Fuel Management

How to Optimize On-Site Fueling Operations

May 2017, Government Fleet - Feature

by Bob Stanton

File Photo
File Photo

Most government fleets routinely own and operate their own on-site fuel systems, and many operate multiple sites equipped with bulk tanks both large and small. Fleets struggle daily with the challenges of inventory balance and control, ever-changing environmental regulations, fuel site infrastructure maintenance, and how to maximize this resource to provide high levels of customer service while ensuring the cost is both manageable and justifiable.

This article will offer suggestions, some slightly out-of-the-box, to assist governments in expanding their in-house fueling resources for both routine and emergency operations.

At a glance:

Fleets can make their fuel programs more effective by:

  • Outsourcing jobsite fueling
  • Deploying fuel cards
  • Utilizing fuel tank sensors
  • Billing customers the fully burdened cost

Looking at Jobsite Fueling

One way to improve fueling efficiency is to outsource jobsite fueling. Many government fleets operate fuel trucks to service equipment that resides at jobsites. Bringing fuel to the jobsite can avoid the timely and costly practice of transporting equipment back to a central staging yard for refueling.

However, when all costs are factored in, it is unlikely that this service is cost-neutral or efficient, even with a healthy markup utilized in charging fuel to user departments.

One element of fuel cost seldom considered is labor cost, both for the fleet and for client departments. When the fuel truck arrives on site during the workday, the entire job, or at least the units being fueled, typically shut down simultaneously, bringing the job to a virtual halt. On-site fueling activity takes time, and routinely, the machines being fueled will not resume their work until refueling is completed for all machines. Labor cost is further escalated if lubricating heavy equipment, a common requirement, is added. The labor lost to the departments incurring this lack of production can be huge.

Capital cost is another factor in jobsite fueling. Fuel truck acquisition costs are very high due to the specialized nature of the truck body. Beyond that, a fuel truck by design is an underutilized asset for most operations. Typically used for on-call service, a fuel truck spends less than 50% of its service life in actual service.

A third element of jobsite fueling, and perhaps the most unseen and seldom considered cost, is the impact of the above factors on the true fuel cost per gallon. These can easily double the cost per gallon, not including the cost of idling jobsite equipment during fueling or oiling.

Further, maintaining the fueling equipment (and oiling equipment, if available), balancing the onboard inventory, ensuring a driver with a commercial driver’s license (CDL) and hazardous materials endorsement is available, and adding the labor lost while refilling the bulk tanks on a truck all enter into the cost equation that some fleets fail to fully consider.

A better alternative is to outsource this service and provide it after hours when jobsite equipment is already idle. Outside firms exist solely to provide these services, and because the services are within their core competencies, they provide it efficiently. When evaluated fully, outsourcing this service can be truly cost effective and even more valuable if provided after working hours.

At first, outsourcing can seem expensive. But when all the internal costs are considered for all stakeholders, outsourcing will likely be an attractive alternative for the entity as a whole.

With savvy negotiating, a fleet can tailor the outsourced services to its benefit and to that of its client departments. Plus, selling the fuel truck and repurposing the operator to the shop floor will likely pay dividends in cost savings, productivity, and shop throughput, and provide additional revenue for the fleet.

Photo: Vince Taroc
Photo: Vince Taroc

Making a Case for Fuel Cards

The second resource suggestion is employing a fuel card system to complement an in-house fueling program. Government fleets seldom consider this resource because the consensus is that a fuel card system is unnecessary with in-house fueling.

Initially, fleets might consider using a fuel card system to control out-of-area fuel expenses, such as those incurred during patient transfers by ambulance to a distant hospital. Another reason to consider a fuel card system may be for an entity that sends vehicle resources out of its area for interagency support. In Florida, many entities have pre-established “go teams” encompassing a broad cross-section of operating departments. The teams are formed to provide temporary basic recovery support to sister entities that may have been impacted by a hurricane or other natural disaster. Because the teams may travel long distances to provide temporary assistance, a fuel card system can offer flexibility and control for outside fueling activities.

A fuel card system can also supplement the in-house fuel inventory during emergencies through the implementation of prioritized fuel system access. This strategy can be particularly helpful should bulk fueling resources become less available.

Some departments may operate their vehicles less during an emergency, giving them a lower priority for fuel resources compared to a department engaged in life and safety concerns.

By offering these lower priority departments a fuel card as an alternative, they remain functional while not depleting the in-house reserve. A computerized fuel system can reinforce this action by using the system to lock out lower priority departments, preventing their access to the in-house fuel system. Some fleets establish a priority hierarchy, and as the emergency approaches they activate each priority to ensure their fuel inventory requires less frequent replenishment.

Fuel cards can also be deployed to emergency vehicles, giving access to fuel stations closer to emergency scenes that may require extended vehicle staging times. Having these resources available may prevent vehicles from exiting a scene prematurely for a refill. It may also prevent the on-scene staging of a fuel truck, as some fleets do currently.

Because fuel cards can be tailored to the needs of individual customers or departments, controls can be implemented to ensure unauthorized products or services are not purchased. Some even recognize and honor the tax-exempt status of governments in their billing processes. In spite of the marginal service fees assessed by fuel card companies, fuel cards can be a sophisticated service alternative, even for government agencies.

Managing Inventory Online

The advancement of technology has brought new tools to the fuel management landscape. Online monitoring of bulk fuel levels and dispensing history using sensors installed within bulk storage tanks is becoming a commonly accepted practice. These devices allow fleet/fuel managers to check their bulk tank inventory levels from anywhere in the world with an Internet connection.

On-site tank and dispenser monitoring systems can ensure dispenser accuracy and assist the fleet in balancing its bulk inventories. Experts confirm that managing a liquid inventory, especially one as susceptible to temperature fluctuations as bulk fuel, is truly a challenge. The steps involved in balancing bulk fuel inventories represent a complex dance that fleets seldom understand fully and often fail to execute simply because the steps require daily attention and constant focus. Balancing inventories is typically a period-end process for most fleets, which usually comes too late for detailed reconciliation. The balancing process often results in an inventory adjustment that seldom favors the fleet and can result in thousands of dollars being written off.

Fleets having these difficulties should explore the numerous tools available to assist in that process. Partnering with the fuel supplier, which also wrestles daily with inventory balance on a larger scale, is often a good first resource.

Considering the Billing Process

An acknowledged best practice is to recover the fully burdened cost of dispensing fuel from client departments. Government fleet managers recognize the value of utilizing fully burdened labor rates; the allocation of fully burdened fuel costs is equally important.

Some fleets, to their peril, treat fuel as a pass-through, or simply a cost of doing business, and do not pass those costs on to their clients. With full cost allocation, client departments have a greater awareness of their true costs. Fleet management software programs are capable of facilitating this process.

Fortunately, the raw cost per gallon has stabilized in recent years. Regardless, it remains among the top two cost elements in most fleet operations. The cost of dispensing, accounting, maintaining the infrastructure, and staying current with environmental regulations continues to escalate. Fuel cost is neither a pass-through nor simply a cost of doing business. It is a high-cost budgetary priority that everyone should have a stake in controlling. Full cost allocation will encourage management control and accountability.

Government fleet management has evolved to a stage where financial acumen is as valued a skill as technical expertise. The existence of in-house fueling infrastructure represents a vital service element in its arsenal. Fleets should evaluate and utilize all the tools available to them to ensure this element is supported and exploited to its full potential.

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