Dealing with the cost of fuel
Any fluctuation in oil prices can have a significant impact on fuel distributors. Consider that transportation costs are around 45% of operating costs, with the cost of fuel to transport the product accounting for 40% of that figure.
That percentage would have risen in 2022 in part due to Russia’s invasion of Ukraine, which forced sharp increases in energy prices. As a cushion, eleven European countries cut their petrol and diesel excise duties, albeit temporarily.
Germany introduced a generous reduction, but it was short lived. Other countries have lowered the amount of duty that can be claimed back and still others have extended their cuts through part of 2023. The Netherlands, for example, who already pay some of the highest excise duty rates in Europe, will see an increase in July. Fuel duty was reduced by 11% last year and will rise by half of that amount.
The UK is looking at a significant hike, with a 23% increase in fuel duty predicted to come into force in March. Trade organization Logistics UK calculates that the increase would cost an additional £4,850 to run one 44-foot truck. (A typical oil tanker semi-trailer has a length of 42.64 feet.) Another point of contention to consider: the varying tax rates for fuel excise duties across EU member states makes it difficult for fuel distributors to maintain a consistent pricing strategy.
And then, when the cost of fuel rises, fuel distributors have two choices: increase their margins to make up for the higher cost or shrink their margins to stay competitive. It’s a precarious position to be in – especially when we’re living in an uncertain economic climate – but, you can lower your fuel costs. However, why stop there when you can lower your operating costs in other areas too?
Lowering operating costs with digitalization
Digitalization converts time-consuming manual processes into digital forms. It connects every area of your business and collects data in real time. The goal of digitalization is to improve efficiency, increase accessibility, and enhance the
quality of services. It replaces complex manual processes with automated and digital solutions, such as cloud computing and the Internet of Things.
How would this work for you? That depends on the digital tools you use, but let’s start with AMCS Fuel Planner. This is a cloud-based, best-in-class system designed specifically to reduce operational costs for the fuel distribution industry. Its rich functionality automates the entire planning process, handling operational planning and scheduling, execution in real time, and delivery of operational data that you can analyse to get an accurate picture of what’s going on.
It improves your compartment planning – you can view compartments of trucks and trailers from your office – volume deviations, delivery forecasting, product substitution and order prioritization. It optimizes distribution based on vehicle and driver qualifications, product pricing, lowest mileage, and product availability at various terminals. Doing all of this has a direct impact on your margins. The more efficient you are in your planning, the more breathing space you’re giving your margins.
AMCS Fuel Planner even has the ability to communicate in real time with different IT systems in your IT infrastructure to enable even more dynamic planning and precise monitoring and follow-up. For example, couple AMCS Fuel Planner with the AMCS VMI Manager (Vehicle Managed Inventory) to calculate expected demand for a certain period of time and automatically generate orders on this basis. AMCS VMI Manager collects historical data, generates consumption curves for each tank and uses stock levels to calculate time of replenishment. An order is then generated, planned and optimised.
Users of AMCS Fuel Planner report increases in:
- Customer-service satisfaction levels (for example, delivery accuracy and order flexibility) up to 50%
- Delivered oil and petrol per driven km up to 15%
They also report reductions in:
- Operational costs (km, time, trucks) up to 15%
- Time spent on planning & resource scheduling up to 50%
- Time spent on registration & follow-up up to 60%
How digitalization reduces fuel costs
Consider your route planning. This labor-intensive process must consider several factors: the size of your fleet, order types, customer delivery schedules, determining the routes – and then adjusting those routes based on changes in customer schedules or delivery locations. Speeds, traffic conditions, road closures, weather – all of these and other points have to be taken into account.
Digital route planning automates these processes. It considers all of the factors we’ve just mentioned and gives you the most efficient and effective routes possible. Not all route planners are created equal, but that’s the gist of what they’re designed to do.
AMCS Route Planner is built with powerful optimization algorithms tailored for distribution and collection routes. For example, users report reductions in the following:
- Number of miles and driving time - Up to 30%
- CO2 emissions - Up to 30%
- Number of vehicles and/or driver shifts needed - Up to 25%
- Time spent per route optimization - Up to 90%
Focus on the reduction in miles driven. How would even a 5%, 10% – or 30% – reduction affect your fuel costs? And what about the other efficiencies gained? You can already see how route optimization affects your operating costs.
Driver behavior and fuel consumption
Driver behavior affects how much fuel their vehicles consume. AMCS Telematics, for example, enables you to track and identify unsafe driving habits, such as harsh braking, excessive acceleration, and speeding. Fuel is not only wasted by unsafe driving habits, but by excessive idling, which can eat up thousands of litres of diesel in a year.
With telematics, you can identify drivers who need additional training, which also mitigates the risk of accidents. (A U.S. 2014 study of health and safety in the oil and gas industry found that in 38% of fatal accidents, drivers were not wearing seat belts.)
Telematics has also been shown to improve driver productivity by up to 12%. The safer they drive, the more efficient that fuel is used.
AMCS’s suite of digital solutions are modular, so they can integrate with any existing technologies you’re using. They’re also scalable, so they can grow with you.
To learn more on how you can lower your fleet’s fuel costs, we urge you to get in touch today.
Improving efficiency and improve margins in the Downstream Fuel Industry