Being praised for having the “Midas Touch” is common in today’s business world. But, while there are many who can make money, there are few that can save it in a way that benefits the bottom line and operations at the same time. This flipside of the Midas Touch has been the theme of Lead Buyer and Fleet Specialist Randy Burwell’s 14-year tenure at San Antonio-based Valero Energy Corporation.
This has led to a win-win situation, netting the refinery company millions of dollars in savings while keeping the fleet running at peak efficiency.
Saving Money From Day One
Burwell joined Valero with the acquisition of Ultramar Diamond Shamrock in the late 1990s.
Almost immediately, Burwell found that he could save the company money by reamortizing Valero’s vehicle leases. This was the very first task he gave himself when he officially took over Valero’s fleet in 1999.
“This was huge for us,” he said. “It cut our monthly expenses by $21,000.”
It could be easy to dismiss this out-of-the-gate success as a result of a lucky set of circumstances, but Burwell brought with him the kind of experience and set of values that makes the ongoing quest for efficiency second nature.
In addition to his fleet experience at Ultramar Diamond Shamrock, Burwell had more than 17 years in the car rental industry, which required a 93-percent uptime of vehicles and had extremely tight margins.
“I brought some of the concepts I learned in the rental industry with me to Valero,” he said.
He also took to heart a lesson from his father — who worked for Exxon.
“He said, ‘you’ve got to produce,’ ” Burwell recalled. “I’m always trying. I have a passion to make things happen.”
In many ways, too, Burwell is simply reflecting the well-established cost-efficiency culture at Valero.
“Valero’s efficiency goals have been in place for a number of years,” said Steve Rehwaldt, sr. manager print specialty & fleet services for Valero.
“The goal reaches all departments and inspires them to seek out efficiencies. By minimizing fleet cost, efficiencies are realized in all departments utilizing vehicles.”
Off and Running
After this initial success, Burwell implemented other changes to the fleet that have saved Valero money and helped the fleet at the same time.
His utilization program moved vehicles from location to location as they were needed. For instance, if there was a spare truck in Oklahoma with low mileage, he would move it to a refinery in Texas that was cycling out a truck, avoiding the expense of buying another vehicle and the inefficiency of having a viable fleet asset that wasn’t being efficiently utilized.
The program proved popular with drivers because it meant they would regularly receive a “new used car or truck,” Burwell said.
As with many fleets, Burwell instituted rightsizing in the sedan fleet. He switched from V-6 Ford Taurus models to four-cylinder Ford Fusion models.
The switch netted the company a savings of 6.5 cents per mile, or $547,000 in lifetime savings over a 47-month period.
Of course, this was a big change for the drivers who were used to and liked the V-6 engines. But, Burwell did his homework ahead of time, which avoided much of the pushback he could have experienced otherwise.
“The transition was pretty darn smooth,” he said.
One of the big benefits of the smaller engine was more power. The 175 hp Fusion delivered 22 hp more than the V-6 Taurus.
Helping eliminate potential pushback, which could have had serious implications for fleet efficiency, Burwell involved the company’s drivers in the choice of the new vehicle. He e-mailed the drivers the Fusion’s specifications, including interior room and horsepower output, inviting comments or questions.
Making the Best of a Bad Economy
Perhaps the biggest sea change that Burwell oversaw was moving Valero from an all-leased fleet to a company-owned fleet in 2008.
The reason was simple: the economy.
Because of accelerated depreciation and the historically high resale rates for trucks and sedans, Burwell found that owning made more sense than leasing, allowing the company to cycle vehicles faster to take advantage of optimal cycles in the resale market. As far as he can tell, he was one of the few fleet managers who shepherded a fleet in this direction.
“I was shocked that not a lot of people jumped on it,” he said.
As the economy continues to slowly strengthen and resale rates inevitably fall, Burwell noted that the pendulum may swing back, which could mean that Valero would return to having a leased fleet.
In fact, every time he orders a new vehicle, he runs the numbers to see if it makes more sense to buy or lease. Buying continues to win out. “The margins between the two are getting slimmer,” he observed.
Making a Simple Observation
One of Burwell’s most recent innovations has been a program he has dubbed “cascading.” The program was another child of the down economy.
