TRUCKERS ADOPT TECHNOLOGY TO SURVIVE HIGH FUEL COSTS

 
By Stephan Karczag

FUEL PRICES. As if the average LTL transportation provider doesn’t have enough to worry about. Escalating cost of operations, competition eroding margins, the big guys taking over or buying out the mid-size and smaller markets, all concerns pounding down on the LTL (less than truckload) and Delivery markets.  

Even the larger LTL companies are being affected. Fed Ex Freight and UPS both raised their rates 5.9% at the end of April due to increasing costs of business operations.

Suspicions of price gouging by oil companies have Congress and local governments initiating investigations to appease the growing concern of constituents over fuel prices.  

The cost of diesel fuel (US national average) is somewhere around $2.90 a gallon, up from $2.23 for 2005 or the $1.93 in January 2005.   According to ATA President Bill Graves, fuel costs for the industry are expected to hit a record $98.3 billion this year, nearly double the $52.2 billion spent only 3 years ago.  

Solutions to the fuel crisis now upon us vary from state to state. California, where fuel costs top the national averages at $3.24 per gallon, is spearheading a push for tougher fuel economy standards as the solution for escalating prices. The California legislature is also pushing to implement a requirement for all diesel sold in the state to contain at least 2% biodiesel by 2008 and at least 5% by 2010.

The effects of implementing the new ultra-low-sulfur diesel for 2007 are creating speculation of another increase in price of eight to fifteen cents per gallon. At a mere ten cents per gallon, that is a $100 increase for every one thousand gallons used.

And there is no immediate relief in sight.  How do companies solve their fuel problem?  
It’s all about efficiency. Only a couple of years ago, some still wondered if it could really be done or how much of a difference it would make? Today, with case study after case study and word-of-mouth buzz fanned by rising fuel prices, those once on the fence are increasingly turning to technology to quickly solve their soaring costs of doing business.  

With fuel costs at the top of the list of overhead expenses, it made sense for Ward Trucking to solve this fast. Their old manual dispatching system was inefficient and forced costly delays and excessive dispatch traffic checking on deliveries.  Ward put technology to use by implementation of a route planning and automated dispatch system, integrated with a wireless, GPS enabled phone system.   Gregory S. Confer, Director of Process Analysis and Improvement at Ward Trucking said year to date, Ward Trucking has saved 16,415 gallons of fuel.  At nearly $3 a gallon for diesel, that is a savings of almost $50,000 for just the first few months of the year.  

Of course, logistics efficiency should go beyond lowering fuel consumption. According to Benny Cordero - Sr. Vice President of Operations, Benton Express, implementing a software solution enabled them to better utilize manpower and equipment resources, giving them more stops per man-hour.   
 
Companies like Ward and Benton are realizing they cannot afford to wait until the big guys invade their territory.  They have to do something quick to maintain or improve their profitability.

Another logistics transport company located in the heart of the Midwest used to have ten dispatchers and several coordinators struggling with 3000 deliveries. The system was manual, and the company experienced a lot of delivery problems.  By implementing a sophisticated but inexpensive SaaS model software system for routing, dispatch and delivery, the company was able to drop their dispatchers down to five and increase their delivery capacity by 230 percent to over 7000 deliveries and cut fuel costs.  

Using technology, they were able to stay competitive, be a very low cost provider and still make their margin.  Further, the company was able to expand operations into new territory with just a couple of staff, keeping their dispatch centralized and their costs low.

For a small fleet, often times their concerns are tracking loads to maintain visibility.  However technology is now being used to track the most optimal routes, monitor when drivers are going too fast, specifically to focus on fuel savings.  

Whatever the size of your fleet or carrier line, technology is playing an ever increasing important role in fuel economy, efficiency and profitability. Costs for technology solutions have dropped considerably and the availability of more customized tools exist.  Businesses must look to technology as a practical, less expensive solution to increasing capacity and income.  We can’t wait for government regulations to do it for us.

 
About the Author: Stephan Karczag is vice president of Cheetah Software Systems, Inc. of Westlake Village, California. For more information visit http://www.cheetah.com/.