ITS Logistics logged 14.5 million miles hauling freight for the Sparks-based third-party logistics provider in 2021.
By Rob Sabo Special to the NNBW
Tuesday, April 26, 2022
In 2021, drivers for ITS Logistics logged 14.5 million miles hauling freight for the Sparks-based third-party logistics provider.
That’s one expensive fuel bill – doubly so in the wake of $5-plus diesel.
As the price of fuel soared – the average nationwide cost for a gallon of diesel was $5.03 in mid-April vs. $3.08 a year ago, AAA reports – regional companies with large fleets and hundreds of pieces of heavy equipment were forced to either re-evaluate their contracts with clients to mitigate the impact of high fuel costs, or watch their profit margins erode.
Two of Northern Nevada’s largest construction and trucking companies, along with a longtime fuel expert, recently spoke with NNBW about existing fuel-saving measures and new avenues they’ve undertaken in the wake of the highest fuel prices on record.
Q&D Construction
On any given day, Q&D has between 400 to 500 pieces of equipment moving around, including trucks, fleet vehicles, and large and small construction and earth-moving machinery.
Kevin Linderman, vice president of Q&D Construction, told NNBW there haven’t been many knee-jerk reactions at Q&D to uber-high fuel prices because the company implemented many fuel-saving programs more than a decade ago. A key component of fuel mitigation efforts at Q&D, Linderman said, is GPS equipment installed across its fleet that limits idle time. If a piece of equipment idles for more than five minutes, it automatically shuts off.
“We implemented idling protocols a long time ago to try and cut gallons,” Linderman said. “We also try to get our guys to drive in one rig, and we keep our foremen working in close proximity to jobs to keep overall travel down.”
Some of the impacts of high fuel prices are beyond control, however. Certain contracts, such as work at the Spaghetti Bowl with the Nevada Department of Transportation, have fuel escalation clauses that reduce the risk of rising fuel costs. That process also works in reverse, Linderman noted.
“If fuel goes down, we have to give some of that money back,” he said.
Private clients have also proven sympathetic to the effects of $5 a gallon gasoline and diesel and have provided relief from fuel escalation costs, Linderman added. The real impact, though, will be felt from contracts that were bid and accepted months ago.
“Realistically, it will make those jobs less profitable,” Linderman said. “These fuel prices are above what we anticipated when we bid jobs six months ago, so it will hit our bottom line just like other companies.
“There’s no great way to recover the difference in the field; it’s always been a risk to the contractor to mitigate that bid time,” he added.
Q&D does have the ability to purchase fuel futures to lock in rates, and although it’s done that in the past, the company didn’t lock in any futures this year because the market was fluctuating too wildly, Linderman said.
“We definitely are a major consumer of fuel in the area, and fuel prices are something we watch every day,” he said. “We price our fuel with five different fuel vendors, and the prices go up and down between vendors, so that’s how we know we are getting the best price on fuel for that day and buy it in bulk for our tank farms.
“It’s difficult to see what we are paying for fuel right now, and it’s the highest it’s been in my lifetime,” he added. “It is very hard to have foreseen it going this high, and protecting yourself in a bid environment is very difficult.”
Tim Aboussleman
ITS Logistics’ fleet of nearly 200 tractor-trailers is governed at 63 miles per hour, a major fuel-saving initiative, said Tim Aboussleman, senior director of fleet operations.
Although that’s a lower rate of speed than many competing carriers, Aboussleman noted, it also has led to significant fuel savings.
“Fuel consumption is something we monitor on a daily basis,” he said. “Most fleets do their pricing structures on the ability to hit 6 miles per gallon. Our year-to-date totals are 7.87 miles per gallon.”
ITS Logistics also adopted higher-power motors across its tractor fleet after finding that lower-power motors work harder and end up burning more fuel.
ITS Logistics operates with different pricing structures for its clients, Aboussleman added. Some clients prefer an all-inclusive flat rate where the cost of fuel is calculated in advance, while others prefer fuel service-charge tables that can vary depending on where the client is located.
The latter allows flexibility when the price of fuel surges. Flat-rate contracts, meanwhile, are where $5 diesel hits the hardest, Aboussleman said. Between 20 and 30 percent of ITS Logistics customers are set up on a flat rate fee structure, he added.
“That's where we had to dive in pretty darn quick,” he said. “Generally, you have to renegotiate rates with the understanding that $5 fuel was an unforeseen economic aspect of doing business.”
Clients have been understanding, Aboussleman added — a national coffee chain even upped its fuel service charge on its own due to the unprecedented rise in fuel costs. Other customers have been met at the bargaining table to renegotiate flat-rate costs since current fuel calculations aren’t sustainable to doing business, he said.
“A lot of customers probably have rate-increase exhaustion, but at least this one they can grasp,” Aboussleman said.
Norma Havens
USA Fleet Solutions
Norma Havens has spent nearly 40 years in the fuel industry – 24 with private and public-sector regional and local fleets, and the past 15 years in fuel telematics.
“I eat, sleep and breathe fuel,” said Havens, who proudly wears the nickname “Idle Queen.”
Fuel telematics, born from global positioning systems, paints a detailed picture of a vehicle or piece of equipment, including GPS tracking, idle time, speed, and routing patterns. That data provides key insight into vehicle and fuel usage.
“One of the No.1 reasons why clients get into telematics is to get control of fuel,” Havens said.
Havens pointed to a recent analysis conducted for a large local fleet. Telematics showed that one-third of total equipment idle time was in the company yard every morning.
“Any idle time in the yard is bad because you aren’t getting anything done.” she said.
Telematics also showed that one local hauling company’s trucks were hauling at high speed. At 70-plus miles per hour, the fuel burn was 1.7 miles per gallon. However, at 65 mph, fuel burn improved to 3.2 mpg.
“They saved almost half their fuel costs by changing that one behavior,” Havens said. “That saved them $15,000 per month.
“But it’s not about the price of fuel, it’s about the cost of fuel,” Havens added. “Cost of fuel is the important question: What does it cost to get, manage, maintain and control it. If you don’t have control – like Q&D does – you have nothing.”
Comments
Use the comment form below to begin a discussion about this content.
Sign in to comment