Would you like to reduce your fuel related costs by 3 – 5 cents per gallon? Regardless of your current fuel discount, – you can you still lower fuel costs while ensuring supply security if your fuel team leverages the right automation and tools to buy further up the supply chain.
Typically, fuel teams buy at one of five levels of strategic efficiency, and as you move from the tactical/manual fuel management practices of Level 1 to the strategic and automated processes of Level 5, you safeguard your company from the risk of volatility, run outs, leakage, and theft while winning dramatic savings of money and man hours…
Five Levels of Fuel Management
Level 1 = Supplier Managed
- Buy fuel on a delivered basis from a single marketer
- No transparency price/freight
Level 2 = Delivered Daily Spot
- Buy all volumes on a delivered business fleet management sale at published price
- Numerous suppliers
- Price floats w/ delivery
Level 3 = Delivered on Contract
- Delivery from few strategic providers via contracts
- Advanced inventory controls and contract management capabilities
Level 4 = Wholesale at Rack
- Buy most volume on contracts from the rack
- Robust freight procurement process
- Licensed distributor status in few key tax jurisdictions
- Coordinated risk management
Level 5 = Bulk and Wholesale
- Buy volume at both the rack and in bulk on contract above rack
- Licensed distributor for most/all operating locations
- Robust tax calculation and compliance capabilities
- Buy above rack and ship on pipeline
- Coordinated risk management
At Level 5 automation has successfully minimized all fuel related costs including supplier and distributor selection, demand forecasting, inventory management, order management, dispatching, environmental compliance, and invoice reconciliation. At this level retailers and bulk buyers can proactively counter unplanned disruptions, run-outs, and retains resulting from usage swings, inclement weather, and traffic.
Moving to Level 5
The first step is to authorize an in-depth spend and benchmark analysis of your fuel prices against OPIS (Oil Price Information Service) rack prices to establish clearly how far above/below the OPIS index your current fuel acquisition costs are.
The next step is to ascertain how much lower your fuel acquisition costs would be with the appropriate technology and best practices to drive excess costs and inefficiencies from your fuel management processes.
Any company purchasing more than one million gallons fuel and seeking the same or better operational advantages of very large purchasers of fuel can and should investigate the financial and operational benefits of Level 5 fuel management.