Fighting Fluctuating Fuel Prices
Editor's Note:
This past week The Towing And Recovery Association of America sent letters to all the major motor club CEO’s asking them to consider instituting a fuel surcharge or fuel reimbursement program to help towers across America that are struggling with high fuel costs. In the spirit of helping all towers, regardless of their Association membership, TRAA has granted Tow Industry Week permission to reprint their latest newsletter article on fighting fuel prices written by Business Editor Brian J. Riker.
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By Brian J. Riker Fuel is one of the top expenses for any transportation business and towing is no exception to the rule. Fuel prices have been steadily increasing these past two years, but the sudden spike in prices has been shocking and very detrimental to business. What can the professional tower do to combat these out-of-control costs? Fortunately, most good business owners already do most of what I am going to suggest; it’s just a matter of revisiting and making slight adjustments.
Review and Adjust Your Rates – Oftentimes, towers don’t adjust their rates to accurately reflect market conditions. They wait too long and then make one large adjustment that gets pushback from customers. Small adjustments several times a year will avoid most of this pushback. Yes, I am aware that for some segments of our industry the rates are set by outside sources, often without regard to the actual cost of doing business. However, with the rapid spike in fuel prices at top of mind, now is a perfect time to open dialogue with those groups to discuss updated rates. Their operation costs are increasing too, so they should understand and expect your services will also cost more.
Institute a Fuel Surcharge – Now is the perfect time to add a fuel surcharge if you have not already done so. Most sectors of the transportation industry already use this method to adjust pricing without constantly changing their base rates. Therefore, the addition of a modest surcharge will be accepted at face value by many of your customers. Fuel surcharges are only meant to offset the additional costs of fuel and, as such, should be based on the difference between the cost when the base rates were set and the current cost. A fuel surcharge should only be applied to the base rates that are dependent on the use of fuel, such as the base response rate and mileage charges. An across-the-board fuel surcharge of X% of the invoice total may not hold up if challenged.
Review Truck Usage – Review how your dispatch office is assigning assets to calls. Dispatchers should be matching not only the right operator and truck to the call, but also considering nearest available and piggy-backing calls to avoid unnecessary deadhead miles. Look at empty miles returning to base and explore the concept of pre-staging trucks in or near hotspots of activity to improve response times and reduce wasted fuel from drivers traveling back to base between calls. Lastly, review take home trucks for efficiency and necessity and adjust accordingly.
Reduce Idle Time – Fortunately we are entering spring which means mild temperatures for most of the country. Gone is the necessity to idle for prolonged periods of time for driver comfort or to warm up slow flowing hydraulics. Consider offering incentives to your drivers for whoever can turn in the lowest idle time and best average MPG each week or month. Fuel economy is key to cost control.
Review Vehicle Maintenance Schedules – One of the greatest impacts on fuel economy is vehicle maintenance. It takes more energy to overcome an underinflated tire’s high rolling resistance, turn bearings that are not properly lubricated, or even suck air through dirty air filters and into the intake manifold to support efficient combustion. While on the topic of preventative maintenance, can you modify your oil drain intervals to save costs? Modern engines are designed to go much further between oil changes so you may be dumping good, clean oil down the drain without even realizing it.
Coach Your Drivers Bad Habits Away – The individual driver’s habits can account for up to a 10% difference in fuel economy on identical trucks operating over identical routes in identical conditions. If your drivers have the habit of “flooring it” every time they takeoff, staying under throttle until the last second, and then hard braking to a stop they are wasting fuel. Additionally, as can be evidenced by a close look at your vehicle maintenance program, they will also be hard on brakes, tires, and other wear components on your trucks. Coaching them to drive slower and in a gentle manner with fuel efficiency at top of mind will not only save fuel costs but it will extend the life cycles of your equipment and save your maintenance budget too!
Review Fuel Purchasing Strategy – Do you use a fleet fuel card, bulk fuel, or just let your drivers buy fuel on the road anywhere they please? Depending on the volume of fuel you purchase daily, this can have a huge impact on your fuel costs. Often there is a difference of fifteen cents or more between fuel stations in the same town, just because one may be part of a big chain or in a more convenient location. Dedicated fuel cards instead of cash or credit cards often offer bulk purchasing power, especially when combined with a preferred retailer option, saving fifty cents or more off the pump price. Prepaying for bulk fuel is a great option for larger fleets, especially if your business model has the trucks returning to base often enough to fuel almost exclusively at your bulk tank. Some fuel distributors may even give you the tank to use at no cost if you agree to purchase enough fuel.
Don’t Cut Corners or Cheat – I can’t believe how many suggestions I have heard about using off-road diesel fuel or recycled gasoline from cars in the storage lot. Both are really bad ideas. Using off-road diesel in an on-highway engine is a serious offense, one that enforcement officers are actively looking for right now. Just don’t do it as it will result in hefty fines for non-compliance. Even if you use just one tank of “cherry flavored” (red dyed) diesel it will be detectable for weeks or months and could result in fines and penalties. 9
Get Involved – Let your elected officials know how the current energy policies are affecting your business. Make that phone call, write that letter, and attend that local event your Senator or Representative is hosting to make your voice heard. Finally, please consider joining TRAA in D.C. for TRAA’s Legislative Action Workshop & Hill Day in June where they will be advocating on key federal issues like this and others that impact your day-to-day operations.
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