Last Year’s Diesel-Price Nightmare Teaches Fleets to Diversify Options in Buying Strategies to Cut Costs
By Mindy Long, Special to Transport Topics
As you will read through Mindy's article Fuel Management is the key to success. Different companies do fuel management differently but the one thing for sure if you want to be successful you better have a fuel management program.
Diesel prices have dropped almost 50% since record levels last year, but fleets continue to work on cutting fuel costs, one of their largest expenses.
In the past, relying on one tool or technique may have been sufficient, but in the market today, carriers say they are combining many methods to ensure they save every possible penny.
From using fuel optimization software and tracking the futures market to setting specific fuel card parameters, many fleets are creating a check-and-balance system that, when put together correctly, lets them buy smarter. Some fleets are also employing new products and changing driver habits to maximize fuel efficiency.
“Fuel is now our No. 1 cost in our organization, even more than labor, and there is such uncertainty around it,” said Roger Placzek, vice president of sales and marketing for deBoer Transportation, Blenker, Wis.
To help minimize that uncertainty for the fleet’s 450 tractors, Placzek said he relies on telematics and fuel-optimization software to track purchases.
“We’re able to be more competitive when we’re dealing with bids and proposals for our customers,” he said.
Placzek uses TMW Systems’ fuel optimization software — IDSC Expert Fuel — which overlays fueling locations with a fleet route and combines that with available networks and discounts to determine how much a trucker should buy at specific locations.
Since beginning to use Expert Fuel, Placzek has been buying less fuel on contract and more on the open market.
“The loss of the volume incentives has been outweighed by the advantages we’re incurring in buying off the retail market,” he said.
Fuel optimization software allows fleet management to narrow purchases even if they have a contract with a chain.
“Within a chain, prices can vary 50 to 75 cents based on location and on the traffic volume at the truck stops,” said Chris Lee, marketing director at ProMiles, a fuel optimization software provider in Bridge City, Texas. Locations farther away from refineries and racks typically have higher prices.
ProMiles also allows users to select other truck stop services, such as parking or dining, to make the most of the stop.
“The fewer stops you make, the more you maximize the fuel purchase,” Lee said.
Optimization software allows fleets to price fuel net of taxes. Although higher fuel taxes in one state may make it seem like a driver is paying more at the pump, it will lower overall cost over time since fleets pay fuel taxes based on where they run.
“A price of $2.50 at one location could be less when you factor out taxes than a location that says $2.40 at the pump,” said Ben Murphy, vice president of optimization studies for TMW Systems, Beachwood, Ohio.
However, carriers that use an optimizer need to make sure the recommendations they receive are accurate.
“We see optimizers that should work in theory but make recommendations that aren’t in the best interest of the fleet,” said Brad Simons, president of Pathway Network, Simons Petroleum.
Jim Guldan, chief financial officer at J&R Schugel Trucking, said the company doesn’t use fuel optimization software for its 650 tractors, but instead purchases the majority of fuel with one vendor to obtain volume discounts and then tracks revenue and expenses to determine more accurate pricing for customers.
J&R Schugel relies on activity-based costing and profitability management software provider Transportation Costing Group, Rockville, Md., which provides tools to help fleet management portray fuel costs, revenue and profitability for individual customers, specific lanes, shipments or even certain times of the day.
“The name of the game is to be current and accurate so that you can measure what the costs are. If you can’t measure what the costs are, you can’t manage them,” said TCG President Ken Manning.
Guldan also works with J&R Schugel’s Comdata fleet fueling card to create a restricted network for drivers.
As part of its services, Comdata, Brentwood, Tenn., works with customers to analyze the fueling network, examine past pricing information and determine the best stops for the fleet. “If you don’t have a fuel optimizer, you are forced to look at the historical data and then factor in the discounts to find the locations with the best prices,” said Tim Hampton, Comdata’s vice president of sales for the central region and vice president of energy services.
Hampton said fleets can set parameters so drivers are able to purchase fuel only at locations where they have secured discounts.
