From sales performance to Web site page views, from delivery routes to manufacturing processes: the prevailing wisdom in business these days is "if you can't measure it, you can't improve it." Fleet fuel costs are no exception. However, this large fleet expense - second only to depreciation - is often overlooked by small fleets.
A comprehensive fuel management program is designed to track, measure and control your fleet's fuel use. Commonly referred to as a fuel card program, this is a bit of a misnomer as the card itself represents only a fraction of the tools available to reduce fuel expense, such as reports, alerts, authorization parameters, fraud control, purchase limits and consolidated billing.
Surveys reveal that, on average, fleets that move from a no-fuel program to a managed-fuel program realize savings of 10-15 percent of their overall fuel management costs.
How a Fuel Management Program Works
The basis of a fuel management program is a fuel card that is issued for each fleet vehicle or driver. The driver enters a driver ID number and the vehicle's odometer reading at the pump. Labeling each transaction with vehicle and driver identifiers allows the company to closely monitor purchasing activity for inadvertent misuse or unauthorized transactions, as well as monitor fuel efficiency.
Programs vary greatly in terms of acceptance, controls and cost. Some cards can be used only at a particular fuel brand; others have multiple brand partners. Some are tied to a major credit card such as MasterCard, which can be used wherever it is accepted.
Card controls can be customized so different vehicles and drivers can have different purchasing allowances. Parameters include days and times fuel can be purchased, amount of fuel dispensed per vehicle per day, transactions per day, dollars per day or gallons per day. The goal is to eliminate "exceptions" or purchases outside the boundaries set by the fleet manager.
Many fleet operators don't even realize they have a spending problem until they see the resulting drop in fuel expense when they implement purchasing restrictions. When the card controls are set up appropriately, a fleet manager can eliminate fueling theft from non-employees (the obvious expense) as well as unauthorized fueling by employees who carry the card for business (the hidden costs), says Pamela Bartz, vice president of marketing for Fuelman, a fuel management company serving commercial and government fleets through a fueling network and fuel and maintenance expense programs.
Robust programs store detailed vehicle and driver information online, which is accessible anytime. This information is collected in vehicle management reports that detail spending by merchant category, fuel type and grade, card, vehicle or employee. Some programs allow purchase data to be downloaded into accounting and fleet management applications.
These consolidated reports simplify work processes and speed up operations by making it easier to reconcile purchases and by eliminating paper receipts.
Reports detail what grade of fuel a driver is using and identify "who's filling up on burritos in the mini mart." Fleet administrators can track miles per gallon and pinpoint stations with the cheapest gas.
Some programs require a minimal fee upfront. Some have a nominal transaction fee; others cost nothing. Some programs offer standardized national account program pricing from selected merchants. Check with each program provider regarding volume rebates, which can be as much as 5 cents per gallon.
A Tale of Two Fleets
These two case studies show savings recouped when two companies moved to a fuel management program. These companies use Fuelman.
1. HVAC Company Reduces Miles Traveled
A Phoenix air conditioning and heating company was using a commercial fueling membership for its fleet of 45 vehicles that joined together as one brand comprised of several independently owned, unattended, fueling stations throughout the area.
The closest of these proprietary fueling stations was two miles from the office where the company vehicles were parked overnight, which meant a four-mile round trip might be required just to begin the day.
Further, when in the field they might have to drive up to 12 miles to find one of the fueling locations. If they could not find a station, the drivers would use personal credit cards and submit receipts for reimbursement. Because the sites were fuel pumps only, the crews were then making additional trips to convenience stores to purchase drinks or snack items for the day.
The company needed more fuel location options, so it turned to one of Fuelman's fleet fueling and maintenance purchasing programs.
Fuelman is accepted at more than 600 fuel and maintenance merchants within the Phoenix area, and 45,000 merchants nationwide. Crews no longer have to start their day with a two-mile trip to fuel, nor make additional trips to a convenience store throughout the day.
"Being able to use Fuelman at multiple locations gets the crews off to a more productive start," says the HVAC company's general manager. "We are saving both time and money fueling when and where we need it."
2. Welding Company Saves Hours on Receipt Reconciliation
An Oklahoma-based welding company manufactures replacement parts for oil rigs and then trucks these components to the field. The company serves customers around the country, including Louisiana, Michigan and Georgia.
For many years, the company had a charge-account relationship with a local gas station for its nine-truck fleet. However, for more distant deliveries, drivers depended on credit cards to refuel. The many different forms of fuel payment created a challenge when it came to tracking fuel costs by truck.
"We have three full-time drivers and a host of others who deliver critical parts to distant states," explains the administrator responsible for tracking fuel consumption. "Monitoring their spending was taking up a lot of my time. There were no controls to limit how the cards could be used, no restrictions on fill-ups after the drivers were off the clock, no restrictions on fuel type, grade, or the number of fill-ups per day."
In 2008, the company's president and owner implemented a Fuelman fuel management program.
With these identifiers and Fuelman's online account tools, the company's fleet administrator now monitors fuel transactions, and knows exactly how much and what type of fuel is bought, how often, what time of day and by whom - even instantly restricting a card's activity to accommodate just the needs of the truck's mission for the day.
The administrator estimates that the amount of time she now spends trying to account for and track fuel costs has been reduced from 20 hours per month to near zero. She no longer wastes time locating information by looking back on log sheets and time sheets or talking to the driver who made a particular charge.
The owner explains, "We saw 'corrections' to fuel purchases as soon as we implemented the Fuelman system. It was apparent, right away, that we had made the right decision to choose a fuel card with real-time visibility of fuel transactions."
Possible Savings with Managed Fuel Program
Here are examples of savings after moving to a managed-fuel program for a typical 25-vehicle fleet. Assumptions are that each vehicle travels 30,000 miles per year and averages 20 miles per gallon. At $3 per gallon of fuel, each vehicle uses $4,500 in fuel expense. The yearly fuel cost for this fleet is $112,500.
Obviously, fleet circumstances and program features vary greatly. These calculations are only meant to provide a starting point to show areas of potential savings.
- 3 cents per gallon, total savings: $1,125
- 4 cents per gallon, total savings: $1,500
- 5 cents per gallon, total savings: $1,875
Closer Fueling Stations
- Eliminating four miles per day, 20 miles per week, 1,000 miles per year: 25,000 miles saved total fleet / 20 mpg = 1,250 gallons of fuel x $3/gallon = $3,750
Cheaper Fueling Stations
- Saving 10 cents per gallon at cheaper fuel stations, total savings: $3,750
- Eliminate one $1 snack per day, 250 per year = $250
- If 8 drivers follow this pattern = $2,000
- If 15 drivers follow this pattern = $3,750
- 3 hours per week paying a bookkeeper $15 per hour, 50 weeks = $2,250
- 4 hours per week at $15 per hour = $3,000
Fuel Grade Controls
- Switching from midgrade (89 octane) to regular unleaded (87 octane), 15 cents per gallon difference: $225 per year/per vehicle.
- Switching from premium (91 octane) to regular unleaded, 22 cents per gallon difference: $330 per year/per vehicle.