According to Burwell, Valero has rarely purchased new light-duty trucks for its refinery operations, since this function inflicts heavy wear-and-tear on the vehicles. But, when he was looking to replace some of these trucks with a new batch of used models, he discovered it was more cost effective to purchase a brand-new, base truck model that cost $17,000 than spend $11,000 for a used vehicle.
The cause was simple economics — at the time, used trucks were fetching historically high resale prices even at the federal government’s General Services Administration (GSA) auctions where Valero acquired many of its used trucks in years past.
“It created a perfect storm, and it made the most sense to purchase a new truck,” Burwell recalled. “Now, all I had to do was convince management.”
Having a ‘Eureka’ Moment
Burwell scheduled his meeting with refinery management to pitch the idea of purchasing new trucks to replace the ones he was cycling out.
He had no idea how he was going to convince the refinery managers to sign off on this idea. So, he did what he always did. He put himself in the other guy’s (in this case, management’s) shoes and, in a “eureka”-like flash, “cascading” was born.
The idea was simple and a variation on his successful utilization program.
The difference with the cascading approach is that the newer trucks are gradually moved from light-duty situations in safety or other low-impact departments, with those vehicles moved to a medium-duty function in the environmental department, and the environmental department truck moved to heavy-duty service at the tank farm.
“The idea of the project has a simple goal,” Burwell explained. “Make the new truck last as long as possible. If the new truck begins service in a light-duty situation, then, after two or three years goes to medium service, and then to heavy service, it’ll maximize the life of the truck. Placing a new truck in medium and heavy service initially shortens vehicle life.”
In fact, according to Burwell, this “cascading” of vehicles will double the working life of the new trucks from four to a maximum of eight years.
While Burwell knew that purchasing new vehicles would benefit the fleet, he also knew he needed to show how it benefitted the company first and foremost.
“Successfully selling an idea requires a demonstration of its benefits,” Burwell said. “The selling points of cascading were extending the life of the trucks and that, with a new truck, there was less downtime, so you save time with drivers not having to take the trucks into the shop. I guess they just knew that I was trying to save money.”
In addition to saving money, Rehwaldt noted that having reliable vehicles in the fleet are also crucial, which the cascading program is delivering.
“Providing safe efficient transportation affords numerous departments the wherewithal to accomplish their job. Automotive issues should not be at the forefront for fleet drivers,” said Rehwaldt. “Downtime is very costly for a vehicle-driven fleet.”
Putting Cascading into Practice
The cascading program has been in effect for about a year, and Burwell credits the help of Jackie Harris, account consultant at PHH Arval, as key in putting the program into successful practice. PHH Arval is Valero’s fleet management company.
She helped Burwell determine how vehicles would be cycled in and out of Valero’s various refinery sites.
“She’s been my rep since 1999, and she’s like my staff. She did all of the one-on-one planning,” Burwell said.
The plan has been successful with few, if any, hiccups.
The new trucks, primarily ½- and ¾-ton Ford F-150 pickups, have been utilized for work that will maximize their lifecycles. Older vehicles are living second and third lives at the refineries and tank farms, the latter, which contribute significant wear-and-tear on the vehicles. These trucks are typically being driven until they wear out and are then sold for scrap, according to Burwell.
The Valero fleet currently consists of about 300 sedans and 1,500 light-duty trucks.
Focus on Safety
For Burwell, the most important thing he has done at Valero is not just save money — it’s creating a safe fleet. “My top priority is safety,” he said.
For instance, no matter if a vehicle is near the end of its lifecycle, Burwell will make sure that the vehicle is still safe to drive. “I’ll fix the brakes even if we’re going to cycle it out in a couple of weeks,” he said.
Burwell has instituted a safety system, which involves, among other things, evaluating a driver’s job prior to ordering him or her a new vehicle. “Before we order a new truck, we evaluate if the driver’s job has changed. That way, we can spec the vehicle properly,” he said.
Fundamentally, Burwell said that he always does his “due diligence” when purchasing trucks to make sure he is making the right choice.
More Savings on the Horizon
While safety is Burwell’s overarching concern, he’s still looking for ways to make the fleet more efficient and save Valero money.
Currently, Burwell’s analyzing the in-house maintenance services at six Valero refineries to see how efficient they are.
The Valero fleet is also currently poised to undergo a new transition, according to Rehwaldt. “With Valero’s entry into the European market, new opportunities will present themselves to the fleet department,” he said. “Presently, a way forward is under evaluation to acquire vehicles.” FF