Fleet Best Practices for Saving Money at the Pump
Photo via iStockphoto.com.
In spite of today’s less-expensive gasoline and diesel, fuel still continues to be one of the top expenses facing fleets.
In addition to tried-and-true ways to reduce fuel expenses, technology and out-of-the-box thinking have helped fleets save on fuel costs.
Although they’re not quite top-of-mind for fleets in general over the past couple of years, alternative-fuel vehicles are also contributing to fuel savings.
Vehicle rightsizing has probably been one of the most effective ways fleets have made an immediate impact on fuel spend.
“Over the past several years clients have been refreshing their fleet portfolios with newer models that are more fuel efficient without compromising performance or space,” said Bruce Wright, senior director of client analytics for Wheels Inc. “At the same time, this refresh effort has given clients the opportunity to question the business requirements around size and job classification levels, resulting in nameplate downsizing — mid-size SUV to compact SUV for example.”
One of the best examples of the benefits of rightsizing has been ADP, which operates a global fleet of 2,200 vehicles in 14 countries.
“Over the years, ADP has reduced engine displacement to achieve better fuel economy, e.g., moving from six-cylinders to four-cylinders to mild eco-versions. For the last three years, to meet self-imposed maximum GHG emission limits of 140 g/km for CO2, we have fielded nothing but hybrid vehicles or high-mileage diesels,” said Michael Bieger, senior director of global procurement for ADP.
It hasn’t been enough to simply add vehicles that can help the fleet save money; Bieger noted that the drivers, too, have become more efficient.
“We have also provided training communication to the drivers on how to drive more efficiently, particularly how to operate a hybrid vehicle,” he said. “Because of the overall scope of the respective fields of influence, drivers have the ability to influence around 10% improvement in fuel economy with better operational habits.”
That said, more fuel-efficient vehicles have increased fuel economy by 27%, according to Bieger, so better vehicle technology has netted the biggest benefits for the ADP fleet.
In addition to thousands in cost savings ADP has netted by rightsizing the fleet, Bieger noted there have been some significant environmental benefits as well.
“Staying away from the obvious fuel savings cost benefit, the largest measure of the program’s success is that, in less than three years, with a little more than 1,000 vehicles, ADP has reduced its CO2 output by more than 3,200 tons of GHG,” he said. “You would need to plant over 130,000 trees to sequester in one year all the CO2 that was avoided.”
In addition to more efficient vehicles, fleets can find savings in other ways — particularly from their suppliers.
“To address price, I see fleets seeking discounts from their service provider or directly from the retailer,” observed Jayme Schnedeker, product manager, Element Fleet Management. “To further reduce price, I also see clients seeking to influence where the driver purchases fuel. Although this can be a more challenging activity, I think it will become a more effective technique as vehicles become smarter to aid in decision making.”
Accurately measuring fuel use has been a long-standing challenge, making it difficult for drivers and fleets to gauge the amount of excessive fuel usage. However, technology is being used to solve what was once a seemingly insurmountable problem.
“Some companies are adding miles per gallon and price per gallon to their drivers’ key performance indicators (KPIs),” said Tony Blezien, vice president, operations for LeasePlan USA. “In the past, companies could usually not measure fuel, due to drivers not entering the proper miles at the pump or inaccurate pump software. Now, there are tools out there that can measure this, and companies are holding drivers accountable. This program has been very effective for two reasons: The drivers who have met or exceeded expectations are rewarded, and the drivers who have not met expectations know why and can work on their driver behavior.”
Fuel should become not only a KPI for drivers, but the entire fleet team, according Brian Matuszewski, manager of Sustainable Strategies for ARI.
“My top piece of advice would be to make fuel spend an important business KPI that is tied to both the fleet manager’s performance and drivers’ performance and compensation,” he said. “Doing so will prompt fleet management stakeholders to address fuel cost reduction strategies more directly.”
Wright of Wheels Inc. noted that the ability to be able to accurately track fuel use and mileage has changed operations in other ways.
“Some customers have identified lower utilized assets and decided to reimburse those drivers using a formal reimbursement program that limits fuel cost to actual miles driven, as opposed to actual fuel consumption,” he said.
Another option fleets can use to save on fuel from the outset is fuel hedging, which requires a bit of effort to implement, but can have some long-term rewards.
“This strategy can make fuel prices easier to budget and avoid unnecessary expense of 5%-21% over the long term,” said Schnedeker of Element. “Predictability of fuel prices can have benefits beyond budgeting, in the form of profitability. As fuel prices increase, hedging provides a way to protect profitability. This is a particular advantage if the organization finds it difficult to pass short-term fuel surcharges on to their end customers.”
Fleets that don’t want to go the fuel hedging route may have another option.
“Ask your drivers to think twice about where they pump gas. There are tier two or tier three fuel providers that offer a 3 to 5 cent difference per gallon,” said Blezien. “Also, make sure your drivers have the tools to identify the lower-cost fuel stations in their area — there are apps they can use to find these stations.”
One of the biggest challenges for fleets trying to control their fuel spend at the pump is one of the oldest.
