Fleets should factor fuel price hike into costs - but how many are?
Turmoil in the oil supply industry has seen petrol and diesel forecourt prices rise by around eight per cent during the last year, but how many fleets are reacting to nullify the increase, asks Tony Johnston, chief executive of vehicle leasing and fleet management specialist VELO?
Johnston suspects that most are simply absorbing the extra cost and have either not analysed fuel expenditure or simply don't know how to address the problem.
"One of the core objectives of managing a fleet is to minimise running costs, without, of course, compromising safety or efficiency. Whilst I am sure that fleet operators are keen to track the impact of rising fuel prices on overheads, many are unsure of how to combat the situation.
VELO has calculated that for a typical business car driver, covering 25,000 miles a year in a vehicle delivering 30 mpg, fuel costs have risen by around £225 in the last 12 months. "This is obviously a significant amount and when scaled up for a 100 or 200 car fleet the sum involved is guaranteed to grab any FD's attention," says Johnston.
Looking ahead, he also believes that the situation is unlikely to improve, certainly in the near future: "As demand outstrips supply, due in a large extent to global political and economic instability, oil prices will continue to rise. It is clear that the situation is going to get worse before it gets better - if it ever does - and in a few months that additional £225 per car could be double."
Although, says Johnston, some fleets do take a periodic review of fuel costs, to identify cases of heavy use, possible misuse and generally manage expenditure, the recent escalation in fuel prices has made the exercise more important than ever. He proposes that fleet operators should undertake a five-point review of operations in an effort to contain fuel costs.
1. Check fuel bills against mileage and mpg
"Some drivers are not averse to filling a spare can (or even a few) with fuel to feed another car in the family or even the lawnmower! It is also not unknown for a driver to fill up a different car and charge the fuel to the company account, and even fuel cards are not foolproof where there is a compliant garage.
"Checking fuel consumption against the manufacturer's figures and making like-for-like comparisons with similar vehicles on the fleet will help to identify areas for improvement. Still better, implementing some form of pence-per-mile reimbursement / recharge formula could actually stimulate drivers to become more consumption conscious."
2. Monitor use of super unleaded
"Although some high-performance cars require high-octane fuel, as do new generation direct gasoline injected vehicles, they are the exception - for the vast majority of petrol powered vehicles on the fleet, 95 octane premium unleaded will more than suffice. However, some drivers mistakenly believe that trading up to 98 octane will enhance their car's performance, and as it is the company paying the 5p per litre surcharge, why should they care? Monitoring fuel receipts will identify the offenders and, again, the adoption of a pence-per-mile payment scheme will help discourage the practice."
3. Evaluate journey plans
"How often do line managers sit down and look at staff journey plans. Cases of 'I always visit them on a Friday' may no longer be justified, especially if that particular trip calls for an out-of-sequence 100 mile journey - which is costing the employer time as well as fuel."
4. Explore the use of more economical vehicles
"User/chooser policies are all well and good and fit into the corporate culture of an increasing number of employers - but there are limits. Introducing fuel performance criteria into the selection process could help to stem the fuel cost tide as would, of course, the introduction of more fuel-efficient diesels, especially for high mileage drivers."
5. Evaluate other forms of transport
"Fleets should look to analyse the use of alternative travel options, especially for long-haul journeys. The proliferation of low-cost airlines has revolutionised internal air transport in the UK - what was a cost non-starter a few years ago is now a viable option. But how many companies entertain or even consider this alternative? Further, how many are still tied to a 'status tradition', viewing air travel as the province of senior management only, and believing rank-and-file employees flying to their destination is alien to company culture? With the low ticket prices offered by the likes of easyJet and RyanAir, for long-distance journeys, flying can be more cost-effective than driving."
Johnston concludes: "Customers look to their fleet providers for solutions to reduce operating costs, and much of our effort is spent working closely with them to achieve these goals, including focusing on the benefits of more fuel-efficient cars. But such changes take time to work their way through, and taking the in-house measures prescribed above will have a more immediate effect on curtailing the impact of runaway fuel prices on corporate budgets."
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Leasedrive Velo is the largest independent privately-owned vehicle management group in the UK and comprises two main operating divisions.
Leasedrive Velo Vehicle Management
Working in partnership with fleet managers, or delivering a complete outsourced service, Leasedrive Velo offers blue chip clients a range of bespoke fleet management services. Major investments in the finest asset management system and pioneering, flexible, web-based customer service technology have resulted in Leasedrive Velo offering customers a truly world class fleet management service capability.
Leasedrive Velo Rental Management
One of the largest short-term vehicle rental management companies in the UK, with access to an almost unlimited choice of vehicles and locations throughout the country, Leasedrive Velo Rental Management offers a simple and transparent pricing policy with no hidden surcharges. For rentals of 28 days or more, it offers the Stopgap mid-term vehicle rental solution. Rates are substantially reduced compared to daily rental.
The headquarters for Leasedrive Velo is at hi-tech offices at TRL in Wokingham. Leasedrive Velo is the winner of the 2006 Fleet News Award for 'Best Contract Hire/Fleet Management Company' the 2006 GreenFleet Award for 'Leasing/Rental Company of the Year', The 2007 and 2008 Thames Valley Business Awards for 'Business Management Team of the Year' and the 2007 ITM Award for 'Independent Vehicle Management Company'.
For further press information on Leasedrive Velo, contact:
Mr Jeremy Snook
JSPR Ltd
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