“This is ultimately a fuel management decision for each business, but there is money to be saved by consolidating gallons, negotiating discounts and locking down your fleet fuel card to a limited network,” Hampton said.
Rich Stecklair, vice president and general manager of universal sales for fleet fuel card provider Wright Express, said fleets can combine the benefits of the fleet fuel cards with telematics devices that draw on Global Positioning System data to help fleets find the most convenient fueling locations.
“If you’re spending five minutes driving out of the way to save four cents on a gallon of fuel, the math doesn’t work,” Stecklair said.
Wright Express uses Web-based fuel calculators with mapping tools to direct drivers to the best fueling locations. If a driver buys fuel outside of his or her parameters, Wright Express alerts the fleet. Fleet management also can use fleet fuel cards and telematics to track driver behavior, eliminate fraud, improve routing and reduce speeding, all of which add up to greater savings and increased driver productivity.
“There is an endless list of checks and balances you can put in on that card,” said Glen Sokolis, President of the Sokolis Group, a fuel management and fuel consulting company in Warrington, Pa. Fleets can limit the time of day, days of the week and how many gallons a driver can purchase — but Sokolis Group warns fleet management not to set it and forget it.
“You still need to look at the physical transactions to make sure they make sense,” Sokolis said. He also advised fleets to review every fuel invoice to ensure the price quoted is the price charged.
Optimization software and historical data can help fleets determine where to fill up based on the direction prices are heading. When prices are increasing, fleets can shift purchases to locations that don’t move as many gallons, because their prices will rise more slowly.
“When prices are dropping quickly, you look for those locations that move a lot of fuel because they get shipments faster,” Murphy said.
Bulk fuel purchases may save fleets a few cents per gallon, Sokolis said, but he recommends that fleets factor in infrastructure and maintenance costs to arrive at the true price.
“Some fleets might spend a huge amount of capital to put storage tanks in, but they’ll never get a return on what they invest,” he said.
Sokolis noted that he recently helped a client in Florida to price tanks that needed to be replaced because of a change in environmental regulations.
“Between the cost of the tank, the construction and how much fuel they use, it would take them over 20 years to get a return, let alone if anything goes wrong or there are government changes that require them to change the tank,” he said.
Buying in bulk also ties up capital.
“If you take a load of 7,500 gallons of fuel at $3 a gallon, you’ve got $22,500 of capital sitting in the ground that it might take you three weeks to get through,” Sokolis said
Fleets that benefit from buying in bulk and operating their own fuel islands still need to monitor how much fuel is received and dispensed. Fleet asset-management company EJ Ward, San Antonio, monitors inventory and fueling for its clients.
The company offers passive or active tracking of fleet vehicles with its telematics device, the CANceiver, to track odometer readings, maintenance needs, acceleration and braking patterns and more.
“What we are pulling off of the engine-control module is critical to how the fleet manages their fuel dispensing and how much fuel is being used on the vehicle,” said Troy Goldhammer, EJ Ward’s chief operating officer.
The company’s active tracking allows real-time information, while passive tracking occurs when a fleet fuels.
“With passive you have significant savings because you don’t have the monthly fees you would with a cellular network,” Goldhammer said.
In addition to buying smarter through software and telematics, fleets are also trying to buy less and reduce nonrecoverable fuel surcharge miles.
“When things get tough, you have to start focusing hard on your costs,” said Steve Graham, vice president of purchasing at Schneider National.
Schneider has worked on reducing idling, limiting out-of-route miles and minimizing the number of miles between delivering one load and picking up the next one.
Improving overall fuel economy is one more way fleets can improve their bottom line. EJ Ward works with PressurePro tire pressure monitoring systems to improve mileage and reduce tire wear through proper inflation.
“We can provide data in real time to tell them they have a low-pressure reading on a tire sensor, and that data can be transmitted at the fuel control terminal or through the cellular network,” Goldhammer said.
EJ Ward’s system can dispense a limited amount of fuel or prevent fueling altogether if im-proper tire pressures haven’t been corrected.
