Cut Hidden Costs: Four Ways to Improve Your Fleet’s Bottom Line
Written by Matt Leuck
Fleet managers often focus on controlling the biggest fixed operating costs for the acquisition of trucks and fuel. However, it’s the hidden costs that keep fleet managers from achieving their organization’s goals for efficiency and profitability.
Forget the old saying, “What you don’t know can’t hurt you.” There are four hidden costs that can slow down fleets of all sizes, across industries and government services:
- 1. Fuel spend management
- 2. Unscheduled maintenance and repairs
- 3. Driver behavior
- 4. Productivity
Properly managing and reducing unnecessary costs can increase a fleet’s contribution to achieving the organization’s financial goals. Here’s what fleet managers should know in order to identify these expenses and follow routes to better financial control.
1 — Fuel Spend Management: Where to Start
The cost of fuel can surpass any other operating expense category. While prices at the pump are influenced by factors beyond a fleet manager’s control, there are many hidden fuel-related expenses that fleet managers and their drivers can work to reduce. For a better handle on fuel costs, fleets should take the following measures:
Turn Off Engines When Parked
Idling varies by fleet, but some fleet managers report that their trucks idle as much as 20 percent of the time. Even in California, which strictly limits idling to five minutes for heavy-duty diesel vehicles that do not meet certain Clean Idle Certification standards, there are still opportunities to reduce fuel consumption.
- The hidden cost: Idling burns one-fifth of a gallon of fuel per hour. That’s up to 1.6 gallons a day times $3.048 per gallon (the average fuel price in early March 2019), for an estimated $1,366 annually per vehicle.
- The solution: Instruct drivers to turn off engines whenever possible when they’re not on the road.
Rein in Diesel Purchases
Fleets often neglect to control fuel purchase frequency, price paid at the pump, and designated refueling locations — even when they participate in fuel card programs.
- The hidden cost: Fleets waste as much as 10 percent of their annual budget because of noncompliance with fuel purchase policies, lack of policy enforcement, or the fact that a fleet has not established purchase policies.
- The solution: Participate in a fuel card program and ensure your fleet takes advantage of all the program benefits. Require drivers to stop at designated refueling centers for discounted pricing along their route.
Keep Tires Properly Inflated
Tire air pressure can impact fuel usage as well as tread wear and vehicle handling.
- The hidden cost: Underinflated tires can reduce fuel efficiency by up to 3 percent.
- The solution: Require mechanics and drivers to perform tire pressure checks before vehicles leave the fleet terminal. Create a schedule that’s sustainable with available resources and that supports delivery deadlines.
Fleet managers delicately balance customers’ delivery requirements with the fleet’s need to maximize revenue-generating payload within the 80,000-pound limit.
- The hidden cost: Every 100 pounds in vehicle weight can reduce miles per gallon up by 2 percent. Overloading vehicles raises the likelihood that tires would need to be replaced early, wheels must be aligned more frequently, and front-end and suspension parts could wear out sooner than their life expectancy and have to be replaced.
- The solution: Adjust loads to keep gross vehicle weight at or just below the vehicle’s rated capacity.
Eliminate Storage Tank Additives
The variability of petroleum diesel and environmental conditions prompts fleet owners to rely on additives to enhance fuel performance, enhance long-term storage capability, improve flow in cold weather, and clean fuel pumps and injectors.
- The hidden cost: Fleets often invest in anti-gelling and anti-microbial additives and cetane enhancers. The cost can add up to $0.01 to $0.10 per gallon.
- The solution: Switch from fossil diesel to clean alternatives such as Neste MY Renewable Diesel™ to eliminate the need for additives. The advanced production process that converts used cooking oil and food waste into Neste My Renewable Diesel results in a consistent, clean and stable fuel with a cetane number of 70-plus that eliminates the risk of fouled injectors, as well as the need for cleaning or performance-enhancing agents.
2 — Unscheduled Maintenance and Repairs: Stick to Schedules
Vehicle maintenance is predictable. Fleet managers know when they should replace filters, fuel injectors and tires, change fluids, and lubricate suspension or steering components on schedules recommended by manufacturers. When fleets skip routine maintenance, vehicles invariably experience breakdowns and accrue costs for repairs and undelivered loads.
- The hidden cost: Improper maintenance reduces fuel efficiency by 10 to 30 percent. Fleets incur missed-opportunity costs while vehicles remain out of service and unavailable for trips that generate revenue. Finally, continuing to run high-mileage vehicles past their expected life span risks major costly breakdowns.
- The solution: Follow vehicle manufacturer recommendations for routine maintenance. Create a capital expenditure plan that funds replacement of at least 10 percent of a fleet’s oldest vehicles each year. Set an asset utilization goal of at least 90 percent in order to reduce cost per mile and overall costs. Switch to renewable diesel to reduce time for parked regeneration of diesel particulate filters (DPF), manual cleaning, or premature replacement of emission control systems.
3 — Driver Behavior: Teach Safe Driving Techniques
Driver performance directly correlates with safety, along with the expense line of fleet budgets. Twenty percent of fleet drivers are projected to be involved in accidents each year. Fuel efficiency can be negatively impacted by how drivers operate fleet vehicles, especially when drivers exceed the speed limit, accelerate rapidly, and brake harshly.
- The hidden cost: A fleet with 500 vehicles is estimated to experience 100 accidents a year at an average cost of $2,500 per occurrence. That’s $250,000 a year. Aggressive driving can lower fuel economy by 33 percent at highway speeds and by 5 percent on city streets.
- The solution: Provide drivers with safety training available from insurance companies and transportation industry associations. Implement telematics to track driver behavior and teach eco-driving techniques that increase fuel efficiency. By using proven driving methods, a single truck averaging 35,000 miles per year can reduce fuel consumption by more than 1,200 gallons.
4 — Productivity: Go Further with Technology
Staying profitable while hauling freight on long trips across the state or country or in the last mile around town demands that fleet managers maximize the utilization of vehicles as well as labor. Many fleets still schedule deliveries manually or use outdated logistics software.
- The hidden cost: Failing to precisely map delivery routes wastes time and fuel.
- The solution: Turn to route planning and navigation systems that dynamically adjust to recalculate routes to account for changing traffic conditions, remaining deliveries, and requests at specific load docks or customer locations. UPS, for example, introduced software that now saves about one mile every day along each of its 96,000 routes and lowers fleet expenses by as much as $50 million annually.
Hiding in Plain Sight: Cut Fuel Costs First
My best advice to fleet managers considering how to better manage hidden costs is no secret: Prioritize fuel spend.
Operational changes — such as increasing routine maintenance or adding route planning systems — certainly help to bring down expenses. Implementing telematics for visibility into fuel usage, idle time, engine hours, and driver behavior also benefits fleets. However, all of these solutions take longer to implement.
To gain early wins, focus on fleet fuel costs first by doing the following:
- Collaborate with drivers to cut engine idling.
- Add a fuel card program that provides discount pricing and establishes fuel spend controls.
- Make the switch from fossil-based diesel to renewable diesel. No equipment investment or vehicle modifications are needed.
Neste MY Renewable Diesel is a sustainable fossil-fuel alternative that enables fleets to reduce emissions while also saving on everyday hidden operating costs. For fleet managers, that’s a great route to follow as they begin the process of maximizing efficiency and profitability.
Matt Leuck is the renewable diesel fuel technical manager at Neste North America.