Implementing Fuel Best Practices

Fuel management is one of the top three overall concerns for most commercial fleets, second only to safety and total cost of ownership. Fuel can be the No. 1 concern as far as fleet spend. With gas prices fluctuating, fuel is still a volatile challenge for fleets. Money-saving ideas aren’t hard to find; the tricky part is implementation.

Automotive Fleet met with Joe LaRosa, director of global fleet at Merck & Co. (and Automotive Fleet’s2008 Professional Fleet Manager of the Year); Donna Bibbo, manager of fleet and employee services, Novo Nordisk Inc.; and Jeff Coleman, director of fleet operations, Time Warner Cable, western region, to discuss how these fleets are implementing programs to reduce fuel costs.

 

Suggest Changes to Overall Policy

"Considering prices in Los Angeles have fluctuated so much, fuel is currently my No. 1 concern," Coleman said. "When costs increase, management gets concerned, starts looking at expenses, and fleet visibility increases dramatically."

To decrease fuel expenses, fleets need to alter how they view and handle fuel expense, developing specific plans of action.

According to Bibbo, Novo Nordisk is starting with the "obvious" items — assessing who is buying premium and mid-grade fuels and sending e-mails asking drivers to go back to using regular.

"Only some executive vehicles require premium. ‘Recommends’ in the owner’s manual doesn’t mean you have to!" Bibbo pointed out.

To develop a plan with management, she presented three key strategies:

1. Immediate action: i.e., remove certain vehicles from the selector or change to more fuel-efficient vans.

2. Longer term steps: implement the easiest ideas although they may get push back from drivers: e.g., not using minivans.

3. Culture-changing items: action items enlisting strong support from all levels changing how company vehicles are viewed (beyond simply as tools of trade).

 

Reviewing Vehicle Selectors

By changing vehicle selectors, fleets can save on fuel expense. Six-cylinder engines are not as fuel-efficient as four-cylinders. If possible, removing six-cylinder engines from vehicle selectors can save in acquisition costs and fuel expense.

"We ordered new minivans. They will still be in fleet, but will be cycled out. Now we offer four-cylinder engines and are right-sizing fleet," LaRosa added.

Unfortunately, vehicles can be considered a "job perk" in the pharmaceutical industry. Selecting the right vehicle presents a balancing act.

"Drivers view vehicles as a job perk. ‘If I don’t like what one company has, I’ll see what another one is offering.’ It requires balance between cost and environment," said Bibbo.

 

Fuel Cards Help Monitor & Analyze Expense

Time Warner is currently on a universal fuel card program, and according to Coleman, the company uses all available tools in terms of alerts and exception reporting.

LaRosa implemented a fuel card program a year ago. Until the fuel card, Merck struggled with reporting and analyzing trends.

"Pump coding is not always accurate, and stations in the Midwest can run out of regular gasoline," said LaRosa. "Sometimes drivers must use a higher grade. Fuel card reports now allow us to see where one driver is consistently utilizing premium grades."

Another struggle was fuel capacity. For example, if a vehicle has an 18-gallon tank and consistently fills with 21 gallons of gasoline, it’s obvious the driver is filling up something else in addition to their company vehicle. "These issues might be a small percentage of the big picture, but every little thing helps!" said LaRosa.

Implementing new policies or programs can present significant challenges.

"The biggest challenge with our fuel card program was accuracy," said LaRosa. "Previously, we were using a corporate credit card. Mechanically it was fine. The problem now is the corporate card didn’t have a pin number associated with it and the gas cards do. Our drivers complain about learning another pin number."

Some suggestions are making the pin number something the driver already knows, such as their employee voicemail number, another access code, etc.

Most divisions of Time Warner use a type of universal fuel card while others go through a maintenance management partner. Cards are assigned to vehicles while employees are issued personal driver codes. All system users are required to sign an agreement outlining acceptable use and policies.

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Re-Evaluating Personal Use Charges

Policies that charge employees for personal use of a company vehicle vary, as do the amounts. With the increases in fuel costs, fleets are taking a second look at possible rate increases.

Personal use of company vehicles is allowed by both Merck and Novo Nordisk. "We have no personal use restrictions. Mileage is up 21 percent on average per vehicle. Drivers are using company vehicles even more for personal use due to increased gas costs," said Bibbo.

LaRosa agrees. "It’s a combination of things. We didn’t have a good reporting system, but now with the fuel card we have a better system. We do restrict personal use, especially vans. We don’t allow employees to attach trailer hitches, etc."

Merck and Novo Nordisk have a personal use charge — a dollar charge per month or paycheck. The personal use charge is being reviewed at both companies due to increased fuel costs.

Time Warner limits exempt employees to a standard minimal personal use of a company vehicle, while front-line technicians are generally not allowed personal use other than travel to and from their job sites.

Fleets can evaluate current personal use charges versus the cost of fuel. If it’s been a while since such a review was done, the ratio is most likely out of date. Fleet managers can inform drivers of a fleet’s reasons for a rate increase and explain that use of a company vehicle is still better and less expensive for them in the long run. (See January 2008 AF on "The Pros and Cons of Driver Reimbursement.")

 

Penalize for Non-Compliance?

Non-compliance with policies created to reduce fuel expense can be costly. Penalizing drivers for non-compliance can help reduce fuel-related expenses.

"If a driver is not complying with policy, the problem goes to the HR department or the driver’s manager. Gas reports for individual drivers are pulled, and employees can be terminated for non-compliance," said Bibbo.

