As the season heats up contractors throughout the country are encountering spiraling fuel prices, both for diesel and gasoline. Because contracting businesses rely so heavily on sending crews out to a customer's place of business to do business, increased fuel costs can significantly eat up your profits.
"Fuel is the second-largest cost for a vehicle," says John Dolce, fleet management specialist and a speaker at National Pavement Expo. "The largest cost, of course, is the principal and interest when buying a new vehicle. But once that disappears fuel becomes the largest cost."
And whether fuel is the Number One or Number Two cost in your fleet, it can have a significant impact on your bottom line. Here's an example that might help illustrate the problem. Assume a contractor operates eight vehicles that average 400 gallons of gasoline a week during the season. Assuming a price of $2 per gallon, cost to the company is $800 per week for fuel alone. Assuming a 35-week season that results in $28,000 for annual fuel costs. According to the U.S. Dept. of Energy, as of the end of March gasoline prices averaged $2.15 per gallon, up from about $1.75 per gallon a year ago (diesel prices averaged $2.25 per gallon, up almost 61 cents over March 2004)—that's a whopping 22.5% increase in gasoline costs. Apply that 22.5% increase to the example and fuel is going to cost that eight-truck contractor an additional $6,300 this year.
Track your mileage!
So while you can see the impact gasoline prices can have on your bottom line, there are a number of steps to take to reduce fuel costs by improving fuel economy. But the first step all contractors should take is to track and document fuel usage.
"The most important thing a contractor can do, the first thing he needs to do, is to track fuel purchases and mileage," Dolce says. "If you don't track it you can't demonstrate any waste and you can't demonstrate any improvement in fuel economy."
He says the Corporate Average Fuel Economy (CAFE) rating is posted on the side of each vehicle when you buy it. The sticker might say "22/17," for example, and if it says 17 your vehicles should be getting 17 mpg when used driving locally.
He says contractors should require all drivers to write the vehicle's mileage on the receipt for fuel each time they fill the truck. Dolce says fuel and mileage should be totaled and evaluated weekly. That way any changes in fuel economy will be identified almost immediately and improvements can be made.
Dolce says tracking fuel and mileage weekly has the additional advantage of deterring theft.
"By requiring the driver to write down the mileage you are requiring him to account for the fuel that he's buying. So you are more likely to be assured that the fuel purchased actually goes into the company vehicle," Dolce says. "If you're not calculating what the mpg is, the perception of the driver is that you're not following it. And if you're not following it a driver might be more tempted than normal to put some fuel in his own vehicle."
Dolce recommends that contractors enlist their drivers and crews in keeping track of mileage and reducing fuel costs, but he says contractors who don't want to take the time to track fuel cost and mileage and calculate miles per gallon might consider investing in a hand-held diagnostic meter to read the Electronic Control Unit (ECU). He says the ECU, which is a small computer that actually runs the engine, will calculate the mpg for that vehicle. You can compare the ECU calculations to confirm the driver's manual calculations.
Drive to conserve
Once you've begun tracking miles per gallon, there are a number of steps drivers can take to improve gas mileage.
- Reduce idling time. Idling time is the single most important factor in improving miles per gallon. The reason is obvious: When a vehicle is idling it generates zero miles per gallon. This applies even to equipment, whether a roller, paver, or sealcoating machine (though some equipment does require idling or a warm-up time).
"You don't want to fire it up until you're using it," Dolce says.
Drivers should be careful about idling for air conditioning (and heating in winter). Idling can be especially hard on a vehicle during the hot summer months, so drivers should turn off their engine even if they're going to only stop for only one minute (some experts say two minutes).
- Avoid fast acceleration. Often referred to as "jackrabbit starts," fast acceleration quickly reduces miles per gallon, requiring almost twice as much gasoline as gradual starts.
- Pace your driving. Research has shown that unnecessary speedups, slowdowns, and stops decrease fuel economy by up to 2 mpg. (The EPA estimates that acceleration rate can reduce mileage by 11.8%.) By keeping a reasonable and safe distance from the car ahead of you and anticipating traffic conditions drivers can avoid erratic acceleration. Another study found that aggressive driving can lower fuel efficiency by 33% on highway and 5% locally.
- Drive the speed limit. Fuel economy decreases 2.2% for every mile per hour you drive over 55 mph. The reason is that more than half of the energy required to move a vehicle is used to overcome aerodynamic drag. As you speed up, the aerodynamic drag and rolling resistance increases, so fuel economy declines.
