Fuel Management
The fuel price in May 2018 is the highest value in the last 6 years (Petrol 93 ULP & Diesel 0.005% - Gauteng, source: SAPIA) but interestingly the increase in the diesel price is only marginally ahead of inflation over the last 3 years (CPI 5.4%pa vs Diesel 5.98%). However, the price trend is up as the oil price increases and rand depreciation remains a threat.
Couple the above with fuel representing at least 50% of a vehicle’s Total Cost of Ownership (TCO), fuel management has to be the single biggest area of focus.
To fully address the needs of a complete fuel management process we need to address 4 issues
- Create a fuel usage / management policy
- Implement a fuel procurement process
- Analyse consumption and apply consumption benchmarks
- Identify and manage variances
The Fuel Management Policy should typically define the following:
- Refuelling methods (other than card) and controls
- Use of fuel cards (if selected)
- Single vehicle and single user; include lost cards, expiry and staff resignation.
- Fuel, oil and toll usage.
- Refuelling limitations – frequency, after hours , weekends, holidays, locations, fuel type, tank capacity and supplier selection in line with procurement process.
- Tip - always fill to the top as this facilitates best analysis.
- Transaction details and record keeping.
- Integrate with the vehicle selection policy to acquire vehicles with least consumption.
- Integrate with disciplinary policy.
The Fuel procurement process should select a supplier based on price, service quality & support
- Select best procurement method e.g. in house / home base, on road, fuel cards, cross border
- Focus your procurement on the least number of suppliers
- Select a supplier that fully meets your vehicle movement, refuelling and service needs
- Negotiate diesel price, deposits and transaction fees
- Transaction information to be available electronically
Detailed Consumption analysis is the best method to identify variances
- Obtain / download transactional data on a daily basis
- Correct information errors e.g. wrong odometer, duplicates, unknown vehicles.
- Identify transactions outside of policy; e.g. after hours, in excess of fuel tank capacity.
- Develop and apply a fuel consumption benchmark for each vehicle.
- Calculate consumption for each and every fill (in preference to a monthly calculation)
- Calculate the cost of consumption in excess of the benchmark.
- Aggregate these costs on a vehicle, departmental and company basis
- Record and manage trends to facilitate a process of continuous improvement
Identify and manage variances
- Identify variances to policy and consumption benchmarks, and report
- Integrate with tracking / telematics systems to identify speeding and excess idling (which contribute to high consumption) and validate locations of fills
- Engage with the driver, service provider or operator who has been identified in this exception reporting process
- Identify solutions for the correction of the variance. This may include training or revised processes
- Apply disciplinary action where appropriate
Fuel management is expected to generate a savings potential of at least 5%, which for a mixed fleet of 100 vehicles averaging 30,000 Kms pa can potentially translate into a saving of R300,000 pa.
Fuel will continue to be your largest fleet expense and price increases will expose you to increasing risk. Fuel management is a necessity.
Have a question?
Contact Nigel Webb - Latitude Fleet Services - nigelw@latitudefleet.co.za