Published September 2007
Fighting Fuel Prices
(page 84)
Professionals share ideas on how to keep profits intact despite the recent spike in costs for gasoline and diesel fuel.
This feature in Cleaner reports noteworthy conversations that take place in Cleaner Discussion, an e-mail based forum for industry professionals sponsored by COLE Publishing. Cleaner Discussion enables the exchange of information and ideas on pipe cleaning rehabilitation and maintenance, trucks and equipment, high-pressure cleaning, business improvement topics, and much more. To find out more about Cleaner Discussion, or to subscribe, visit www.cleaner.com.
Question:
Fuel prices are murder these days. I am wondering how others are responding. Raising rates? Adding fuel surcharges? Finding ways to economize? Surely doing nothing is not an option. Thoughts?
Answers:
I just put it into our rates. I don’t like the fuel surcharge option.
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We have converted all of our fleet to diesel. We have a 2,000-gallon fuel tank and buy diesel direct. This normally saves 10 to 30 cents per gallon. We have also added aftermarket intakes and custom-tuned computer chips that are set to economy to get more miles per gallon.
Doing these things is expensive, but we see miles-per-gallon figures from 18 to 22. We are also fanatical about intervals between oil changes, and we only use synthetic motor oils. Doing all this has seemed to help, but it only makes a dent.
We’ve already spent $30,000 this year in fuel. We have been talking about going up on rates by around $10-per-hour more. This would more than pay for the fuel, but the employees are suffering just like we are with high fuel prices, so they will be getting a raise, also. This means our net profit pretty much stays the same. And some of the people out there think we are taking advantage of the customers.
I don’t like the idea of a fuel surcharge too much.
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Fuel cost has always been an issue. Prices have never been very stable. I remember pumping gas when I was younger and fuel surged to 45 cents. “That’s it! Nobody is going to drive anymore,” I thought.
We tend to measure our fuel cost in terms of what it costs per gallon rather than how productive we are with each gallon we purchase. We are reminded every time we buy gas. We stare at the pump as the numbers spin like a slot machine we can’t seem to beat. We have no control over the cost of fuel, but we can certainly impact how we use it.
Suppose you purchased 20 gallons of gas for $70 ($3.50 per gallon). That sounds expensive, but suppose that 20 gallons helps generate $20,000 of profitable sales. The $70 was a great investment. No one would complain that the fuel was overpriced. Now, spend that same $70 and generate $0. The $70 seems high. You could have parked that truck for a better result. Somewhere in between lies a happy medium.
Companies waste some fuel every day. We tend to tweak trucks for higher fuel efficiency. We change oil, rotate tires and try to lighten the cargo weight. That’s all very important, but if that’s all you’re doing, maybe an organizational approach is in order. A lack of organization dramatically raises fuel costs (among others.)
Just how effective is your dispatcher at routing calls? Do they inform drivers of road closures and traffic delays? Are your trucks crisscrossing on the road? How many calls are returned to the next day that should have been completed the first day? Do you even track that? How many times are the trucks going to supply houses each day for parts that should already be on the truck?
What is the average miles per gallon for the fleet? Does any truck have unusually low mileage? Is there a chance that someone may be stealing fuel? Can it happen? We all know that parts and tools disappear. Why not fuel?
Do you use a GPS that shows the truck’s driving path, number of stops, frequency of stops and miles driven? Do drivers call in their mileage every morning? Who is driving around handing out estimates instead of actually selling the work? What is the company policy on personal use of trucks?
My point is, there are a myriad of possibilities when it comes to fuel cost. Instead of focusing on the cost per gallon, maybe we should focus on what the company is getting for that gallon. Maybe we should look at sales-per-gallon purchased instead of getting dizzy watching that slot machine spin.
Add-on sales can be a powerful enhancer to this ratio — you’re already onsite, and if you’re priced properly, the initial service you were called to do already paid the overhead. The bottom line is that fuel is a legitimate, direct cost that each company can manage and impact.
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Like any good business person, I have done research before I switched my fleet. Economy-tuned chip and air intake sell for $450. That gives me around six more miles per gallon. I have figured that the change on each truck pays for itself in just over three months. Everything after that is savings.
There are other ways to save fuel, such as better call routing. We have been using Verizon Wireless’ Field Force Manager for about a year now. We had the truck-based GPS for about five years before that, but we were not happy with it.
With the current system, the secretaries log in the jobs to the system, and then the dispatcher can see all job locations and all worker locations. With this information, he can dispatch the most efficient way. The workers also like being able to use the phone’s GPS to route them the quickest way to a job, or tell them how to get to a job where they are not familiar with the location.
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How about trying nitrogen in your tires? Up to 5 percent better gas mileage and longer life of the tire.