Friday, July 31, 2009
Friday, July 24, 2009
Fuel Costs Climb
Fuel Management Statements in today’s news and our comments to them in Bold
Oil prices held above $67 a barrel Friday, adding to gains made overnight, as world stock markets rallied on signs of improvement in the U.S. economy.
Ok, the U.S. economy might be improving. Companies are reporting better than expected earnings but earnings are still not as good as most previous earnings and revenues for most companies are down. Pointing more toward wage cuts than actual growth.
By midday in Europe, benchmark crude for September delivery was up 11 cents to $67.27 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract added $1.76 to settle at $67.16.
Evidence that the recession-hit U.S. economy is strengthening has bolstered investor optimism and triggered a rally from $58.78 a barrel two weeks ago. While crude demand hasn't rebounded yet, traders have begun to have more faith that consumption will eventually pick up.
Yo-Yo ride. The oil market has gone up and down like this over the last couple of months. In fuel management you learn to control the controllable. Things like margins from your fuel vendors and where your drivers fuel their trucks.
"We haven't seen demand increase yet, but all the good news about the economy seems to be adding fuel to the fire," said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney. "Just the fact that things are improving is enough to change the sentiment of a lot of people."
Why would demand be increasing for gas or diesel fuel? The American people have changed their driving habits, some don’t even have any where to drive since they are unemployed. So your not going to see gas demand increase anytime soon.
For diesel fuel demand to go up, you need fleet fuel of trucks on the road delivering products. As revenues for U.S companies came out this week, we can see that has not occurred. No increase in trucks to deliver products, no increase in diesel fuel demand. Again, manage what you can with your fuel cost, manage your fuel expenses through a solid fuel management and fuel consulting program.
"I wouldn't say the current fundamentals support oil at $65 to $70," Rigby said. "A lot of countries aren't out of the woods yet."
"It's putting the cart before the horse, but that's what the market does."
Rigby said he expected oil to rise over the next few weeks and test an eight-month high of $73.23 a barrel reached on June 30.
This is a guy that I believe knows what he is talking about with fuel costs. Fleet fuel demand, gas prices, diesel fuel cost don’t support where we are right now. Perhaps in a few months they will, even more reason to get your fuel management under control now.
Lastly, as a fuel management and fuel consulting company we always try to help our clients and potential clients buy diesel fuel and gas the best they can. Fuel management is very important if you want to control your fuel costs. As the U.S. economy improves fuel costs will go higher. Will your supplier margins go higher? You probably won’t know unless you have a team of fuel experts on your side watching your fuel management.
Sokolis Group is a fuel management and fuel consulting company. We save companies tens of thousands of dollars a year by lowering their fuel cost through lowering the fuel margins they pay. Sokolis Group can be reached at 267-482-6155 or www.sokolisgroup.com. Fuel management at its finest.
Oil prices held above $67 a barrel Friday, adding to gains made overnight, as world stock markets rallied on signs of improvement in the U.S. economy.
Ok, the U.S. economy might be improving. Companies are reporting better than expected earnings but earnings are still not as good as most previous earnings and revenues for most companies are down. Pointing more toward wage cuts than actual growth.
By midday in Europe, benchmark crude for September delivery was up 11 cents to $67.27 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract added $1.76 to settle at $67.16.
Evidence that the recession-hit U.S. economy is strengthening has bolstered investor optimism and triggered a rally from $58.78 a barrel two weeks ago. While crude demand hasn't rebounded yet, traders have begun to have more faith that consumption will eventually pick up.
Yo-Yo ride. The oil market has gone up and down like this over the last couple of months. In fuel management you learn to control the controllable. Things like margins from your fuel vendors and where your drivers fuel their trucks.
"We haven't seen demand increase yet, but all the good news about the economy seems to be adding fuel to the fire," said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney. "Just the fact that things are improving is enough to change the sentiment of a lot of people."
Why would demand be increasing for gas or diesel fuel? The American people have changed their driving habits, some don’t even have any where to drive since they are unemployed. So your not going to see gas demand increase anytime soon.
