Secret Site Map
Saturday, August 30, 2014

Home Magazine [Business Operations] Pain at the Pump

[Business Operations] Pain at the Pump

Features - Business Strategy

Wildly fluctuating gas prices can wreak havoc with your bottom line. Here are some tips for limiting the damage.

Christine Brazell | May 27, 2014

Large fluctuations in gas prices can give any pest management professional heartburn. They are difficult to predict and an expense that PMPs have little or no control over. An essential business purchase, when the price per gallon jumps more than a few cents, companies may start feeling some serious pain at the pump.

According to Jerry Batzner, president of Batzner Pest Management, New Berlin, Wis., a $0.10 increase in the price of gas per gallon would cost his company $10,000 a year in increased fuel costs to keep his fleet on the road. However, the good news is that experts are predicting gas prices will remain fairly stable this year and perhaps even decrease by the end of 2014.

Two factors related to managing fuel consumption that can have a significant impact on the bottom line are routing efficiently and managing gas usage. In addition, there are some common sense ways to manage fuel consumption that may seem like little steps, but when combined, can add up to a significant amount.
 

Regularly Review Routes.

According to Russ Ives, president of Rose Pest Solutions, Troy, Mich., the better planned the route, the fewer miles a technician is driving. As other service calls are plugged into established routes, they can become less efficient. The more regularly routes are reviewed and companies work to optimize route density, the more they can minimize drive time for their technicians.

“The more time we take in between reviewing routes to optimize them, the less efficient we are in miles related to revenue. If a technician has 20 to 22 work days in a month, and we haven’t reviewed that in a year or so, we may find that we can gain one to two free days by rerouting,” Ives says. “To do $10,000 in production, rerouting may enable us to do that with 100 or 200 less miles of driving, and that also frees up the technician to take on more work without taking on more hours. Reorganizing their stops and getting them better aligned helps us on fuel expenses and, perhaps just as importantly, on payroll and benefits expenses.”

Batzner uses several methods to plan and optimize routes. The firm also uses third-party software that exports data and sorts it into logistical boundaries or territories. In the call center, the company tries to schedule customers in the same ZIP code with consecutive stops within territories. In addition to a program to optimize routing, the call center uses a visual route manager.

“When on the phone with a client, the call center can use the visual route manager to give them an idea of how and when to schedule that service,” Batzner says. “It gives us the 25,000-foot view of when we are going to be in that particular area and at what times.”
 

Fuel-Saving Tips from GasBuddy.com

  • Avoid high speeds.
  • As your speed increases, your aerodynamic drag increases in an exponential fashion. Driving 62 mph vs. 75 mph will reduce fuel consumption by about 15 percent.
  • Do not accelerate or brake hard.
  • By anticipating the traffic and applying slow steady acceleration and braking, fuel economy may increase by as much as 20 percent.
  • Keep tires properly inflated.
  • Keep tire air pressure at the level recommended by your vehicle manufacturer. A single tire under inflated by 2 psi, increases fuel consumption by 1 percent.
  • Use air conditioning sparingly.
  • When the air conditioner is on it puts extra load on the engine, forcing more fuel to be used (by about 20 percent). The defrost position on most vehicles also uses the air conditioner.
  • Keep windows closed.
  • Windows open, especially at highway speeds, increase drag and result in decreased fuel economy of up to 10 percent.
  • Service vehicle regularly.
  • Proper maintenance avoids poor fuel economy related to dirty air filters, old spark plugs or low fluid levels. Change oil on a regular basis.
  • Use cruise control.
  • Maintaining a constant speed over long distances often saves gas.
  • Avoid idling.
  • If you anticipate being stopped for more than one minute, shut off the car. Restarting the car uses less fuel than letting it idle for this time.


 

Manage Mileage and Gas Usage.

When tracking mileage, variances signal when something has changed in terms of driving habits or with the vehicle. Investigating variances holds people accountable and resolves issues that may have been increasing gas costs.

“Looking at mileage can give you some clues as to how to reduce gas usage. If all of a sudden a truck that had been getting 18 mpg is now getting 16 mpg — what’s changed? Is it the way the driver is driving? Are they heavy on the accelerator? Doing jack rabbit starts and fast stops? Are they warming up the vehicle a lot before they get in? Are there mechanical issues? If vehicles are not properly maintained, you’ll pay for it in miles per gallon,” says Ives.

Batzner analyzes consumption versus budget versus cost to identify variances. “If gas went down a dime, and we are at budget, there are some inefficiencies. If there are variances, we check with the call center to investigate why that’s happening and justify the variance,” says Batzner. “By validating variances, it gets people talking about them so everyone is more aware of them.”

Rose Pest Solutions has vehicles in which personal use is permitted with appropriate documentation and reporting, and others that are business-use only. When there are significant variations on a route, it can raise a red flag that something’s not right.

“I remember when I first started working summers gas was $0.17 per gallon. When it’s $4.00 a gallon, that can put a real strain on the pocketbook for anyone, so it’s important to reduce temptation by reviewing the data, asking questions, maintaining vehicles properly and helping people to do the right thing,” Ives says. “Managing mileage helps us avoid misreporting or other misuses from occurring.”

 

Do Predictions Matter?

Russ Ives, president of Rose Pest Solutions, Troy, Mich., tries to utilize newsletters and reports such as Kiplinger’s and the Wall Street Journal to stay on top of trend predictions. But predictions don’t account for unexpected disruptions caused by unplanned downtime at refineries, severe weather in supply regions and political events in oil-producing countries.

“In the Midwest, our gas supplies tend to be tied to refineries around Chicago. When I look at spikes, they usually seem to be related to the shutdown of a refinery,” Ives says. “When the refinery capacity is reduced, gas prices go up. Once they go back into production, prices tend to go down.”

In addition, according to the U.S. Energy Information Administration, gasoline is often more expensive in the summer because more costly summer blends are supplied and demand is generally higher. Also, U.S. refineries often conduct planned maintenance in the spring, which can lead to a drop in gasoline production.

“When planning for the year, we try to err on the conservative side, overestimating fuel costs vs. having to shell out at the end,” Ives says. “Fuel is one of the least predictable items on our income statement.”


 

Annual Safety Training.

Batzner Pest Management brings in a third-party consultant to conduct a safe driving program each year. The program typically runs two to three hours long and covers safe and not-so-safe driving habits, fleet safety and increasing fuel efficiency.

“Bad driving habits, like jack rabbit starts, cost money. While reducing those alone is not a significant way of finding cost savings, several small improvements that account for 1 or 2 percent can add up, and hopefully at end of the day you might have 10 percent improvement,” says Batzner.
 

Fuel Programs.

Another way PMPs are saving on fuel costs is by working with a fuel program to issue employees fuel-only credit cards. Some programs offer a few cents off per gallon; others offer rebates when you use certain brands.

“We use a program branded through one company that will honor three or four other brands,” Batzner says. “The cards are accepted at several stations, so our technicians don’t have to drive out of their way to fill up, resulting in lost production time.”
 



 

Of course there’s no silver bullet for managing fuel consumption, but for Batzner it’s all about watching the daily routing. “Emergencies are very costly in terms of lost time and production, fuel costs and fleet costs in general. Let’s say a truck you buy is good for 100,000 miles. If you put 30,000 miles on it, it’s good for about three years; if you only put 20,000 miles on it, it’s going to last for five years,” Batzner says. “And sometimes it’s a matter of setting the technician’s mindset that it’s OK to spend 10 extra minutes if you think it’s going to save a callback.”

 


The author is a freelance writer based in Muskego, Wis. She can be contacted at cbrazell@giemedia.com.