Most truck fleets today are still not using a fuel purchase optimization system, even with diesel pushing past $3.00 per gallon in some locations. Who would have thought such a thing was possible from such a cost-conscious industry? It is one of the Great Mysteries, right up there with how the pyramids were built or the nature of black holes in space, and the more prices rise and the wilder the fluctuations, the more mysterious it becomes. Why would any fleet willingly pay higher prices for fuel?
There are, of course, all sorts of possible explanations, from the abiding hope that things will “get back to normal” to concerns that such systems might alienate drivers or be difficult to implement.
Many well-managed fleets have also already taken other important steps to reduce fuel costs, such as negotiating preferred rates, joining a fuel purchase network, implementing a route optimization system, restricting idling and specifying equipment for fuel economy. Each of these measures can potentially make a significant contribution to minimizing fuel costs, so why go chasing the last pennies per gallon with yet another system?
IT ALL ADDS UP
The fact is, saving a few more pennies here and there on fuel every day can really add up in a hurry. Suppose that you were only able to save an average of four cents per gallon per year. If a typical truck in your fleet runs 100,000 miles per year and averages seven miles per gallon, that is an annual savings of $571.43 per truck. Not so bad, and the savings could be much higher.
“I really don't understand why fuel purchase optimization is not more popular because we know that it works,” says Dr. Richard (Rick) Murphy, founder, chairman and CEO of Integrated Decision Support Corp. (IDSC), a provider of fuel purchase management solutions for the trucking industry.
“With our Expert Fuel system, for example, customers see an average savings of four cents per gallon on a restricted network and eight cents per gallon on an unrestricted network. These savings occur because prices vary by location, and they tend to be the same whether you buy one million gallons of fuel per year or per week.
“It does take some effort to do, since you have to manage the drivers, too,” he notes, “but we have never seen it increase driver turnover. Almost every carrier we work with puts only the better national truck stop chains into the system, those that include safe parking and driver amenities, and then we optimize fuel purchasing within that set. In fact, newer drivers especially tend to like the system because it takes out a lot of the uncertainty and anxiety. They know when and where they are going to buy fuel and how to get there.”
For most fleets, there is probably a fuel purchase optimization system available today that can help wring more cost out of the fuel bill, no matter what other fuel cost saving measures have already been implemented. From Web-based ASP solutions to integrated, enterprise-wide systems, there are plenty of options from which to choose.
LOTS OF CHOICES
The simplest approach to making better buying choices is not a software “system” at all, but just asking drivers or dispatchers to check out the daily prices at preferred truck stops along your routes via the Internet. Many fuel providers list current prices, updated throughout the day, on their Web sites. Go to Flying J's Web site, for instance, (www.flyingj.com), and you can view prices at Flying J facilities across all of the U.S. and Canada.
For even more convenient in-cab fuel purchase guidance, drivers can compare regional fuel prices at most fuel providers via an Internet-enabled cell phone. Earlier this Spring, for example, Verizon Wireless and MobileGates Corp.announced that new map-based applications from MobileGates, MG Traffic and MG FuelFinder were available to Verizon Wireless Mobile Web 2.0 customers.
The new tools are designed to help customers avoid heavy traffic and locate the lowest priced fuel in the region or along a route, sorted by price for any grade of diesel or gasoline. The MobileGates solution is also available through Sprint/Nextel Internet-enabled cell phones under the name TrafficMobile Fuel Pricing.
“We felt there was a real need for an easy-to-use, low-end fuel purchase tool for regional truckers and smaller fleets,” notes Anthony Meador, MobileGates CEO. “This is a plug and play solution available to customers on equipment they probably already have. In fact, they can sign up for the service right from their telephones.”
MobileGates also plans to offer an enterprise-wide solution, according to Meador. “We will be going into beta testing on our new enterprise solution in about 60 days,” he notes. “It is called The Collaborator, and was developed for use by dispatchers and fleet managers with their drivers. We plan to begin marketing it by the end of this year.”
Other fuel management system developers also offer both ASP and enterprise-wide, client-server choices. Maptuit Corp., for instance, began with its integrated product, FleetNav Fuel, which is an add-on to its in-cab routing and directions solution called FleetNav, and then introduced an ASP version last summer targeted to owner-operators and smaller fleets.