For diesel fuel demand to go up, you need fleet fuel of trucks on the road delivering products. As revenues for U.S companies came out this week, we can see that has not occurred. No increase in trucks to deliver products, no increase in diesel fuel demand. Again, manage what you can with your fuel cost, manage your fuel expenses through a solid fuel management and fuel consulting program.
"I wouldn't say the current fundamentals support oil at $65 to $70," Rigby said. "A lot of countries aren't out of the woods yet."
"It's putting the cart before the horse, but that's what the market does."
Rigby said he expected oil to rise over the next few weeks and test an eight-month high of $73.23 a barrel reached on June 30.
This is a guy that I believe knows what he is talking about with fuel costs. Fleet fuel demand, gas prices, diesel fuel cost don’t support where we are right now. Perhaps in a few months they will, even more reason to get your fuel management under control now.
Lastly, as a fuel management and fuel consulting company we always try to help our clients and potential clients buy diesel fuel and gas the best they can. Fuel management is very important if you want to control your fuel costs. As the U.S. economy improves fuel costs will go higher. Will your supplier margins go higher? You probably won’t know unless you have a team of fuel experts on your side watching your fuel management.
Sokolis Group is a fuel management and fuel consulting company. We save companies tens of thousands of dollars a year by lowering their fuel cost through lowering the fuel margins they pay. Sokolis Group can be reached at 267-482-6155 or www.sokolisgroup.com. Fuel management at its finest.
Friday, July 17, 2009
Fuel Management, What Makes Company Successful!
Why Fuel Prices go up & down, who is watching your Fuel Management?
With the economy still not growing at the rate most people would have expected by this point in time, getting your costs under control is very important. Fuel Management is one of the most difficult to control if you don’t fully understand it. Most companies pretend to think they are managing their fleet fuel costs and have their fleet management under control but do they really?
Over the last 20 years, I have seen more people not know what fuel actually costs; therefore to have a fuel management program becomes almost impossible for them. Proficient fuel management can reduce your fuel spend 5 to 15%. How you might ask? Easy, it’s called management. The same way you would manage your work force or capital expenses, you manage fuel. The problem is most people don’t fully understand fuel cost so they can’t do proper fuel management and they don’t want to seek help because like most of us, human nature says, “Asking for help makes me look weak.” In this economy no one wants to look weak or ask their boss to spend a little money to save a lot of money on fuel management.
What is fuel management? Fuel management is a broad term used by many different companies for different things. Fleet fuel card providers use the term because their card helps customers buy gas and diesel fuel and provide fuel reports, therefore they feel that this is fuel management. GPS companies use the term fuel management because their devices track vehicles and can reduce the amount of miles used and therefore reduce the volume of diesel fuel or gas bought. There are companies that feed information into computer systems and tell the client the lowest priced place to buy fuel, they also call this fuel management. We won’t argue that most of the claims by these companies are fuel management. Let us explain fuel management by Sokolis Group.
Fuel management by Sokolis Group is rolling up the sleeves and analyzing how you are currently buying your diesel fuel and gas. It’s creating visibility behind what you are really paying for your fuel; are you paying fair prices? Determining if the way you are currently purchasing fuel for your truck fleet is the best way to fuel management. How much are you paying your drivers? Are your drivers waiting a long time at a truck stop or fuel stop? Do your bulk fuel pumps only have 1 or 2 spots to fleet fuel your trucks and your drivers are waiting? Are you paying a fuel jockey nightly to fleet fuel your diesel units? Plus many other areas determine fuel management just to get started.
Wait for the next blog entry to find out about fuel management or email me directly at gsokolis@sokolisgroup.com.
Sokolis Group is a fuel management & fuel consulting group that helps companies manage and lower their fuel costs. www.sokolisgroup.com or 267-482-6155.
With the economy still not growing at the rate most people would have expected by this point in time, getting your costs under control is very important. Fuel Management is one of the most difficult to control if you don’t fully understand it. Most companies pretend to think they are managing their fleet fuel costs and have their fleet management under control but do they really?
