Fuel costs are up, and so are the number of ways companies in the home channel are dealing with them.
TW Perry, a prodealer with six units in Maryland and Virginia, has a fleet of 70 trucks that felt the sting of higher diesel costs this year. President Rich Cortese said the price in diesel rose quickly and painfully, leading to some tough decisions.
“Our benchmark had always been $3 a gallon. When it got to be $3 or more, we instituted a small surcharge ($5 for next-day delivery),” he said. And it seemed like diesel prices just wouldn’t stop rising.
“They just kept going up and up and up and up. We also have to absorb higher surcharges from most of our vendors, and we’re just sucking it up. We’re going to have to live with it. Because of the housing market, our contractors are struggling too,” he said.
Cortese explained, however, that it was the housing boom that in many ways prepared the prodealer for the rising cost of diesel. During the boom, the dealer started a “next-day delivery” feature, meant to be a point of differentiation for the company. The next-day promise was a complex and often difficult task when contractors were overwhelmingly busy with building work in the late 90s and early 2000s.
To cope with that offer, TW Perry learned to streamline logistics operations in a number of ways, such as ensuring that two trucks never visited the same block twice in one day, and soon, using new software. Now those investments are paying off by giving the dealer a way to keep a close eye on efficiencies that help save fuel.
“We always tried to do our best to be very efficient,” he said. “We sought out the best software we could find. We track our deliveries, try to do the best we can routing trucks.”
The importance of pinpointing shipments and tracking truckers cannot be underestimated in the current fuel cost environment, explained Kirk Morris, information technology manager for Bridgewater, N.J.-based Somerville Lumber.
The one-unit dealer began using Dispatch and Delivery, a software program produced by business management technology company Activant.
“It was really important for us to find a way to streamline delivery routes and, with the higher fuel costs, minimize unnecessary trips,” Morris said.
On top of the logistics planning software, in late May, Somerville began using FuelForce, a fuel management system produced by Princeton, N.J.-based Multiforce Systems. Through the program, drivers use key cards at gaspumps, and software records how much gas goes into each vehicle. Drivers must input their mileage.
Not only does this help identify problems with the vehicles, Morris said, but it also prevents another unfortunate reality of skyrocketing fuel costs—fuel theft.
“We can control how much that is being used, per vehicle. In an environment like this, there’s the possibility of siphoning,” he said.
Morris said Somerville has not had a problem with having diesel fuel siphoned off, but it is a sad reality that the company must still prevent against it, he added.
Reports of diesel fuel theft have become rampant. Truckers have reported waking up to find other truckers siphoning off diesel—from McArthur, Ohio, comes a news reports of a siphoning allegation that led to a fistfight between two truckers. Farmers across the Midwest who rely on diesel for their equipment have reported thefts of hundreds of gallons of diesel at a time, while gas stations are reporting numerous diesel thefts by truckers. One Burbank, Calif.-area BP station reported a theft of 4,000 gallons of diesel in a single morning.
“The game has definitely changed,” said John Strauss, logistics and transportation manager for True Value. “I think we were all a little surprised at the velocity of the increases. I think we now understand that the challenges of demand and supply are totally different than they were five or 10 years ago.”
The co-op, with its 12 distribution centers and fleet of about 320 leased trucks, like others, has been forced to aggressively manage fuel costs.
The co-op has implemented PeopleNet, which like the software used by Somerville Lumber, helps gather data on deliveries and plan load deliveries to an exact degree. The software also tracks the condition of the trucks, to make sure oil changes and tire pressure are optimal, another factor in fuel saving.
“We tried to avoid doing any upcharges, but we recently had to put in an adjustment—dependent on the level of their participation with the co-op,” and other factors, including the size of the order, Strauss said.
True Value has heavily focused on educating truckers to find the smaller, more practical ways of saving fuel, such as simply driving slower. Strauss said, for example, that for diesel trucks, driving over 55 miles per hour represents a tipping point, where each mile per hour over that limit makes gas mileage efficiency drop significantly.
“We share expertise, tips, like how driving 63 miles per hour rather than 65 miles per hour can help save money, explaining how just three miles per hour for a heavy-duty truck can be pretty substantial,” he said
Contractors have also felt the sting as well. Cipriano Lands cape Design, a two-unit lawn and garden contractor in Ramsey, N.J. converted much of its stable of 12 vehicles from 8-cylindar diesel burning heavy duty trucks to lighter, 4-cylindar, gasoline-burning vehicles.
The company invested $250,000 over the course of four years in the project, which has led to the contractor being able to cut its fuel consumption in half, said president Chris Cipriano.
He noted that the company has an overall “green” philosophy, which was the primary reason for many of the gas-saving changes that began two years ago. As fuel prices rose sharply, the early conservation efforts helped.
“It’s still a significant increase to us, and we’ve seen it in what we do and also in what our suppliers are giving us,” Ciprianosaid. “One example: some of the different sandstones we use that come from Arizona, the shipping costs are actually now more than the cost of the actual product.” As a consequence, he is relying more on local dealers, he said.
In the volatile fuel market, there is perhaps one certainty for these contractors and home channel companies—no matter how high diesel prices reach, the trucks must roll on.
“Last year, we drove about 27 million miles, burned over 4 million gallons of gas, delivering to our members,” Strauss said of True Value. When asked what that figure will be this year, he laughed and said, “We’re looking at about the same amount of mileage. In this economy, it’s more important than ever that the truck comes in on time.”