“The biggest challenge may not be the biggest cost driver, but fraud is a challenge that requires regular attention and focus,” said Wright.
Fraud at the pump often involves fleet drivers using their card to purchase other non-related fuel items, but passing it off as a fuel expense. This is also known as “slippage.”
“The best way to avoid slippage is to set up the proper controls and hierarchy from the outset that best fits your fleet structure and function. Fleet managers should also have a clear driver policy that establishes what is and is not permissible,” said Henry Miller, general manager of the commercial fleet card group for Shell Oil Company, North America. “With these components in place, it becomes less of a burden for fleet managers to stay on top of slippage — they can simply focus on reviewing the necessary reports for exceptions and abnormalities.”
According to Ramel Lindsay, VP of fleet product group U.S. Bank Voyager, the data collected at the pump helps reduce slippage.
“With a fuel card, typically, the driver has to enter a driver identification number or a pin number so the fleet manager knows which fleet driver is associated with that ID. And, there is a vehicle identification number that is also a part of a transaction,” Lindsay said. “Reporting capabilities and collecting this type of data is paramount, and it’s available in real-time as the transaction occurs and is authorized.”
As the fleet driver fuels up, all this information is being gathered and if there is any unusual activity, the fleet manager will be notified via text message or e-mail.
The recurring theme for fuel savings is technology. One of the newest tools in the arsenal has been telematics (telematics and fuel savings will be examined in detail for AF June’s telematics feature — Editor).
“Telematics has a number of uses from a safety and risk perspective, but it also serves as a fuel management tool through monitoring the most efficient driver routes as well as tire pressure, mitigating idle time and managing driver speed,” said Blezien of LeasePlan USA. “As the price to utilize telematics continues to decrease, clients are also seeing the true benefit of the product.”
Reducing idle time has been one of the biggest benefits of telematics, when it was discovered that one hour of idle time equals about the consumption of one gallon of gasoline or diesel.
“Whether it’s route optimization, fraud reduction or steering to lower cost providers, any fleet can realize savings from combining a telematics solution, with a fuel card,” said Bernie Kavanagh, vice president of North American fleet WEX Inc.
If there’s one step fleets can take to become more fuel efficient quickly, it’s adding a fuel card to the mix, according to Matuszewski of ARI.
“Closely looking at fuel card data allows fleet managers to strategically identify potential areas of improvement by seeing how and where excess fuel might be being consumed by the fleet,” he said.
However, fleet managers need to think before they leap into the use of a fuel card.
“Before fleet managers even integrate a fuel card into their fleet operations, they need to have a good sense of the current costs associated with their fleet operations and their goals once they adopt a fuel card program,” said Lindsay of U.S. Bank Voyager. “Specifically, fleet managers need to know their fleets’ vehicle breakdown, the mileage they expect from these vehicles; this also depends on what the vehicle is used for.”
In understanding these basics, the fleet manager can define the parameters to monitor for the fleet. A variety of the fuel cards available today have reporting capabilities that allow fleet managers to monitor metrics such as odometer readings and fueling transactions, in real time.
Greg Crowe, fleet program manager for Thornton’s, a convenience store chain with over 184 locations, has been partnering with the U.S. Bank Voyager fleet card and network for 15 years. The convenience store chain runs its own co-branded fleet card program that markets to potential fleets across the U.S.
Before Crowe decided to partner with U.S. Bank, he made sure he learned what each provider had to offer and whether it would meet his fleet’s needs.
“A real benefit of having a fuel card is setting spending limits, we can track who’s fueling what, see who our larger users are and determine whether or not this individual needs to use that type of fuel,” Crowe said. “We can also track fuel spent and mileage, because of odometer reading reports.”
Crowe emphasized the security aspect offers peace of mind because of the various metrics that the fuel card can track. And the ability to customize the type of data the fleet manager can view, allows the fleet manager to use the fuel card system to its full extent.
Kavanagh of WEX agreed with Crowe. “There really are no drawbacks to a fuel card program. The benefits range from opportunistic buying at low-cost providers to eliminating fraudulent behavior,” he said. “Many customers have taken the fuel data and integrated that into other in-house systems to further streamline their fuel management processes.”
Agreeing with Kavanagh is Miller of Shell.
“Fleet fuel cards provide controls to help manage costs and can also offer visibility into precise metrics to help ensure compliance with driver policies,” he said. “Depending on the type of fuel card chosen, there may no impact at all to fueling operations. Universal fleet cards allow drivers to access a large network of retail sites — when and where they want — with the benefit of controls in place to ensure that the burden is taken off of the shoulders of fleet managers.”
An important metric that fleet managers can monitor are odometer readings. Odometer readings can serve as an indicator for when the vehicle needs to go in for an oil change, tire change, and other types of preventive maintenance.
Fleet managers can also customize the types of reports they receive and set up vehicle identification tags for specific vehicles.
“Mobile technology is growing in popularity, and giving fleet managers and drivers tools they can use on mobile devices is on the rise,” Kavanagh said.
