The issue with fleet fuel is visibility. Even when you subscribe to services such as OPIS, DTN or Platts for your pricing, you still need to know taxes, freight, surcharges and margin.
It doesn't simply jump off the page and say, "My margin to you is _____." You need to do your homework.
Some more homework questions to consider: Is your company getting a discount from the posted fuel price at truckstops and retail? Is the discount more or less than a comparable company in fleet fuel volume purchasing?
How can you enhance your discounts to lower your margins and get the most value for every dollar spent? Consolidate volume? Use the same vendor? Change vendors? Negotiate a better deal?
Truckstops: Have you negotiated the lowest price possible? If you buy 500,000 gallons a month and you miss by 1 cent, that costs your company $60,000 for the year. Most large companies that Sokolis Group evaluates miss by at least a penny, and some are buying well over a million gallons a month. Clients using fewer than 200,000 gallons a month can be missing the optimum pricing mark by 10 cents a gallon or more. That size company can be spending $240,000 more each year than a similar-size company with a well-run fuel management program.
Bulk fuel: Trucking companies often miss extra charges such as pump fees, freight fees and fuel surcharges that are too. Or these charges are not itemized and just bundled into the total cost.
Mobile fuel: A major area where companies make mistakes in fleet fuel is with mobile fuel. This is when the truck comes to your location to fuel. The first mistake is not recognizing the benefits of a mobile fueling program. Many fleet managers do not have a total understanding the fuel pricing and fleet management labor savings. A common mistake is not auditing invoices. You have to review them and make sure the pricing agreement is always correct. One new client of ours thought they had a fuel price tied to a specific margin. They never checked. Over a period of six months, at 20 locations, they over paid their mobile fuel vendor by $195,000.
If you do not have a complete understanding of the complexities of the fuel markets and all of the components that make up your total fuel cost and the fuel margins that go with it, you need someone who does. Depending on your company's needs, you might consider hiring an expert, making an investment in training someone in your company, or contracting with a fuel consulting firm or fuel management company.
Glen Sokolis is president of the Sokolis Group, a nationwide fuel management and fuel consulting company, www.FuelManagementSokolisGroup.com.
Previous installments of "Friday Fuel:"
"Successful Fuel Management Program Equals Discipline", 9-11-09
"Who's Watching Your Fuel Program," 9-18-09