Controlling Fuel Costs to Maintain Profitability

By Ranger Kidwell-Ross

Editor

Understanding the 15% Rule

• Only 15% of fuel actually does something useful – like moving the vehicle.

• Good upkeep vital.

• Check fuel economy with chassis manufacturers prior to purchase.

• Talk to other contractors/users about their experiences.

• Consider advantages/disadvantages of diesel vs. gasoline vs. hybrid

• Check at www.fueleconomy.gov

Get Pre-Purchase Info

• Curtail aggressive and high speed driving.– Speeding and rapid acceleration and braking cut

mileage up to 33 percent at highway speeds and by 5 percent in town.

– Gas mileage decreases rapidly above 60 mph.– Use GPS system to track– Compare mileage driver-to-driver

• Consolidate routes, other trips.• Minimize unneeded engine idling.

– Shut off auxiliary while blowing, etc.– Operators dress appropriately; don’t idle engine to

run A/C or heat to stay comfortable.

Train Your Operators!

• Set up routes to avoid left turns.– UPS got $2 billion in fuel savings.

• Cross-train operators.– Check differences in time taken to service

accounts, as well as fuel usage. – Investigate differences, both plus and minus.

• Specify transit routes, not just customers and order of service.

Train Your Operators!

• Get them to key in on equipment costs.– Compare routes for efficiency.– Know why fuel economy and other costs vary.– Train to read GPS properly to gain needed data.– Consider bonus system based on overall job

performance by operators; set up rating system that includes route economy, checklist reporting.

• Find out while still in business...– Contractors tell stories of buying out unprofitable

competitors; then, they reduce # of sweepers needed for routes by 50% and make money!

Train Your Managers, too…

• Proper maintenance = 50% longer svc.• A tuned engine gains 4% fuel economy.

– Faulty oxygen sensor can cost 40% in fuel. – Air cleaners can cost up to 10% in fuel.– Proper tire inflation gains @ 3.3% (and improves

tire safety and longevity). Every 1 psi drop in pressure of all four tires can lower gas mileage by 0.4 percent.

– Look for "Energy Conserving" on oil’s API performance symbol to ensure friction-reducing additives are included. Gains 1-2%.

Maintenance Procedures

• Maintenance software provides great data. • More frequent oil changes a plus?

– One contractor tracks that 50% more frequent oil and other lubricant changes more than pays for added cost via chassis longevity.

• Use synthetic oil to stretch out oil changes?– Better lubrication = longer engine life. – Extended time between oil changes = lower overall cost.

• Fuel filters are cheap to replace… until they fail.• Communicate with drivers.

– Driver’s daily written checklist a must.– Must be in writing for accountability.– Have a place for ‘Other.

Preventive Maintenance

• Fuel costs less when ground temps are lower. • Don’t fill tank in ‘fast’ mode to reduce vapor loss.• Don’t pump when fuel truck is filling storage tank.• Reduce vapor loss via keeping top half full.

– Gasoline vehicles especially.

• Get your own tank(s) and bid refill prices.– Bid between vendors and save a few cents/gallon.– Get a tanker trailer if you have enough volume and buy at

wholesale prices.

Fuel Purchasing Basics

• What’s better, single-engine or twin?– See page of handout.– Depends upon average debris load; twins might be able to

pick up in one pass while a single-engine makes several.

• What’s better, diesel, gas or hybrid?– Excise tax claim can be more aggressive with dual tanks.

• What’s place of tow-behinds, pick-up mounteds?– Calculate fuel economy and other total costs (including time

taken to clean) when evaluating equipment.– No curb broom costs time.– Shoveling out costs time.– Weak or inappropriate performance costs time.

Developing Accurate Costs

• Real World Example:– Contractor had a small route that required

10/hours per week of sweeping, all in a town located 45 minutes away from his office.

– Following are the calculations for the twin-engine sweeper he historically used, versus switching to a Victory T-500, and a new local employee, for the route.

Think Outside the Box…

• Travel Fuel/Month – 2 gallons/hour x 1.5/hours travel/day x 20 days = 60

gallons/week @ $3/gallon = $180/month

• Sweeping Fuel/Month – 2 gallons/hour x 40 hours/month = 80 gallons/month

@ $3/gallon = $240/month

• Est. Employee Cost = 1.5 hours travel/day x 20 = 30 hours travel/month + 40 hours of sweeping/month. Cost: 70 x $15 = $1050/mo.

