P-Card for fleet fuel throws a high number of considerably lower average transaction amounts into the spend, diluting the average transaction size. Strategic sourcing staff looking to add fleet fuel spend to a P-Card may find the rebate doesn't change, or may even drop, as the additional volume is offset by the smaller transaction size.
Adding this impact on rebates to the lack of detailed Level III data can preclude the effectiveness of a P-Card for fleet fuel purposes.
Fleet Fuel Card Programs Developing Additional Controls
At one time, purchasing cards offered transaction controls not available with fleet fuel cards, for example, the ability to limit transaction dollars or exclude individual merchants from acceptance. However, fleet fuel card programs are rapidly adding these and many other controls, evening the "playing field" with P-Cards. For example, fleet fuel cards now can offer purchase limits on:
■ Number of transactions.
■ Times of day.
■ Days of the week.
■ Transactions dollar amounts.
■ Product codes.
A key point here is fleet fuel cards develop and implement these controls with the fleet fuel industry in mind, while P-Cards must address a much broader consumer market.
All in all, while purchasing cards offer a level of universality, they lack fleet-important services, including consistent Level III data capture, industry-specific card controls, fleet-oriented cost reporting, and the possible dilution of a revenue-sharing program are serious drawbacks.
This service may be changing, however, as credit card companies develop new products that combine the universality and card controls of a purchasing card with the Level III data capture of a fleet fuel card. Fleet managers should closely follow these developments. One day, they may have payment solutions that will put a single card in a driver's wallet for both purchasing and fleet fuel purposes.