“FleetNav Fuel is a fuel purchase optimization system that is overlaid on our in-cab routing and directions system,” explains Erin Cave, director of product management for Maptuit. “It provides suggestions for the best fueling stops along a route based upon the customer's own existing fuel purchase arrangements, the amount of fuel onboard, the size of the fuel tanks and the out-of-route miles required to fuel at a particular location. Fleet managers can also see if drivers accepted the recommended fueling stops or not and what the results were. For instance, they can see how far the driver may have had to go out of route to fuel at another location. We have also teamed up with SiriCOMM to provide an ASP version of FleetNav called FleetNav Express.
Both an integrated, client-server fuel optimization system and an ASP solution are also available from Integrated Decision Support Corp. (IDSC), a long-time provider of fuel optimization services. Developed specifically for truckload carriers, IDSC's Expert Fuel is designed to work with a fleet's mobile communications and dispatch and routing system to provide drivers with optimized fuel purchase and route plans at the time of dispatch.
The fuel plans are generated using IDSC's proprietary algorithms to calculate essential factors in real time, including current fuel prices, fuel onboard, vehicle fuel consumption, state tax implications, fuel network implications, out-of-route miles, company route and terminal fueling policies, tank fill policies and driver amenities.
“The system will also generate several real-time and historical reports, including a report on driver compliance,” notes Murphy. “Some fleets use the reports to encourage compliance by creating competitions between fleet managers. No one likes to be last.”
IDSC's Web-delivered system is called FuelAdvice.com. It is designed to provide in-cab fuel location pricing information, optimal fuel trip planning and fuel query services for over-the-road truck operators on a subscription basis. “FuelAdvice.com is targeted to fleets with fewer than 75 trucks,” Dr. Murphy. “Some fleets offer it to their owner-operators as a retention tool. The nice thing about an in-cab solution is that there is virtually no integration cost. Instead, it is tied to the mobile communications system.”
A system called FuelLogic is the fuel optimization and fuel management offering from Prophesy Transportation Solutions, Inc. It integrates with the company's Mileage and Routing and Mobile Communications systems, which are part of Prophesy's suite of dispatch tools. According to the company, it is designed to work with a fleet's existing fuel networks, fuel cards and other negotiated discounts.
ProMiles Software Development Corp. offers its own fuel purchase optimization tool called Fuel Opt within its trucking mileage guides, ProMilesXF (on CD) and ProMiles Online (available over the Internet). According to the company, the system first optimizes the route and then associates the truck stops along the route with the lowest fuel prices.
BULK FUELING OPTIMIZATION
Companies that buy a lot of fuel, especially in bulk, also have opportunities to reduce fuel costs by looking further up the fuel supply chain to the fuel terminals. Houston-based FuelQuest, Inc. provides full or partial fuel procurement outsourcing services for some of the nations largest fuel purchasers, including convenience stores like Circle K and fleets like UPS and Swift.
“Large companies that buy fuel in bulk or that are interested in aggregating fuel purchases to lower costs are our target customers,” explains Ryan Mossman, director of marketing solutions management for FuelQuest. “Our system can help companies save money on fuel in three different ways: by helping them find the best prices at the rack [the terminal] from among all suppliers, by helping them lower the cost of transporting fuel to their locations and/or by helping them to maintain optimal fuel inventory levels. Keeping too much fuel in storage tanks can needlessly tie up money that might be better deployed elsewhere.
“All of the 800 or so fuel terminals in the U.S. are in our software system,” says Mossman, “and we handle the purchase of over 9-billion gallons of fuel every year, including diesel, biodiesel, ethanol blends and all grades of gasoline. We will also be handling ultra-low-sulfur diesel fuel. Some companies use our software themselves; others outsource all their fuel purchasing, pricing and financial reconciliation to us.”
Most of the fuel purchase optimization systems get their price information from data specialists such as OPIS (Oil Price Information Service), automatically downloading the data every few hours or as changes occur. OPIS, for example, has been providing oil news and pricing to the downstream oil chain for over 25 years. Today it distributes information on petroleum prices via fax, newsletter, e-mail, the Internet and third-party vendors. According to the company, nearly 100 billion gallons of fuel are pegged to the OPIS rack and spot prices every year.
