Fleet managers have always had to contend with erratic pricing on fuel in South Africa. With the increase in natural disasters and geopolitics creating even more disruption, the need to aggressively manage rising fuel prices and fleet operating costs is greater than ever.
The significant increases in the fuel price over the past months have left businesses and consumers reeling. Companies in the transportation industry which is a critical link in South Africa’s supply chain, are under more pressure than ever before. With fuel prices as of writing this sitting at just under R27 a litre for 95 petrol and 20 cents shy of R26 a litre for diesel, the chance of respite looks slim for these businesses.
This article explores fleet managers’ current challenges with the fuel price increase and how they can overcome these challenges. If you are looking for a hands-on solution to your truck driver and transportation needs, MASA is here to help. You can get in touch with our specialist drivers division to learn more about our services.
Fuel price variation is a fact of life for fleet managers
As a fleet manager, one has to accept that a lot is out of your control. Driver behaviour, fuel prices, the microeconomics of supply and demand, the geopolitics of global oil production, currency fluctuation, and extreme weather – all these factors impact the productivity and profitability of your fleet yet are impossible to predict or command.
Your fuel cost can swing widely due to an ever-changing concoction of these and other ingredients. It’s a high visibility risk factor because, after depreciation, fuel is the second-largest total cost of ownership expense for most businesses. Fuel can represent up to 60% of operating costs in a company’s entire fleet budget. It’s a serious concern for any small business or a large fleet manager looking to save money and control costs.
At the same time, despite the lack of control over the situation, your CFO, owner, or bank doesn’t like unpredictable costs. The fleet manager is inevitably in a tricky, high-pressure, and essential role.
Clearly, it’s imperative to be agile in your practices to stabilise your spending over time. But what can fleet managers do to influence all these unpredictable factors that contribute to fuel price fluctuation? We’ve identified four practices that we think might help your business.
What can transportation businesses do to lighten the load?
1. Stay flexible in your approach to fuel price management
Since the factors influencing fuel prices are out of your control, building flexibility into your operating model is vital. You should be able to adapt quickly to fluctuating gas price movements, natural disasters, or even global pandemics. All these events can cause total overnight disruption of the entire business model. A flexible approach will allow you to stay level-headed, make the right call, and help your employees and drivers cope with change.
While fuel price is impossible to control, fleet managers can impact fuel consumption, which helps reduce overall costs. This is where data and reporting come into play, especially when combined with your vehicle telematics. The way to mitigate overall cost is to focus on vehicle fuel efficiency, operating parameters, driver behaviour, and incentivising drivers to fill up at low-cost fuel providers.
Since companies often report the overall fuel cost as one line in the budget, and it’s a significant number, it’s not uncommon for the fleet manager to be given a directive from the CFO to reduce fuel costs by a certain percentage in the coming year. Fleet managers must then employ a combination of lowering price-per-litre (PPL) and limiting instances where drivers spend more than they should or need to.
2. Utilise fuel card savings programmes
An excellent example of this in South Africa is a fuel card offering from Standard Bank. Through partnerships with leading oil companies, Standard Bank’s diesel savings programmes save their client base millions of rands by enabling them to procure diesel at preferential prices across the country.
A fleet of 10 vehicles using 20,000 litres a month typically saves about R15,000 per month or R180,000 yearly on a Standard Bank diesel savings programme. Standard Bank also recently launched Visa Fleet Card, South Africa’s first chip and PIN fleet card. In addition to the heightened security, they have the added benefits of reduced fees.
Another area where businesses often miss savings opportunities is by not managing and controlling risk. This comes down to information on daily fuel consumption and driver behaviour.
When introducing a fleet card to a fleet, real-time analytics reports are made available to identify if a vehicle or driver is moving uneconomically. Fleet managers can then determine the causes, respond appropriately and initiate savings to dampen the impact of increases in fuel costs, among others, on the business.
3. Right-size your fleet
It is common for an organisation to select too many or too few vehicles for the job. Taking time to analyse business needs and your expected growth trajectory and carefully matching the fleet specs to each job will make a difference to fleet spending in the long run. Getting vehicle selection right can have a significant impact on overall costs, as well as fuel efficiency.
The day-to-day fuel efficiency and driver choices about where to buy gas and vehicle maintenance repairs are often more visible than vehicle selection because they require daily management. Fleet managers must take a holistic view of operating costs to become most efficient.
4. Encourage safe driving to control fuel and fleet operating costs
A safe driving training and recognition program can reduce fuel consumption and decrease emissions. Most company drivers average 40,000.00 kilometres a year. Your company’s reputation and bottom line ride with them for every one of those kilometres. As is true in any situation, people do what they are rewarded for doing.
Recognising success and educating drivers regularly on safe driving habits and practices will impact operating and fuel costs and build a stronger connection between drivers and the company itself. You may also reduce liability exposure by lowering the incidence of preventable accidents.
You have got to do what you can to save!
With the right technology and ample planning and preparation, all facets of your business, from back-end operations to drivers, can streamline efficiency and stretch the boundaries of fuel cost savings in 2022.
Find the correct drivers and employees for your company’s journey through tried and tested staffing solutions companies like MASA. We at MASA have over 40 years of industry experience in finding the best personal fits for your business to help it grow and succeed. Get in touch with us today!