Over the last 20 years, I have seen more people not know what fuel actually costs; therefore to have a fuel management program becomes almost impossible for them. Proficient fuel management can reduce your fuel spend 5 to 15%. How you might ask? Easy, it’s called management. The same way you would manage your work force or capital expenses, you manage fuel. The problem is most people don’t fully understand fuel cost so they can’t do proper fuel management and they don’t want to seek help because like most of us, human nature says, “Asking for help makes me look weak.” In this economy no one wants to look weak or ask their boss to spend a little money to save a lot of money on fuel management.
What is fuel management? Fuel management is a broad term used by many different companies for different things. Fleet fuel card providers use the term because their card helps customers buy gas and diesel fuel and provide fuel reports, therefore they feel that this is fuel management. GPS companies use the term fuel management because their devices track vehicles and can reduce the amount of miles used and therefore reduce the volume of diesel fuel or gas bought. There are companies that feed information into computer systems and tell the client the lowest priced place to buy fuel, they also call this fuel management. We won’t argue that most of the claims by these companies are fuel management. Let us explain fuel management by Sokolis Group.
Fuel management by Sokolis Group is rolling up the sleeves and analyzing how you are currently buying your diesel fuel and gas. It’s creating visibility behind what you are really paying for your fuel; are you paying fair prices? Determining if the way you are currently purchasing fuel for your truck fleet is the best way to fuel management. How much are you paying your drivers? Are your drivers waiting a long time at a truck stop or fuel stop? Do your bulk fuel pumps only have 1 or 2 spots to fleet fuel your trucks and your drivers are waiting? Are you paying a fuel jockey nightly to fleet fuel your diesel units? Plus many other areas determine fuel management just to get started.
Wait for the next blog entry to find out about fuel management or email me directly at gsokolis@sokolisgroup.com.
Sokolis Group is a fuel management & fuel consulting group that helps companies manage and lower their fuel costs. www.sokolisgroup.com or 267-482-6155.
Friday, July 3, 2009
Fuel Prices Falling
Prices of Crude Oil, Gas Prices and Diesel Fuel as demand is down and inventory is high.
Oil fell towards $66 a barrel on Friday, adding to a drop of nearly 4 percent the previous day, as unemployment data hardened views economic weakness would sap energy demand further and that last month's rally was overdone. OPEC fuel management for fuel supply and fuel demand has been off the mark.
In the latest sign the economy of the world's top consumer was still struggling, data on Thursday showed U.S. employers cut 467,000 jobs in June and the jobless rate rose to a 26-year high.
Oil prices have doubled from a low of $32.40 a barrel in December last year and they surged by 42 percent in the last quarter — the largest quarterly gain since 1990.
The latest U.S. government data showed a bigger than expected increase in stocks of motor fuel ahead of the July 4 holiday weekend, typically a time of high demand as the peak of the U.S. summer driving season.
With all of the bad news, we think the rally is over and we will see $60 a barrel for oil before we see $70 a barrel. Of course we are free to change our minds.
For all your fuel management and fuel consulting needs, Sokolis Group will take care of you. Please reach out to www.sokolisgroup.com or 267-482-6155
Oil fell towards $66 a barrel on Friday, adding to a drop of nearly 4 percent the previous day, as unemployment data hardened views economic weakness would sap energy demand further and that last month's rally was overdone. OPEC fuel management for fuel supply and fuel demand has been off the mark.
In the latest sign the economy of the world's top consumer was still struggling, data on Thursday showed U.S. employers cut 467,000 jobs in June and the jobless rate rose to a 26-year high.
Oil prices have doubled from a low of $32.40 a barrel in December last year and they surged by 42 percent in the last quarter — the largest quarterly gain since 1990.
The latest U.S. government data showed a bigger than expected increase in stocks of motor fuel ahead of the July 4 holiday weekend, typically a time of high demand as the peak of the U.S. summer driving season.
With all of the bad news, we think the rally is over and we will see $60 a barrel for oil before we see $70 a barrel. Of course we are free to change our minds.
For all your fuel management and fuel consulting needs, Sokolis Group will take care of you. Please reach out to www.sokolisgroup.com or 267-482-6155
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