- Shift at lower RPMs. Revving an engine to maximum RPMs reduces fuel efficiency.
- Reduce use of air conditioning. Depending on traffic conditions and vehicle speed, using air conditioning can reduce fuel economy by as much as 2 mpg or 15%. If using air conditioning you should turn it off several minutes before reaching the job site and just allow the fan to circulate the cool air. Encourage drivers to drive with windows down or the air conditioning operating at lower levels if they need it. However, when driving at 40 mph or faster using the air conditioner costs less than having windows open, which increases drag on the vehicle.
Maintenance means fuel economy
Improving driving skills is not the only way to improve fuel economy. Proper maintenance of your vehicle, equipment, and engines also can result in better gas mileage.
- Replace fuel and air filters. Dolce, who says changing the air filter can improve gas mileage by as much as 10%, recommends replacing the air filter once a year in small vehicles before the beginning of each season. In larger vehicles you replace the air filter when the restriction gauge indicates it's time to replace it. Others recommend replacing it more often, especially for vehicles working in dirty or dusty environments.
- Align and maintain tires. Under-inflated tires are not only a safety hazard, they can cut fuel efficiency by as much as 2% per pound of pressure below the recommended level. Check the owner's manual for each vehicle's recommended inflation levels. Also, consider using radial tires where appropriate. Radials can result in a 3%-5% improvement in fuel economy in local driving and as much as a 10% improvement on highway driving.
- Maintain the engine. That means keep engines tuned according to the owner's manual: Change oil regularly, use a high-quality oil, and make sure timing is properly set. Thanks to no-lead gasoline, drivers don't have to clean spark plugs but might want to consider premium platinum-tipped plugs which last upwards of 100,000 miles.
- Monitor fuel injectors and fuel pump. Fuel injectors can leak both internally and externally. External leaks are easy to detect as you can often see and smell the gasoline. Dolce says internal leaks are harder to detect, though black smoke and a rough idle are a hint that something inside is not functioning properly.
Dolce says the fuel pump is pressure regulated and if there's a problem with the pump the pressure declines. With less pressure the fuel pump pumps less gas, resulting in a leaner mixture. If this happens to your vehicle you will actually notice improved gas mileage because less gas is being used. But the leaner mixture results in less acceleration and a vehicle that doesn't operate as efficiently.
- Use appropriate fuel. The owner's manual suggests what octane fuel each vehicle needs. AAA estimates that while only 5% of vehicles sold in the United States require premium gasoline, premium gasoline accounts for 20% of all gas sold, so don't use more-expensive, high-octane fuel if you don't need to.
- Lighten the load. As the weight of a vehicle increases, say from an empty sealcoating truck to a full one, more fuel is used. The same is true when towing equipment on trailers. An extra 100 lbs. can reduce mileage by .5 to 1 mpg, so make sure you are towing only what you need and that the trailer carries only what you need on the next job.
Can you pay less for fuel?
Dolce says that contractors buying fuel from a gas station are probably paying a 30% or so markup. He says businesses that use enough fuel can justify installing an in-ground tank and storing fuel in their yard, which enables them to buy it in bulk at a lower price.
Tanks range in size from 2,000 gallons to 30,000 gallons and Dolce estimates contractors can save as much as 30% of the cost of their fuel using an in-ground tank. He says local and federal regulations need to be followed, but contractors using 10,000 or more gallons of fuel per year should consider storing their own fuel.
Contractors who don't use enough fuel or who are not interested in storing fuel in their yard can still negotiate with station owners to reduce the pump price.
Meet with the owner and let him know that you have used X gallons a year in the past and that you expect to use Y gallons this year, then ask for some type of volume discount. Then, after that discount is agreed on, consider negotiating an additional discount for bills paid in 30 days (as opposed to 60 or 90 days).
When it's time to buy
Contractors can improve their gas mileage by making buying decisions based partly on fuel economy. And some of that, according to Dolce, is determining when to replace an old vehicle that's costing you maintenance dollars.
"When the wear and tear of a particular piece of equipment or any old vehicle is more expensive than a new vehicle, you need to replace it," Dolce says.