Lindsay with U.S. Bank Voyager sees, with the rise in digitization, there will be a migration from plastic (fuel cards and credit cards), to fleet drivers using their cell phones as a source of payment.
Many fuel cards already have a mobile app that fleet managers and fleet drivers can download to manage fueling.
“At a high-level, two key fuel management trends you see in the fleet space include the establishment of an ongoing driver safety program that embeds a strong emphasis on a safety-first culture and incentivizing efficient driving behaviors,” Miller said.
In order for a fuel card to be truly effective, Miller believes that fleet managers must have a clear understanding of the fuel pricing market that the fleet operates in.
Another option some fleets are looking at to save fuel is utilizing alternative or “clean” fuels, such as compressed natural gas, propane autogas, electricity, or hybrid solutions, as with the case of ADP.
“One of the more interesting techniques I have seen fleets utilize to save fuel is successfully implementing clean technology vehicles in such a way that allows the fleet to meet its job requirements and lower its total cost of ownership,” said Matuszewski of ARI. “Making clean technology vehicles effective is a great challenge; however, when you can make it work it’s a true win-win situation: good for reducing costs and good for the environment.”
While they have advantages in terms of fuel costs and sustainability, alternative fuels may not be the first stop light-duty fleets are taking today for a single reason.
“With the current, low national average of fuel pricing, I have not recently seen a demand on alternative fuel vehicles,” said Blezien of LeasePlan USA. “Oil companies are not investing in these types of alternative fuels because costs are low, and they do not see the need or demand at this point.”
Matuszewski agreed that low fuel prices are a cause for lower alt-fuel vehicle adoption.
“Lower fuel prices have made the business case for many alternative fuels more challenging, without a doubt,” he said. “Nonetheless, despite low fuel prices, clean technology continues to advance and the cost of the technology is continuing to come down — particularly for electric-drive vehicles.”
However, these challenges may only be a dip in the alt-fuel road.
“The expectation is that, as oil prices regain their footing and begin to rise, that alternative-fuel options will garner a renewed interest,” observed Wright of Wheels Inc.
This doesn’t mean that fleets are abandoning alt-fuel wholesale. Utah’s Canyon Transportation is going all in, switching most of its airport transit fleet to propane autogas.
Surprisingly, the switch to propane autogas wasn’t a move from gasoline or diesel, but compressed natural gas (CNG), which fit the company better operationally and economically, according to Owner and CEO Melanie Marier.
“The ROI is very quick. With the kind of miles that we do, my estimate is that over the life of the vehicle, I’ll come close to paying for the vehicle in savings,” she said. “So that’s very attractive.”
Range and infrastructure was a big issue for Canyon’s drivers. Because of the altitude, CNG range was limited.
“Our drivers leave the yard for a very long shift, and if you’re putting the burden on them driving a vehicle they have to refuel every 100 miles why would they want to jump in that vehicle, and why would they want to use the CNG vehicles? They would use the gasoline option,” said Marier. “With propane autogas, it had a very long range and the station would be in our yard.”
The typical expectation is that the drivers will have to refuel their vehicles once a shift. Canyon Transportation has a 1,000 gallon propane fuel station on site from Blue Star Gas, and there are several public fueling stations near the Salt Lake City airport. Marier said that there are still some altitude issues that are affecting range and operational efficiency, but expects these to be solved soon.
Todd Mouw, vice president of sales & marketing for Roush, noted that most fleets pursuing propane autogas are displacing diesel. In fact, Marier leases diesel vehicles during the high season.
“The cost of diesel is still relatively high, and propane is low, so there’s still a really good business model for budgets from a fuel perspective,” said Mouw.
Mouw noted that one of the other benefits of alt-fuels includes not only the lower fuel price, but less maintenance that’s needed compared to diesel vehicles. Most of the propane autogas adoption has been by medium-duty truck fleets, he said.
No matter what alternative fuel a fleet manager may be considering as a way to save fuel, Marier has one piece of advice.
“It has to be the least disruptive option, and have to be easy to put in place,” she said.
Beyond the practical advice of rightsizing, using technology, or shopping around for better prices, there are fundamental considerations fleet managers need to keep in mind when implementing a strategy to reduce fuel spend.
“I think the most important aspect is clearly defining the metrics that will be used to measure fuel savings,” said Schnedeker of Element. “Year-over-year expense can be misleading given changes to prices, vehicle mix, and consumption patterns. I think targeting specific reductions in consumption waste offer the largest opportunity to optimize fuel expense.”
Wright of Wheels Inc. advocated sticking to the basics.
“Focus on improving your fleet-wide MPG through reduction in idling, improved engine fuel economy, and improving driver behavior,” he said.
The biggest challenge facing fleets trying to cut their fuel spend may not be fuel costs or fuel choice, according to ARI’s Matuszewski.
“Being able to make sense of all the noise and come up with an actionable plan that targets areas of the fleet operation that are high impact is the biggest challenge,” he said. “Investing resources to translate fuel data into actionable information to improve the fleet operation is a good first step.”