Fighting Back at the Pump

Distributors offer cost-saving suggestions.

The fuel crunch has become virtually inescapable in the United States. Be it around the water cooler or on the evening news, it seems everyone is spending time discussing the issue and its far-reaching impact.

The material handling industry is certainly not immune. Not only are internal fuel costs going up, but vendors and suppliers are adding significant fuel surcharges. MHEDA members are without a doubt feeling the pinch, but that doesn't mean they're taking it lying down. In fact, most are implementing innovative strategies to fight back at the pump.

Efficiency Is Key
Even with fuel prices dropping from their all-time highs earlier this year, many distributors are accepting that a higher fuel expense is part of the cost of doing business. Therefore, long-term planning is paramount to position a company to succeed in spite of the increased burden. While technology and innovation are sure to help ease the fuel price pressure down the road, the basic principle of efficiency is an absolute must for the here and now.

“We're doing our best to move down from eight- to six-cylinder vehicles when possible.” David Cannon, Towlift Inc.

Operating in New York City, where an eight-mile commute can take upwards of an hour, Robert Kehley, general manager of Key Material Handling Equipment Company (Brooklyn, NY), knows that routing efficiency can make a huge difference in the bottom line. A few years ago, Key installed GPS systems in all of its service vehicles, which currently number 14, a move that has helped its service technicians find alternate routes when NYC traffic becomes gridlocked. Additionally, Key is “zoning” its mechanics. When a technician is dispatched to an area, he or she stays there. This helps Key reduce mileage and avoid the tolls that are charged when a vehicle drives between boroughs.

GPS software has gained quite a bit of traction within the industry. In fact, the majority of companies interviewed are using some form of global positioning. Delta Materials Handling (Memphis, TN) has about 50 vehicles that each travel an average of about 1,700 miles per month, enough for President Greg Costa to implement GPS earlier in 2008. “Even though it was expensive, we felt it was a good way of tracking our people, as well as making sure that our vehicles are doing what they're supposed to be doing,” Costa says.

Also firmly aboard the global positioning bandwagon is Springer Equipment Company (Birmingham, AL) President Ted Springer. The company, whose fleet of 20 service vehicles covers central and northern Alabama, has been using GPS in one form or another since 1999. He says, “I think anyone who hasn't given GPS a shot is missing the boat. They don't realize how unbelievably efficient they can become, and that's not even mentioning the side benefits like less overtime and fewer wasted gallons of fuel from speeding.” He credits the GPS systems with helping Springer Equipment's overall gallon consumption drop significantly. “Being able to breadcrumb routes really makes it easy for us to handle one of the biggest costs of doing business,” says Springer.

Werres Corporation (Frederick, MD) operates about 100 vehicles, and President Paul Souza believes responsibility falls on the company to make an internal effort to save at the pump. He says, “The answer lies in being as efficient as we possibly can. We can't control the impact by charging more on the revenue side; we have to control it by being efficient on the cost side.”

For Jeff Schmeck, president of The Miner Corporation (New Braunfels, TX), the higher costs have had a silver lining. “It's caused us to be a little smarter. Our employees are being more disciplined and adjusting their normal routines rather than making special trips,” he says. He's used this situation to implement daily huddles to make sure everyone is on the same page, which has curtailed mistakes. Each service tech is outfitted with a rugged camera phone, so they can collaborate with people in the office to discuss projects without making additional trips. The company also partnered with SuperChips, a company specializing in fuel injection technologies, to reprogram its diesel engines to improve efficiency.

“Right now, we're utilizing GPS on cell phones. The next step is to get it in the trucks.” Jay Terry, Allstate Equipment Company

Quality Forklift Sales & Service (Shakopee, MN) has found that knowledge is power when it comes to saving money at the pump. The company has invested significant time in reemphasizing fuel-saving strategies to its existing technicians. Additionally, every staff member who operates a vehicle is given a fleet card. This card is used for refueling, and requires drivers to input mileage details before dispensing fuel. Controller Colleen Wright then compiles a report detailing miles driven, cost per gallon and other pertinent details. The report is then dispensed to each driver, making them aware of exactly where they stand in regard to fuel consumption. “It makes sure the issue is on their radar screens and keeps the drivers honest,” says Wright.

The Challenge of the Charge
With the drastic increases in both fuel costs and vendor-side freight surcharges, many distributors are feeling the pinch. To keep a healthy bottom line, some of that cost must be passed on. The problem lies in how best to do that. Fuel surcharges, once a dirty word in the eyes of end-users, are becoming less of an issue. However, some distributors still aren't comfortable with them.

Jay Terry, president of Allstate Equipment Company (Chesapeake, VA), has seen a 7.3 percent increase in vehicle expenses for his company's fleet of 15 diesel service vehicles this year. He's also seeing hefty fuel surcharges from vendors—one recent delivery had a surcharge of 37 percent—but remains unwilling to add a fuel surcharge of his own. He says, “I know some dealers are adding a surcharge for fuel, but we're not going to do that. If we do anything, we will increase our zone charge to compensate for additional gas cost.”

