Apply fuel management processes, they work
When fuel costs for an LDV represent in excess of 55% of the monthly operating costs (30% of the total cost of ownership (TCO) including depreciation and interest), why doesn’t it get the attention it deserves?
A fuel company claimed in its marketing that 1 in 8 fuel transactions has an element of abuse and fuel management specialists expect to achieve savings approaching 10%. Fuel loss isn’t just about theft. It’s about inefficient vehicles, poor mechanical condition and wasted Kms, but you don’t know it’s happening unless you can measure it.
The first step in managing fuel consumption is to have a fuel policy. Define where you fill up, always fill to the top to facilitate consistent analysis, weekend / after-hours fills, the administration process, and how do you pay. Importantly, this policy and any management outcomes must be incorporated into fleet and disciplinary policies.
Fuel procurement is a supply chain function but remember the diesel price is negotiable and the petrol price is fixed. Defining where you fill is a vital first step without which you are reducing your buying power and you often pay greater than negotiated rates. Then of course the debate is on road refuelling or home base.
A home-base may give you the advantage of improved pricing but they require serious security, stock management and on site pump management. This comes at a cost which may offset the perceived benefit. There is also the question of “dead Kms” – vehicles travelling unnecessary Kms to reach a refuelling point. The cost is not just fuel. For a heavy vehicle that cost can be in the range of R10 – R15 per Kms (TCO) and what of the cost of vehicles being “out of service”.
So if you choose on road refuelling, who is your supplier and how do you pay. The supplier will be selected through SCM processes but remember price, location, convenience and your procurement policy. Payment has at least 3 options – bank fuel card, electronic card free systems or purchase orders. Let’s not debate purchase orders as they are administration intensive and deny you access to the required transactional information.
Bank fuel cards are extremely attractive but have their critics because of concerns about security and the need for good businesses practices. However, they provide flexibility, are widely accepted and provide excellent and easy to obtain electronic transactional data. This data facilitates consumption analysis and ongoing security checks.
Electronic card free systems have inbuilt security systems which identifies the vehicle but can only be used at specified refuelling points. Being electronic, there are a range of additional security features available but unlike cards there is an equipment purchase cost which must be included in the cost benefit analysis. Additionally, the quality of transactional information, specifically Kms readings, and their ongoing management must be understood.
Now that you have the transactional data what do you do with it. Monthly summaries of expenditure and consumption provide insufficient detail to fully manage fuel. Analysis on a fill by fill basis and comparison to consumption benchmarks facilitates prompt management intervention. Further analysis will identify the cost of consumption in excess of benchmarks and its aggregation provides enabling trend analysis. This analysis identifies problem vehicles and drivers.
Proper replacement planning contributes to improved service delivery and cost reduction. Technology has reduced the fuel consumption of vehicles in recent years e.g. a reduction of 2 litres per 100kms saves R7200 pa based on 30,000Kms pa. This simple analysis further demonstrates the benefits of a modern fleet.
The long term trend for fuel prices increases is 13% pa and the recent drop in the crude oil price has been offset by tax increases and a depreciating rand. Fuel will continue to be your largest fleet expense and price increases will expose you to increasing risk. Fuel management is a necessity.
Measure it and compare it to benchmarks. It’s actually quite easy and made easier with specialised software