Fuel expenses account for a large chunk of any delivery businesses' overall operating costs. For enterprises with a large number of trucks—e.g. 3PLs—any increase in fuel prices can significantly affect your overhead and seriously impact profitability.
Unfortunately, businesses have no way of controlling fuel price volatility—but what they can do is work on their operational efficiency. To that end, there are technological solutions that aid firms to manage their fuel more cost-efficiently by monitoring driver behavior, finding optimal routes, and spotting opportunities for improvement.
The Importance of Fuel Management
Fuel management is the process of calculating, tracking, and optimizing fuel usage so fleets can decrease costs. Managing fuel efficiently is crucial for having better control over your fleet’s overall operating expenses, but to do so you need to have actionable data.
Previously, fleet operators and managers had to rely heavily on spreadsheets in finding ways to cut down fuel consumption. Those days are gone now—the right technology helps fleets of all shapes and sizes get usable data with several clicks and in a matter of minutes.
Data is necessary for determining which drivers are most efficient with their fuel consumption, for instance. Fuel management data is useful in making well-informed decisions regarding traffic patterns to avoid, territory divisions, and driver performance. This can also be used to plan for capacity and expansion.
Again, effective fuel management can increase businesses' profit margins by cutting down on expenses. After all, fuel costs can escalate quickly especially for fleets that are driving more than 100 miles per day. Some estimates say that fuel costs actually make up almost 25 percent of the total average marginal costs within the transportation and trucking industry. This percentage is higher than the combined expenses on tolls, repairs, insurance premiums, tires, permits, maintenance, and licensing. Simply put, this isn’t something that 3PLs can just ignore.
Factors Affecting Fuel Management
To overcome the effects of high fuel prices, you can use 3PL freight software to keep tabs on fuel efficiency and make operational improvements to decrease fuel consumption. This starts with understanding how much diesel or gasoline your fleets use every year—this way, you can identify areas where there is room to boost efficiency, allowing you and your management team to come up with action plans to combat the impact of rising fuel costs.
The right 3PL freight software enables you to monitor the following:
Idle engines account for a large source of fuel wastage. Data from The Department of Energy Office of Energy Efficiency and Renewable Energy shows that vehicle idling can consume anywhere from a quarter to half a gallon of fuel per hour. Freight software gives dispatchers and fleet managers insight into delivery vehicles that may be idling too long. These insights enable dispatchers and managers to identify drivers who constantly idle, and correct them on this behavior.
Over-speeding can also significantly increase fuel consumption. In fact, some research shows that drivers who go just 5 miles per hour above the speed limit can cost their companies 20 cents more per gallon of fuel. An advanced 3PL solution allows managers to track driver behaviors to identify those who are exceeding speed limits so they can educate delivery drivers on efficient speed methods.
Ensuring that every delivery vehicle receives regular maintenance goes a long way in keeping fuel costs low over time. Studies show that engines that are properly tuned have measurably better gas mileage. Thus, your 3PL system might alert managers, dispatchers, and drivers when vehicles are due for maintenance according to mileage, date, or engine alerts.
Routing and dispatching
Decreasing fuel costs requires having better-informed drivers and finding the shortest or quickest routes between stops. Dispatchers and fleet managers monitoring real-time traffic conditions can change route plans and inform drivers quickly. Advanced route optimization can also be configured to account for driver speed, driver skill, and other factors.
What to Look For in 3PL Freight Software
3PL software can be beneficial for those that want to combat the effects of rising fuel prices. That said, you need to remember that not all 3PL solutions are created equal—some have more robust and advanced features than others. When choosing 3PL freight software, you should consider looking out for these features.
Fleet managers who are blind to what their drivers are up to cannot hope to monitor and identify drivers who idle, overspeed, and fail to adhere to route plans. Advanced 3PL software provides dispatchers and fleet managers real-time visibility on drivers, routes, and orders—enabling you to be agile and proactive on the day of delivery. Not only does this help you manage delivery routes as they’re in progress, it also gives you the tools to cut down failed deliveries (and the expensive reverse logistics processes that come with them).
Intelligent route planning enables fleets to cut down on fuel costs by finding the most cost-effective routes for multi-stop routes for drivers and carriers. Route optimization features factor in different constraints such as costs, driver skills, and real-time road and weather conditions. Optimizing routes also help cut down vehicle and labor costs.
Effective fuel management requires having reliable data so fleet operators and managers can make data-driven decisions. Solutions that can't be integrated with others will result in data silos and shadow IT. A worthwhile 3PL software solution has a centralized system capable of accepting and handling the free flow of data from multiple sources. Simply put, if your telematics solution and your last mile tracking functionality aren’t able to communicate, you’re not going to be able to get the visibility you need to effectively address the challenges we’ve been discussing.
In the end, rising fuel costs are here to stay. But this doesn’t mean that businesses should raise the white flag and watch as fuel bills continue to pile. To combat the negative effects of higher fuel prices, you need to ensure proper and effective fuel management. 3PL freight software is just the tool to allow fleets to manage fuel more cost-effectively.