Williams Toyota Lift (East Sparta, OH) President Andrew Williams recently added a zone charge to his company's billing and has found customers understanding thus far. “They actually prefer the zone charge because of its consistency when compared to port-to-port mileage charges,” he says.

The Department of Energy helps Springer Equipment's Ted Springer develop his fuel surcharge rates. “I reference the DOE's weekly retail price survey. Customers can go right to the Web site and see it so they know I'm not making it up.”

David Cannon, president of Towlift Inc. (Cleveland, OH), experimented briefly with a fuel surcharge but has since done away with it. “Customers began to push back. They didn't want to pay extra line charges.” Towlift came up with a solution Cannon calls the all-in rate. This rate consolidates all charges associated with a purchase into one set rate. Customer reaction has been positive since the switch was made, according to Cannon.

Conversely, Robert Kehley says that his customers have accepted the modest fuel surcharge that Key Material Handling has implemented. “Right now I poll my competitors to help set my surcharge. No customers have been pushing back, so I think it's at a comfortable level,” he explains.

“A bright side to higher fuel prices is the huge increase in the number of electric forklifts we've sold.” Robert Kehley, Key Material Handling Equipment Company

Taking a Load Off
A few MHEDA members are experimenting with some outside-of-the-box solutions. To curb the impact of operating a fleet of 30 Ford F350 diesel pick-up trucks complete with utility beds, The Miner Corporation's Jeff Schmeck developed a way to lighten the company's fuel-bill burden. Every Friday, Miner service technicians bring in their vehicles and empty out all of their unnecessary parts and equipment. Schmeck says, “Technicians are pack rats by nature, so weekly we make them go in and strip their trucks down. They take out everything that is excess and get it out of the truck, which significantly reduces weight.” For a company that averages about 2,000 miles per vehicle per month, that process pays huge dividends. The Miner Corporation is saving somewhere between 15 percent and 18 percent on its fuel bills, and with a gallon of diesel priced near $4.00, that equals significant savings. Schmeck says, “I think distributors would be shocked by how much weight their technicians are carrying, and by how much money they could save by stripping down their vans every week.”

“We have four groups of employees that have begun carpooling whenever they can.” Jeff Schmeck, The Miner Corporation

The Most Valuable Resource
Many business owners will tell you that a good employee is their most valuable resource. At Towlift, David Cannon means it. In addition to using GPS for more efficient routing, Towlift is now offering incentives to its employees who come up with ideas that save money at the pump. If an employee comes up with an alternate route or strategy that ends up saving the company money, then Towlift will share a portion of those savings with the employee. This creates the ultimate win-win where both company and employee profit.

A Helping Hand
Southwest Materials Handling Company (Dallas, TX) Senior Vice President of Operations Kenn Harper knows that the fuel crunch is impacting more than just the company's bottom line as the company's 20 vehicles cover a 50-mile radius around Dallas. It is also affecting the livelihood of his employees. That is why Southwest recently gave its employees special credit cards. These cards bring the cost of gas back down to 2007 levels and the company then pays the difference. Harper sums it up by saying, “We're saving them money on the mileage they drive daily in their personal vehicles, and that's something they seem to be pretty excited about.” Southwest is even toying with the notion of a four-day work week, although Harper admits the feasibility of such a move is still in question.

MHEDA Takes a Stand Earlier this year, MHEDA was one of 42 associations that signed a letter to Congress urging members to take action to combat the rising cost of fuel. In response, President Bush issued a four-part plan to develop the domestic oil supply, including allowing offs-hore drilling, increasing oil shale access, investigating oil in the Arctic National Wildlife Reserve and increasing the amount of do-mestic refining. In the meantime, distributors must search for their own solutions to the cost of fuel. You can read the full letter here.

To LP or Not to LP
Springer Equipment's Ted Springer is researching a couple of options for the near future. One of these options involves the implementation of Garmin turn-by-turn voice navigation systems into existing GPS systems. Springer believes this will cut down significantly on drive time. He is also researching a more ambitious opportunity, converting his fleet of 20 vehicles to LP gas. MPG is decreased with propane vehicles, but according to Springer, “Even with the lower mileage and the slow rise in propane cost, it still has a much cheaper per-mile cost than gasoline.”

   Current Issue    |   Past Issues    |   Search    |   Contact Us    |   Send Files    |   Advertising    |   Site Map    |   MHEDA Home Page    |   Blog

The MHEDA Journal • Fourth Quarter 2008 • Volume 37, No. 4 • Contents are Copyright © Data Key Communications, Inc.
All rights reserved. • Nothing may be reproduced in whole or part without written permission of the publisher.