The rising cost of gasoline and diesel fuel is hurting our profits.   Our business has 10 to 20 cars and trucks on the road on any day.  Some of these travel fixed driving routes but the majority have to be scheduled every day.  The vehicle fleet costs are not only increasing because of fuel costs but also because of rising maintenance and labor.  Is there any way we can be more efficient in using our vehicles?

Saving fuel costs

Our Response:  Yes, there are specific things you can do.  First, you should be using a program known as vehicle routing software, route optimization software or a transportation management system (TMS).  The largest TMS may be too large for a small company but even mid-sized companies are using these fully integrated demand logistics management solutions that allow transportation organizations to manage field operations more effectively.

The smaller route optimization systems will allow you to enter the desired destinations for your fleet for any given period of time.  The vehicle routing software will then calculate the most efficient route for each vehicle to take.  It will provide the driver with routing information and also maps if desired.  The route will be optimized for a combination of mileage, time and, in some programs, the work to be accomplished at each stop on the route.  Some optimization software includes the ability to measure the efficiency of each vehicle and each route in terms of such key items as fuel use, labor use, maintenance, and time.

The price of a TMS will typically start at about $10,000 and run into big numbers for big companies.  The price of simple route optimization software package starts in the $1 - $2,000 range and can quickly pay for itself even in a small fleet.  A small truck on a multi-stop route running at 8 mpg for 5 hours a day in urban traffic at 30 mph (150 miles) is going to burn $56 per day of gasoline at $3 per gallon.  That's $14,560 per year per vehicle on a 5 day week.  Conservatively, if you can improve the mileage efficiency by just 5% by optimizing the route, that is a savings of over $700 per year just on gasoline.  The actual total savings can be significantly greater because of the other variable costs that are reduced as well.  In some cases, fleet sizes can be reduced (along with drivers who are in short supply) and/or the work done can be increased.  The reality is that all the significant transportation companies are using these programs today.  They could not be competitive without them.

I worked with a small regional distributor on a similar problem not too long ago.  They bought PC Miler (a smaller package) for a couple thousand dollars and paid for it in a matter of months.  Their current savings are running over $2,000 a month.  Similar packages include Cube Route and StreetSync.

My second recommendation is that you examine the profitability of each route, region, product line and customer to make sure that you are not throwing money away on business that is not sufficiently profitable to make it worthwhile.