What an interesting time for motor carriers. New or rising costs for trucks and drivers, regulatory requirements and safety mandates are all ongoing challenges. And let’s not forget fuel.
This might be a good time to review the costs associated with fuel. Costs, plural? Yes, the direct cost of fuel that actually is burned is only one element. Inventory, financing, administrative and transaction costs, plus the fuel a carrier pays for that is not burned in its vehicles, have to be considered as well.
Even with low interest rates, fuel in inventory at terminals and in trucks cuts liquidity. One hundred extra gallons for every 100 trucks can equal $40,000 of working capital.
Financing and transaction costs for fuel purchases can include 10 cents per gallon. Some truckstops are paying 2.5% per transaction and smaller carriers frequently pay an additional fee.
Which brings us to the sensitive discussion of fuel that a carrier buys but is not burned in its engines. OK, call it what it is—fuel fraud. Five-percent theft, which is difficult if not impossible to catch, approaches $4,000 per year for each truck.
Technology limitations have forced the industry to continue to use a consumer credit card model for commercial fuel transactions. This creates several challenges. First, the carrier remains all but invisible to the truck stop. Second, the person using the card (the driver) is not usually a principal in the transaction.
Today, magnetic stripe cards still drive the great majority of fuel transactions. While some truck stops treat the sale of fuel as a commercial transaction, a significant number use third party card systems to manage their business.
Technology does exist to allow this to change, and the catalyst that will drive this change is high fuel prices and the need to control expenses, specifically fuel-related costs. In the fuel lane itself, the key change will be the verification of the truck’s identity so fuel doesn’t flow until the right truck is in the lane, and if it leaves the fuel dispenser turns off.
Back office changes will also be important. Purchasing policy management systems tied to a card that are based on a separate database maintained by a third party is not a 21st century solution to managing truck, trailer and driver needs.
Integrating decision-support, enterprise management and on-board systems will be the wave of the future for managing fuel costs in a world of escalating prices and other challenges.
This column appeared in the February 2014 edition of Fleet Equipment. You can read the entire issue on your phone or tablet by downloading the Fleet Equipment app.
