Market Insights: Managing fuel costs
Across the country, LBM dealers have been enjoying a break from the soaring fuel prices that were once impacting their bottom lines. But even with the dip, many realize the decrease is likely temporary.
After a period of lower gas and diesel costs, prices are very volatile; they’re starting to tick back up again and are expected to continue that upward trend over time. In the Department of Energy’s May 18 report, the national average price for diesel had risen for the fifth straight week, increasing 2.6 cents to $2.90 per gallon, according to trucking and freight magazine Transport Topics, up 15 cents for the month. The price is still $1.03 less than a year ago, but the rise is indicative of the Department of Energy’s projections that prices will continue inching upward by the end of the year.
“Every economic forecast and indicator is that fuel prices will continue to rise and stay at higher levels,” said Brian Tabel, executive director of marketing at Isuzu.
The respite from higher prices, though brief, provided fleet managers of all sizes with a key opportunity to invest in future savings — into equipment and practices that will improve fuel efficiencies down the road.
“Whether large or small, fleets seem to be investing in new equipment, including new trucks, to improve efficiency,” said Mike Malloy, staff reporter for Transport Topics. “Not every single truck, but changing them out over time.”
Maximizing MPG — through new technologies and design improvements — has been a focus of truck manufacturers for some time. “Manufacturers are always looking for ways to improve fuel economy,” noted Malloy. “Whether in equipment, technology or engines. They’re so much more efficient than [they were] just a few years ago.”
At the most basic, incremental improvements — such as vehicle weight reduction, use of low-rolling resistance tires and automatic engine start-stop systems — continue to play a role in improved efficiency, according to Bob Johnson, director of fleet relations at the National Truck Equipment Association (NTEA) in a recent article following the 2015 Green Truck Summit. Beyond the basics, “The most direct route to controlling engine emissions is the powertrain,” Johnson said. “This is where we will see most new technologies being considered.”
Beyond the trucks themselves, a portion of the responsibility for improving fuel economy falls to the company and to the drivers themselves.
For Weyerhaeuser Distribution, the rise in fuel prices drives decision-making and logistics in finding the balance between providing stellar customer service without over-servicing and wasting money. It also means finding other ways to use the miles on trucks, including picking up third-party products to fill an otherwise empty returning truck or, vice versa, utilizing third-party providers for pickups and sharing associated revenue.
Driver education into fuel-efficient practices is also vital — even small adjustments in driving technique can add up to significant savings over time, not to mention reduced wear and tear. For example, the Department of Energy recommends avoiding aggressive driving, such as speeding and rapid acceleration and braking. Drivers also should avoid idling, the DOE says, which can use a quarter to a half gallon of fuel per hour. Engine shutoff systems are helping to address this concern, as well.
New technologies allow fleet or operations managers to monitor how the trucks are being driven, and the subsequent reports allow for driver education as well as spotting potential problems or maintenance needs. In fact, the Department of Energy estimates that feedback devices can improve fuel economy by 3%. Peterbilt has realized up to a 5% improvement with the use of its “Driver Performance Assistant,” an in-dash coaching tool that provides real-time feedback to improve skill, productivity and fuel efficiency. Isuzu drivers can receive a “Vehicle Health Report” from their dealer, which relays data on braking, acceleration and other details that impact total cost of ownership.
Similar to safety talks, coaching and team meetings can help promote smarter driving behaviors. LBM dealers might also consider implementing a reward system, such as bonuses or improved pay tied to drivers’ individual fuel economy improvements, to help encourage buy-in from the team and adherence to smarter behaviors.
As with many aspects of doing business, periods of economic prosperity are an ideal time for capital investments that can improve savings long term. The current fuel price decrease, though clearly temporary, is one such opportunity to replace inefficient trucks with higher-MPG options, as well as to begin implementing an internal culture that encourages logistical and operational efficiency. Large and small steps add up over the long term to fuel savings that will be needed once prices climb higher.
Nicole Edwards is business logistics manager for Weyerhaeuser Distribution (woodbywy.com).