Fleets interested in accessing OPIS data directly can subscribe to the OPIS and Oil Express Newsletters or attend OPIS-sponsored conferences. Their next Fleet Fueling Conference is scheduled for September 17-19 in St. Louis. More information is available at www.opisnet.com.
WHY PRICES VARY
When fuel prices begin to cause real financial pain, the impulse to find fault is almost irresistible. There are lots of good reasons, local and global, for today's volatile fuel prices, however, and most of them are not going to change any time soon.
“There are real, physical reasons why domestic fuel prices vary at the pumps, regardless of who buys where,” explains Murphy. “State taxes contribute to price variability, for instance, as does the cost of transporting fuel. Retail fuel price variability is not simply a factor of consumer buying patterns and it increases as prices fluctuate.”
Globally, the fact that more than 60% of our nation's fuel comes from foreign sources is, of course, at the heart of the pricing problem. So is the fact that oil supplies worldwide are not increasing to keep pace with worldwide demand, which is exploding in developing countries such as India and China.
No wonder President Bush has called America's dependence on foreign oil a “national security problem and an energy security problem.” It clearly is. Events like Hurricanes Rita and Katrina and the terrorist attacks on oil rigs in Saudi Arabia were also shocking reminders of the vulnerability of the oil supply chain to sudden disruptions
If there is a silver lining for fleets trying to deal with today's fuel market it is this: There are still opportunities out there, and good ones, to offset at least some of the fuel prices increases, and fuel purchase optimization systems are one of those opportunities. “For the good of the industry, fleets should be taking advantage of fuel purchase optimization technology,” observes Murphy. “I hope they do.”
Tools to help you reduce fuel prices everyday on every trip
Today many fleets large and small and even owner-operators can benefit from using a fuel purchase management system. There are a number of solutions from which to choose, depending upon the size and nature of your business. Here is a partial list of suppliers. Some now offer web-delivered options available for a monthly fee as well as integrated, enterprise-wide systems, making it easier to find a supplier and a solution that are a good fit for your fleet.
FuelQuest, Inc.: The company's fuel management outsourcing system was developed to provide larger companies that buy fuel in bulk (or are interested in aggregating their fuel buying) with terminal-level sourcing and pricing, fuel delivery management and/or fuel inventory management. The software system is available on a license basis, via the Internet for a subscription fee or as company-provided, service. (www.fuelquest.com)
Integrated Decision Support Corp: Expert Fuel is designed to provide drivers with an optimized fuel plan at the time of dispatch, including where to fuel and how much to buy (www.idscnet.com). FuelAdvice.com is IDSC's web-based fuel pricing and trip planning option, delivered through a web browser on a subscription basis. (www.fueladvice.com)
Maptuit: FleetNav Fuel extends the company's FleetNav Directions to provide drivers and fleet managers with route analysis and fuel price evaluation data. It also takes into account a number of factors, such as the vehicle's current fuel level. (www.maptuit.com) An ASP version called Fleet Van Express is also available.
MobileGates: Systems from MobileGates are designed to help users avoid heavy traffic and locate the lowest-priced fuel via an Internet-enabled cell phone from Sprint/Nextel or Verizon. (www.MobileGates.com or www.mobilepublish.com)
ProMiles Software Development Corporation: Fuel Opt is for use within the company's trucking mileage guides, ProMilesXF (on CD) and ProMilesOnline (available over the Internet). The system is designed to first optimize the route and then associates the truck stops along the route with the lowest fuel prices. (www.promiles.com)
Prophesy Transportation Solutions, Inc: Windows-based FuelLogic is a fuel optimization and fuel management program designed to identify the lowest priced fueling options and to help reduce out-of-route miles. (www.mile.com)
Oil Price Information Service (OPIS): Offers information about fuel prices plus petroleum industry news and analysis through a variety of sources. (www.opisnet.com)
T-Check Systems: Offers an Internet-based fuel management service called e-Stop Fuel Management Tool Kit, which includes truck stop retail pump prices, net price per gallon, wholesale cost-plus averages, state and federal taxes and other information. Any company can subscribe to the service, but it is free to T-Chek customers. (www.tchek.com)