If there has been one constant during this crisis, it is that the COVID-19 pandemic has reminded all of us that the world is an unpredictable place. Major catastrophes can happen at any time and can hit hit anyone. The only thing that trucking companies can do to help themselves and their employees during such extraordinary times is to prepare for the worst of what is to come and merely hope for the best outcome.
The question is, how does a fleet manager deal with these intractable problems? Can one prepare for such a crisis and implement measures that lower their fleet’s daily operating costs so that they can have extra funds available to keep their company’s head above water when the ship starts sinking?
As a fleet manager, we know that you’re already aware of what it costs to keep that fleet running on a daily basis. But why not have a refresher on what operating costs are and what is incorporated in these costs? These types of business decisions can save your company from catastrophic losses.
The standard definition of operating costs states that it is all the expenses related to the operation of a business or the operation of a device, component, piece of equipment or facility. What does this mean? Well, these are the costs of the resources you must acquire to maintain the existence of a business or fleet. We are here to help you make sense of these resources.
Taking a Closer Look
What is the skinny on operating costs? The fact is, operating costs do not include capital costs. So what do capital costs include? Let’s take a closer look:
- First, the costs associated with acquiring a vehicle
- Second, the ongoing vehicle financing a trucking company must engage in
- Third, vehicle depreciation.
- Finally, capital costs. Why? Because if you take into consideration that a new vehicle will lose approximately twenty percent of its value within the first year and fifteen percent each year after that, there is a lot to consider.
The question now is, what are the operating costs? Fleets both large and small must deal with unexpected costs. How will companies adjust to these new paradigms? Many trucking companies are wrestling with these very questions.
The question is, how will a modern company address overall operating costs? Let’s look at each of them one by one:
- Fuel
- Insurance
- Service, maintenance and repair (SMR)
- Fines
Most of the costs listed above are quite variable. What is the meaning here? Well, they are seen as more fixed. Still, these costs also vary depending on how many accidents a particular fleet gets into and whatever their yearly premium increases are. Costs will also vary depending on fleet size, vehicle types and the purpose the fleet is being used for. The question is: How can a fleet reduce these costs?
Reducing Fuel Costs
Fuel is one of the largest expenses a fleet deals with. This problem is magnified in times of crisis when global markets are down. What other factors influence fuel prices including supply and demand, weather forecasts, imports and exports, gas storage, regulations and much more?
The problem is that many of these factors exist outside of a fleet manager’s sphere of control. The good news is that fleets do have control over keeping an eye on how much fuel the fleet consumes and then implementing measures to reduce that amount. But how can a trucking company do that?
If a particular job does not require a large van or truck, why use one? It’s a fact that the heavier a vehicle is, the more fuel that vehicle will use. This fact is not only because of these vehicles but also because they tend to have more powerful engines that need larger amounts of fuel to handle heavier loads.
In addition, heavy-duty commercial motor vehicles spend far more time idling. Typically, a truck idles for nearly 2,000 miles per year. As such, it is estimated that rest-period truck idling in the U.S. consumes nearly a billion gallons of fuel. How much does this amount of wasted fuel cost? Too much. Thus, using a truck or other heavy-duty vehicle for jobs not required for those vehicles is a huge waste of time and resources.
When purchasing commercial motor vehicles for your fleet, you need to look at how fuel-efficient they are. While you can consult lists that name the most fuel-efficient vehicles or talk to dealers on what kind of purchase you should make, it is important you complete your due diligence. The question is, what should you look for?
First, make a shift towards lighter vehicles. Why? Because heavier vehicles guzzle fuel like there is no tomorrow. Remember, you can downgrade to smaller engines without downgrading the class of vehicle. For example, switch from a 6-cylinder to a 4-cylinder. In many cases, a smaller engine can have nearly the same horsepower as a larger engine especially if you are operating in tight urban environments.
Other Fuel Considerations
When you are selecting and purchasing vehicles, you need to make sure to take note of capacity problems. What should be the maximum weight load? The fact is, this is important as overloaded vehicles increase fuel consumption, which costs you both time and money. Did you know that for every one percent reduction in weight, there is a 0.33 percent improvement in fuel economy? Likely not, but over time, these fuel issues compound.
But how do you significantly reduce your overall fuel consumption? First, you should definitely look into optimizing your fleet utilization. When you are properly utilizing your fleet, you are getting the most out of them. Don’t waste your fuel by not paying close attention to fleet utilization. Perhaps a telematics solution you can use to monitor your entire fleet’s movements and usage would help? When you have effective data at your disposal, you have more options.
Consider the following when you are evaluating your operation:
- Truck drivers are only sent to jobs that are nearest to their current location to avoid long journeys back and forth. The last thing you need is air miles you are paying for but your truck drivers aren’t utilizing.
- Have the best routes for your truck drivers been taken? If so, can the routes be shortened? Can areas with heavy traffic be avoided so that excessive idling is reduced? These questions are critical to ensuring you reduce unnecessary costs.
- Are truck drivers fiven enough time between jobs to get to their intended location? The more pressed for time a driver is, the more likely they are to speed. Speeding is not just a fuel guzzler, but it is a serious safety problem.
- Non-vehicle assets are not being run when not in use. Sometimes assets that don’t directly relate to a run are left running by accident or simply not turned off by operator to avoid the effort of starting them up again. These issues create major fuel usage problems.
Just remember, saving costs is about more than conserving fuel. Have you considered how the insurance costs you pay are crippling your business? The thing is, many trucking companies believe they don’t have any control over their insurance costs. The thing is, they absolutely do. You might think that there’s not much you can do to reduce your insurance costs but there are actually many ways.
The question is, how does your fleet impact insurance costs. First, have a look at your record.
- What are your past accidents and who was at fault?
- How many vehicles do you have in your fleet?
- What are the makes, models and mileage of vehicles in your fleet?
The thing is there are many different ways fleets can reduce costs and survive in the COVID-19 era. Is your fleet one of them?