Three Ways to Manage Rising Gas Prices

Fuel Prices 2009-2012By Derek Singleton
There’s been a steady stream of articles about rising gas prices here on Triple Pundit. Some have looked at what the impacts of higher gas prices will be while others have acknowledged that they aren’t going lower and asked if your business is ready for the “new normal” of high fuel prices. These articles have pointed out some very important aspects of high fuel prices, and I wanted to build on them by offering a few strategies for coping with the upward trend of gas prices. Here, I’d like to offer some advice to companies that operate fleets and see fuel as a capital expenditure.

Many businesses and fuel procurement offices have assumed that if they could just weather a few rough years, fuel costs would eventually stabilize. That assumption, however, is turning out to be flawed as oil prices are expected to rise by 30 percent in the next three years. Moreover, 2011 set the record for the higher average annual gas price, when adjusted for inflation. To get an idea of how dramatic the uptick has been in recent years, take a look at the graph at right.

Fortunately there are a few things that can be done to manage the new era of high fuel prices and add money to the company’s bottom line. These strategies break down into three general methods of management:

  1. Improve fuel procurement operations;
  2. Better manage the fleet and general operations; and,
  3. Focus more intensely on route planning and shipment loads.

Improve fuel procurement operations
As fuel prices have risen, they’ve also become less predictable. These days, a five cent per gallon swing in either direction is commonplace. This means that buying at the wrong time can quickly bleed money from a fuel procurement budget, especially when purchasing hundreds or thousands of gallons at a time. A variety of automated fuel procurement options have popped up to help build some predictability into fuel prices by forecasting demand, monitoring on-hand fuel, and procuring at the best market price. These solutions help avoid bad purchase decisions and typically save companies a few cents on the gallon.

Better manage the fleet and general operations
Companies can actually save a lot of money by making fairly minor improvements in the way that the fleet and operations are handled. One great example is the benefit of employing highly-skilled workers. Drivers that are versed in fuel saving technique such as smooth acceleration and momentum control can save anywhere from five to 20 percent in fuel efficiency. Beyond that, just keeping tire pressures stable can impact fuel efficiency by as much as another one percent.

Focus more intensely on route planning and shipment loads
A final way to save on fuel costs is to analyze the delivery routes and shipment loads. Advancements in transportation management software have made it easier to plan the most efficient route possible. These complex algorithms can do things like limit the amount of time spent in fuel-wasting commuter lanes and plan which drop-offs are most efficient. For instance, a transportation management system can suggest dropping off the heaviest load first–even it’s the farthest drop off–in order to make the rest of the trips with a lighter, more fuel-efficient vehicle.

These three strategies can help companies save a significant amount of money. If you have any other ideas on how to save money, please drop by my website and leave me a comment at: Three Strategies for Reducing Fuel Costs in 2012.

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