At Merck, the fuel card program was a big eye-opener for sales administration. "Word gets around when you start questioning employees regarding gas usage and purchases, and employees start getting better about usage. They realize they are being watched," said LaRosa.

If a Time Warner employee is found fueling personal vehicles, the unauthorized purchase is considered theft, which may result in termination. "We had issues with fraudulent practices, and it’s pretty close to being an automatic termination. The information is generally discovered during the reporting process," said Coleman.

"If the employee is found using extra fuel due to excessive personal use, the penalty will be based on the person’s work history, usually at least a written warning, and could lead to termination," said Coleman. "Cases of fueling ‘over grade’ usually generate a progressive warning to the employee, beginning with a verbal, then written message. This last part can be tricky to enforce, since fuel coding on our billings are not always accurate, but are based on what the station reports."

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Mileage Reporting One Key to Curbing Fuel Costs

At Merck, drivers weren’t inputting accurate vehicle mileage into gas pumps.

“At the pump, you have to put the pin number and vehicle odometer reading. Drivers were making the mileage up, putting 99,999, etc.,” said LaRosa.

A company wants to know a vehicles mileage in order to determine its EPA mileage rating, allowing better estimation of fuel expense as well as the ability to monitor the fleets carbon footprint.

“Inputting accurate mileage helps with monitoring and measuring, allowing us to figure out vehicle greenhouse gas emissions, carbon footprints, etc.,” said LaRosa.

The leasing company Merck was with used mileage as an override to replacement cycles. “If a driver put in 99,999 and our replacement mileage is 85,000 for that vehicle, it would show up on our replacement list. You could have a month-old car that had 99,000 miles,” said LaRosa.

According to Bibbo, drivers don’t always understand the importance of accurate mileage reporting.

“We explained it helps the company in replacement issues, calculating miles per gallon, and reducing environmental issues,” said Bibbo. “The environment is important to our company. We operate on something called the triple bottom line: we’re going to be financially responsible to our shareholders, socially responsible to our employees, and environmentally responsible to the world. Telling drivers we need the mileage because we are trying to make our fleet environmentally friendly can go a long way with them being compliant.”

Rolling Out GPS to Fleets

GPS programs are gaining momentum in the fleet industry. Studies estimate telematics usage will hit 5.8 million units by 2009, with revenues growing to more than $2 billion. These telematics tools allow a fleet to monitor driver behavior, maximize routing efficiency, and assess fuel usage.

GPS programs can also help reduce fraudulent reporting. Time Warner is conducting a pilot test with GPS units in fleet vehicles. “GPS is showing us inconsistencies between what is supposed to be happening and what actually is,” said Coleman.

Time Warner hasn’t implemented GPS fleet-wide. The company’s initiative was based primarily on workforce management of techs in the field. The company is running a 100-unit pilot to determine potential benefits in visibility and tracking for dispatch. GPS would also be used to handle straggling calls and find the closest unit.

“We are seeing enough benefit that management is buying into it. Drivers did not react well initially. There were a number of factors involved in that, such as ‘Big Brother,’ ‘Management doesn’t trust us,’ etc.,” said Coleman.

GPS has not been rolled out at Novo Nordisk or the U.S. Merck fleet. Currently, LaRosa is evaluating possible use in Merck’s European fleet.

According to the fleet managers interviewed, one of the biggest issues with GPS is driver acceptance. What do you tell a driver who has misgivings about the addition of a GPS unit to their vehicle? To implement a successful GPS program, fleet managers can educate drivers as to how the units benefit them as well as fleet in general. Fleets can pilot test a GPS program with a few vehicles prior to rolling it out to the whole fleet. In other words, to get acceptance, GPS must be “sold” to drivers.

“The next site we roll this out to we need to do a better job of employee education and get them into the mindset that this is going to happen. Have them understand the ‘whys.’ We are pretty convinced we can pick up an extra job per day per technician, which is a significant additional level of productivity. We’ve also already found a few people who were cheating on time,” said Coleman.

“We tell drivers GPSbenefit them due to increased productivity,” said Coleman. “It helps the company bottom line, which helps drivers in terms of your pay, benefits, etc. More directly, if there’s an emergency, we’ll be able to locate the scene. If the truck is stolen, we’re going to be able to find it. If a driver gets lost, they can figure out where they need to go.”

Coleman copied magazine and Internet articles and distributed them among management. “Good talking points can come from other fleets,” Coleman added.

 

Since the pharmaceutical industry is so competitive, Bibbo believes GPS would have to be adopted on a large scale by all pharmaceutical companies to get driver buy-in.

Time Warner experienced driver reluctance to some degree, but “point to other companies who are doing it, such as UPS,” Coleman said. “Let’s get real, this is coming. It’s going to happen now or it’s going to happen later, it’s the way of the future.”

Because Time Warner is a technology company, its main driver audience is technicians with interest in technology. “We can drive it to them that this is going to put us on the forefront of technology in this area. Our company is going to lead,” Coleman said.

Merck plans to install OnStar in its U.S. fleet vehicles. “It will start as a driver-paid option, but we’re also looking at it as a possible company-paid option. If a driver can travel his or her routes better, less fuel is used, thus saving money,” said LaRosa. “We’re on the fence currently whether we should pay for it as a company or allow drivers to buy-up. We’ll run it as a trial to see how it goes.”