With the price of gasoline and diesel fuel rising higher weekly, managing fleet and transportation costs is critical to the bottom line for distributors.

There are a number of components to transportation and fleet management that companies face, whether they are a gases distributor or welding products retailer that offers delivery services, or a welding company that provides in-house transportation of finished goods to its customers.

Sarah Banks, senior consultant for the logistics practice for Plante & Moran LLP, an accounting and management consulting firm (www.plantemoran.com), said that there are key issues that companies struggle with when they own their own transportation fleet.

Those issues include managing drivers, and the correct use and deployment of vehicles, which is known collectively as fleet management.

“Are all your trucks being used all the time or are some of them sitting in the lot? If trucks are sitting, that is a cost you have to absorb,” Banks said.

However, the biggest challenge in today's world is — and is expected to remain — managing the price of fuel. That management challenge has increased because fuel prices have had only one direction in recent years — up.

“Fuel is one cost that is understood by fleet owners because it's visible,” Banks said.

“Other costs tend to be hidden,” she added.

The hidden costs — in addition to having vehicles sitting idly in a yard — include all of the other costs that are tied to truck utilization and fleet deployment, and those costs should be measured regularly.

“If you're not measuring all of the components of fleet ownership, then you don't really understand the costs associated with using the vehicles,” Banks said.

Knowing the cost-of-ownership is critical because you can't know how much to charge for delivery of goods unless know how much it's costing you, above and beyond filling the fuel tanks every day.

Customers are aware that fleet owners and operators, are responsible for fuel costs, and many of them currently are receptive to the idea of applying fuel surcharges to delivered goods.

However, Banks said a distributor should move cautiously before considering fuel surcharges as an option.

“A company really needs to understand its current and projected costs before it goes down that path. With the unknowns connected to fuel prices on a week-to-week basis, it is important that fuel surcharges address costs while avoiding frequent adjustments that can cause customers frustration,” Banks said.

In fact, she said it is best to plan additional fuel surcharges or an increase to an existing fuel surcharge in conjunction with an already scheduled product price increase.

That tactic — combining a price increase with a fuel surcharge — can help to take the edge off the pain that such increases cause to customers, she said.

To control costs in other ways, fleet owners can develop and use other management techniques that address specific areas.

For example, Banks said fleet owners can institute a “no idling” policy, which means that drivers must turn truck engines off when they are at a pick-up or delivery location.

However, she said that distributors have to consider carefully whether the costs of leaving a truck running outweigh the costs of shutting it off and starting it up at each stop. Each set of circumstances depend on the amount of time that drivers spend at a customer's shop, and the time it may take to re-start the vehicle.

“Depending on the circumstances, a company can save more fuel when drivers turn off the engine rather than letting it sit and idle,” Banks said.

“When they leave the vehicle, drivers generally turn the engine off anyway. We see new technology coming that allows the cab to maintain climate control inside even when the engine is shut off, but that's a bigger investment,” she said.

Managing a fleet also requires adjustments to changing business conditions.

“Typically, what we see for smaller companies is they have made a decision to invest in more vehicles, but haven't kept up with whether that makes sense if their business changes.

“Keeping up with the nature of your business and understanding your customers requirements can help you ensure your fleet is at the appropriate level to provide optimum service,” Banks said.

This leads to another management consideration: Whether to lease or buy your trucks.

“Typically leasing companies provide detailed pricing information that can provide a good baseline measurement as to the actual operating costs. A company then can compare its own operating costs against the leasing costs to determine whether to own or lease,” Banks said.

GPS Systems Help Companies Manage Fleets

Global Positioning Systems are coming in handy to help companies manage their delivery fleets.

Todd Hubbell, sales associate for TrackNet GPS Vehicle Tracking Systems (www.tracknetonline.com) said his company can install a GPS in a vehicle to provide an online system that can be accessed by any Internet-ready computer.

TrackNet customers enter a log-in name and password, and a Google map appears on the screen to show real-time tracking of a commercial fleet.

Hubbell said the main features customers tend to use are the stop and start reports.

These reports generate data whenever the vehicle stops, the engine is turned off and is re-started, and moves.

“The system updates this activity every two minutes, show you where the vehicle has been every two minutes throughout the day,” said Hubbell.

“Alerts tell you exactly when the vehicle is parked — it it's supposed to be parked at the company lot, when the vehicle reaches the pre-programmed zone or exits the zone you are alerted. If there's no message it's not in the zone,” he added.

TrackNet's customers purchase a GPS unit, and pay a monthly fee that covers air time. The wireless system is used to transmit the coordinates and send data to TrackNet's server and put it on the Internet for customer access.

Tracking speeding drivers is another use.

If drivers go over a set speed limit, the system also will alert management.

Vehiclepath GPS (www.vehiclepath.com) also offers commercial fleet tracking services.

One of the Vehiclepath's customers, Peterson Industrial Inc., an Alabama-based company focused on industrial and commercial piping, plumbing and metal fabricating, installed Vehiclepath GPS fleet tracking to prevent a major problem - speeding drivers.

The company discovered that was not the biggest problem it had.

“In a 48-hour span we had a driver that got a ticket going 92 mph in a 55 mph zone, and another driver who passed our owner going over 80 mph,” Michael Woodall, project manager at Peterson Industrial, said.

“Management installed Vehiclepath GPS fleet units shortly after that.”

Vehiclepath GPS fleet tracking units enable fleet managers to track in real-time where their drivers are, set speed alerts that are delivered by text messaging so that the company is notified if a driver exceeds a set limit.

Vehiclepath GPS also allows fleet managers to verify job hours and match fuel purchases to truck delivery schedules and use.

Peterson also tracked out-of-town truck use.

The company discovered through the Vehiclepath GPS that it was being overcharged about six hours per week just for one truck.

Woodall said the company asked itself how much it could save if it realized the savings from similar overcharges for its entire fleet over the course of a year.

Based on their number of trucks and hourly pay rate, increasing employee productivity by four hours per week — about 45 minutes per day — would save Peterson Industrial about $200,000.

In addition, the company found that it reaped savings on gasoline use.

“Drivers that reduce their speed generate better fuel economy. If they can increase their fuel economy by 15 percent, our annual fuel savings would be close to $150,000,” Woodall said.

Rather than drivers feeling as if they are being watched too closely and resenting it, Dan Hubbard, marketing manager for Vehiclepath, said that explaining to drivers that the systems help to reduce liability and provide savings helps with their acceptance. The systems help to assure jobs,and the companies that use them save enough money to more pay for them.

Ultimately, he said GPS systems make it safer to own a fleet and make it more profitable for everyone — owners and employees alike.

TrackNet's Hubbell added that GPS systems also act as quality control devices for companies.

“They'll be able to see where the truck has gone from one job to the next — whether drivers were out of the zones — and they'll be able to tell if the vehicle went somewhere it wasn't supposed to go, and how long it was stopped,” he said.