He says to make that determination add up principal, interest, fuel, and any maintenance costs, then divide by the mileage to get a cost per mile for the piece of equipment. Do that beginning as soon as you acquire any piece of equipment and do it every year. After the fourth year, when principal and interest disappears, maintenance costs begin to rise.
Dolce says that when maintenance costs (including tire costs), and labor cost equal roughly 30% of the residual value of a vehicle, the owner should begin considering replacing the vehicle. So if a $70,000 dump truck after 6 years is worth $10,000 and maintenance costs of that truck are $3,000, the contractor should begin to consider replacement.
"It's not that your company can't survive spending $3,000 a year on that vehicle. You can live with that," Dolce says. "But you need to plan how you're going to replace that vehicle because the next year the residual value will be $7,000 and maintenance costs will also be $7,000. And you can even live with that.
"What you can't live with is the next year when the vehicle is worth $5,000 and the maintenance costs are $10,000."
So when it's time to make a decision, the first question to ask is: Do you really need that piece of equipment? Can you provide service as well without it? Or perhaps your business has changed. For example, maybe you bought a one-ton truck six years ago but now you're business would be better served with a half-ton truck.
Other considerations should be:
- Consider hybrid vehicles, which use electricity for lower speeds and then switch over to gasoline for higher speeds.
- Make sure you need four-wheel-drive vehicles which use more fuel than other vehicles.
- Evaluate engine sizes and select smaller engines if you can use them efficiently.
- Select the appropriate-size vehicle. Trucks, for example, are available in several configurations and sizes. If you can get by with a shorter truck bed, smaller cargo area, or even cab, your vehicle will get better gas mileage because it will weigh less.
- Select a light exterior color, light-colored interior cloth seats, and tinted windows—all of which will help reduce heat buildup so you require less air conditioning.
"Few contractors take these steps now but that's because they don't perceive their gas mileage as a problem," Dolce says. "That might change with the price of gas increasing."
How to help your drivers
- Provide driver training. One trucking company reports a 2% improvement in fuel economy for drivers who completed the course.
- Reinforce fuel economy. Provide constant feedback to drivers by including fuel economy tips in employees' pay envelopes.
- Offer a fuel economy incentive program. Particularly if you already use a global positioning system or some similar type of tracking you can track each driver's use of the vehicle. Or if the same driver drives the vehicle every day you can track his performance and reward him for operating in a fuel-efficient manner.
To set up such a program you first need to track fuel economy to establish a benchmark. Once the benchmark is established you can set a miles-per-gallon goal for each type of vehicle or piece of equipment. Drivers who exceed the target for a three-month period receive a financial bonus. The more they exceed the target, the greater the financial bonus. If more than one person drives in a crew this could also be done on a per-crew basis.
Uncovering the "hidden cost" of fuel — and what to do about it
The price of fuel itself might not even be the most significant part of your vehicle fueling costs. Let's look at it the way one contractor did. The system his company (and many other contractors) uses requires each crew to fuel its vehicle(s) on the way back to the yard each night.
Using an example of an eight-vehicle company, let's assume four employees per truck and 30 minutes a day to fuel each truck. That means two labor hours per truck (four employees x 30 minutes) per day are spent fueling. At an average pay of $12 per hour and assuming a six-day work week, it costs this contractor $144 a week in labor just to fill one vehicle with gas. Multiply that by eight vehicles and that's a labor cost of $1,152 a week just to gas-up the fleet. Multiply that by a 35-week season and you get annual labor costs of $40,320 to fuel the fleet — and that comes right off the bottom line. To look at it another way, divide the $1,152 weekly labor costs by 400 gallons a week of fuel and you can see that labor costs add an additional $2.88 per gallon to the cost of fuel itself.
Some companies, to help reduce this labor cost and to ready their vehicles for the next day's work, have taken to hiring one or more people at night (depending on the size of the fleet) to make sure the fleet is ready to go for the morning crews. This person is responsible for readying each vehicle, filling it with fuel, and checking basic maintenance features such as tire pressure and the integrity of the oil, and for making sure equipment is filled with the necessary materials (sealer, paint, crack sealant) and tools. Then, when the crew arrives in the morning, the equipment is ready for them to get started.
Another option to consider is a fueling service, such as BC Stocking Distributing (www.bcstocking.com) or Albina Automated Fueling (www.albina.com) or Pacific Pride (www.pacificpride.com), which fuels vehicles and provides other related services for a fee, enabling drivers to be on the road sooner.