• Sweeper Payment Portion (at $1200/month) – Usage in Example: 40 hours sweeping/month + 30

hours transit/month = 70 hours use/month = 44% of total usage = $528 is % payment cost.

Comparison: Chassis-Mounted

• Sweeper Payment Portion (at $1200/month) – Usage in Example: 40 hours sweeping/month + 30

hours transit/month = 70 hours use/month = 44% of total usage = $528 is % payment cost.

• Total Cost of Chassis Sweeper Operated 40 hours; travel 30 hours is $1998/month. ($180 + $240 + $1050 + $528)

• Amount of ‘Sweeping Time’ Still Available:– 160 total hours available – 70 hours used = 90

hours still available (56% still available)

Comparison: Chassis-Mountedpage two

• Employee Cost (includes fuel) = 44 hours/month at $17/hour.– includes using his truck and he buys fuel = $187 (cost

per wk.) x 4 = $748

• Cost of sweeping 44 hours – assumes 10% slower sweeping– including all $220/month sweeper payment cost) =

$220 + $748 = $968

• Amount of ‘Sweeping Time’ Still Available:– 160 total hours available – 44 hours used = 116 hours

still available (73% still available)

• Cost savings using above assumptions and example: $1998 - $968 = $1030 savings/month.

Comparison: Tow-Behind

• Purchase a one-grade-lighter trash bag, and negotiate cost with suppliers.  – Previously, the company purchased ten or twelve

cases at a time for about $39 per case of 250.  – Now gets lighter grade bag and buys full-skid

minimum. Cost reduced by $17 per 250, for a total of $22 per 250.

– Downside is more $$ out per each purchase.

Related Cost-Saving Ideas

• Buy oil and air filters for the sweepers from NAPA, not OEM. – This saves almost 50% over the dealer prices,

even in quantity. Check NAPSA’s discount price over local prices.

• Get onsite dumpsters from clients where you change-out trash bags. – Reduced bags in hopper often means all night

sweeping with no dumping.– Lower debris disposal costs; less non-sweep time.

Related Cost-Saving Ideaspage two

• Provide vehicles to sales personnel and other managers who now use their own vehicles. – Advantage #1: Saves money over mileage reimbursements.– Advantage #2: Allows you to control ‘first impression’ image

to customers via vehicle choice.

• Pre-mix all two-cycle fuel by one person. – Get better mix = get better machine life.

• Pre-mix all two-cycle fuel by one person. – Get better mix = get better machine life.

• Pre-mix all antifreeze before use. – Not premixing can create glycol hotspots that, in

the extreme, can cause engine failure.

Related Cost-Saving Ideaspage three

• Do not over-service air filters; wait for indicator. – Many reported instances of engine loss from over-service.

• Read all the tips at the WorldSweeper.com Tip Clipboard.

www.worldsweeper.com/TipClipboard/

Related Cost-Saving Ideaspage four

• Know your fuel and other costs!– Calculate fuel costs at year’s end. – Estimate highest price for coming year.– Bid on price per sweep; notify re: possible escalating ‘fuel

recovery charge.’– Example: 5% if $4.00 to $4.25; 6% if $4.26 to $4.50, etc.

• Don’t wait; stay under 10% at one time.• Take fuel charge off when price of fuel drops

back down.• Raise cost per sweep if customer would prefer.• Have the facts to offer customers if they ask.

– Resources and graphics at: www.eie.doe.gov

• Use your knowledge to negotiate with vendors.

Fuel Surcharge Basics

ADVANTAGES:• Provides immediate cash flow help.• Perceived by customers as temporary, not a new long-term cost.• Need is widely understood because knowledge widespread.

DISADVANTAGES:• Some customers won’t pay.• Some may get bids to take business elsewhere.• Some may not be able to pay; fewer sweeps.• Takes time to implement and defend (phone calls)

Fuel Surcharge Advantages & Disadvantages

• Single-engine sweepers do not qualify.• Must be conservative in usage; warm-up time.• Get engine gallons/hour stats from

manufacturer.• Generally available for off-roadway fuel usage

only.• Not all states allow; check your state regs

with Excise Tax Dept.• Check re: state excise tax rebate availability.• Municipal contract rebates: if card lock

system used and municipality pays the bill.

Excise Tax Rebate Guidelines

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