How Fleet Management Software Can Improve Fuel Efficiency

by:
on October 8, 2015

Volatile gas prices, bad drivers, employee error and fraud: These are the bane of any organization that relies on fleets of vehicles (plus the fuel to power them), to conduct business. To better understand the challenges fleet managers and transportation accountants face when it comes to optimizing fuel efficiency in their fleets, we conducted a survey of transportation industry professionals.

In this report, you’ll learn how the issues mentioned above affect your peers—and how fleet management software can help improve fuel efficiency and streamline operations.

Key Findings

  1. More than half of respondents (53 percent, combined) say that fuel costs exceed projections “somewhat” or “very frequently.”
  2. A majority (54 percent, combined) say they are either “somewhat” or “very concerned” about fuel theft occurring in their fleet.
  3. Twenty-seven percent of survey respondents say that improved data collection and analytics is a top benefit of fleet management software.
  4. Another 27 percent say that improved budgeting is a major advantage of using a fleet management solution.
  5. Seventeen percent of respondents say enhanced employee monitoring capabilities is a worthwhile benefit of fleet management software.

Introduction

Volatile fuel prices are a fact of life in the business world. Consider the chart below: Over the past 20 years, gas prices have fluctuated wildly, between approximately $1 and $4 a gallon.

Historical Average Gas Price per Gallon in United States, 1995-2015

Historical Average Gas Price per Gallon in United States, 1995-2015

Source: U.S. Energy Information Administration

 

Just as spikes in gas prices can hit average Americans hard in their pocketbooks, they can be disastrous for companies in the transportation industry (or that otherwise rely heavily on transportation to move their goods from coast to coast).

Compounding the problem for many businesses is the issue of employee fraud and error when it comes to reporting fuel costs. Some truck drivers have gone to elaborate lengths to steal fuel (and presumably short-change the company they’re driving for).

Meanwhile, in the back office, fleet managers, accountants and dispatchers may simply make errors when calculating costs as a result of how they track fuel expenses.

As such, firms relying heavily on transportation are looking for every way to mitigate loss. We conducted a survey of accountants, owners, dispatchers, delivery coordinators and fleet managers in transportation, logistics and distribution about the challenges they face and the benefits they see from using fleet management software. Here’s what we found.

Accurately Projecting Fuel Costs Is a Top Pain Point

Among survey respondents, more than half (53 percent) indicate that fuel costs exceed projections “somewhat” or “very frequently.” Actual fuel costs can exceed projections for a variety of reasons: Obviously, gas prices can fluctuate wildly. Beyond that, however, a firm’s fuel costs can exceed projections due to:

  • Accounting errors
  • Inefficient route planning
  • Road work, traffic
  • Poor driver behavior (such as hard braking or excessive idling)
  • Theft or fraud

Frequency of Fuel Costs Exceeding Projections

Frequency of Fuel Costs Exceeding Projections

Often, a firm might purchase a “fixed forward” contract with a fuel supplier, which allows it to buy gas at a fixed rate for a set period of time. Such contracts can be a gamble: While they guarantee a consistent price, which helps with budgeting, firms can lose out when gas prices experience significant and unexpected drops.

For some fleet managers, negotiating and managing such contracts is a difficult process, as there are many influencing factors to consider—including current and projected fuel prices, projected shipment volume, projected fuel consumption and so on.

“The company is supposed to work with a fuel supplier for discounts, and that is not always easy to deal with, which makes a big impact on the overall costs of fuel,” says one of our survey respondents, a fleet manager at a transportation company. “It takes some time to get the cost totaled.”

Fleet managers that lack a proper fleet management system often have to manually enter in a large volume of data—receipts, mileages, transactions and so on—in order to come up with projected costs. Using fleet management software, however, much of those tasks are automated. Not only does this reduce errors, it also allows fleet managers to view all relevant data in one place.

Many fleet management systems are able to integrate with fuel payment services, making it easier for fleet managers to track expenses and ensure that nothing is amiss.

“[Our system] takes a transaction file from the fuel card provider and uploads each transaction into our fuel log portion of the software,” says Robert Edilson, marketing director at Collective Data, a fleet management software vendor.

“It tracks cost of fillup, units, fuel type and meter readings. The meter readings coming through the fuel log will drive the preventative maintenance section of the software as well as factor into the replacement cost calculations in the software.”

Fuel Theft a Concern for Over Half of Respondents

Fuel theft can occur in many ways. Sometimes, it might be as simple as a driver inflating how much he spent on fuel to his fleet manager and providing no receipt. But schemes can get more complex than that. For example, a driver could use his company’s fuel card to purchase fuel at a discount for another driver who pays him back at a cut rate, coming up with a false explanation for the additional fuel charge to his company.

Level of Concern Over Fuel Theft

Level of Concern Over Fuel Theft

Even with procedures and policies in place to prevent theft, it can be a challenge to enforce them.

“It is difficult for us to impose the rules that we have about documenting fuel costs,” says another survey respondent, an accountant at a contracting firm that operates a fleet of heavy construction vehicles.

“The drivers may not be totally compliant to our requests. They may not always save the receipts or the associated documentation. It is sometimes hard to track the cost accurately.”

Fleet management software assists with preventing fuel theft because it is able to provide incredibly accurate estimates for how much fuel should be consumed in a given situation, taking into account:

  • The make and model of the truck
  • The distance of the trip
  • The route taken
  • The load of the truck
  • The driver’s behavior

The user can then compare the actual fuel cost against the estimate based on this data. Some systems can even alert the user automatically if there are repeated discrepancies or suspicious patterns.

In addition to preventing theft, fleet management software is able to monitor and identify other bad behavior on the part of the driver. Typically used in conjunction with a hardware device placed in the truck, the software can relay GPS location, frequency of hard braking, driving speed and so on to the back office. This gives users critical data that allows them to objectively evaluate their drivers, and tell them how they can improve their fuel efficiency while driving.

Benefits of Fleet Management Software

Finally, we asked our survey respondents an open-ended question about the benefits they have seen from using fleet management software, and coded the responses into different benefit categories. (Of our original sample, two-thirds of respondents are using a formal fleet management system.)

Top Benefits of Fleet Management Software

Top Benefits of Fleet Management Software

Improvements in budgeting, data collection and fuel-cost estimating are the most significant benefits users experience from using fleet management software. Without a proper fleet management system, a user will typically rely on a hodgepodge of spreadsheets, basic accounting software and, often, a lot of guesswork to put together a budget.

Here’s an example: Say you are managing a fleet of 10 semi-trucks that will collectively drive 100,000 miles in one month. The trucks’ fuel efficiency is highly dependent on how heavy its load is, the driver’s behavior, the conditions it’s driving in and how frequently it must contend with traffic. Thus, fuel efficiency could fluctuate from anywhere between four miles per gallon and eight miles per gallon. The gas prices during this time period will also fluctuate—let’s say between $2 and $3 per gallon.

The total fuel cost in our hypothetical month could thus be anywhere between $25,000 and $75,000: a huge variation. What fleet management software is able to do is take a lot of the guesswork out of the equation. By optimizing routes and relying on algorithms that can predict fuel efficiency based on load size, traffic patterns and driver behavior—in addition to feeding in the most accurate predictions for future gas prices—this software can significantly narrow the estimated fuel cost range.

Conclusions

For now, fully electric semi-trucks and autonomous semi-trucks appear to be a ways off from widespread adoption. Until then, fleets must rely on fossil-fueled trucks driven by imperfect meatbags. While nailing fuel costs down to the dollar will always prove to be a difficult task, a proper fleet management system can go a long way in taking out the guesswork and providing increased visibility into a fleet’s operations.

If you have comments or would like to obtain access to any of the charts above, please contact forrest@softwareadvice.com.

Methodology
To collect the data in this report, we conducted a two-week survey of 11 questions, and gathered 142 unique responses from random employees who work in the transportation industry in the role of fleet manager, owner, executive, dispatcher or accountant. Software Advice performed and funded this research independently. Results are representative of our survey sample, not necessarily the population as a whole. Expert commentary solely represents the views of the individual. Chart values are rounded to the nearest whole number.

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