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Guest post: Alphabet on mitigating fuel price rises


31-Mar-11 15:42

With the price at the pump hitting business costs in a variety of forms, understanding the options available is key. In this guest post, fleet management company Alphabet’s Paul Hollick answers some questions on strategies to mitigate the inevitable impact.

 

What is the best way to control fuel costs?


Firstly, you need to know how much fuel your company uses. While truck and van fleets usually know this, many car fleets do not because they pay for business fuel via their mileage expenses process. This obscures essential information about the volume and price of fuel purchases: records are dispersed across departmental transport budgets; there is no central record of journeys and mileage; and drivers are often paid at fixed pence-per-mile rates that bear no relation to the price they pay or the fuel consumption of their particular vehicle.

 

Do volume-related discounts really save money?


Generally, only very large businesses, which can negotiate significant discounts on average pump prices, on the back of very high annual fuel volume, benefit from discounts. The key question to ask is: "What is the discount against"? Is it against the national average price for the whole of the UK, and if so, over what period? Or is it against the supplier’s own price, which may be significantly higher than cheap outlets such as supermarkets.

 

Gaining complete visibility over fuel costs is entirely possible. Firstly, all regular business drivers should buy fuel using fuel cards, whether they drive company cars, cash allowance cars or their own cars.


The company then deducts the value of fuel purchased from each drivers salary, less the cost of any fuel they use on business. The method can be used in conjunction with fixed rate mileage expenses or, better still, by paying each driver at actual cost by pro-rating the fuel spend against their business/private mileage split. This encourages drivers to minimise fuel consumption, as they cannot subsidise private mileage through claiming over-generous mileage expenses.

The more data a company collects on individual vehicles’ and drivers’ fuel purchases, mileage, journeys and fuel efficiency, the more able it will be to change policies and processes in order to minimise fuel consumption.

 

What should you expect from your vehicle funding and management company in terms of strategic fleet policy advice on holding down fuel costs?


Businesses have virtually no influence on the price of fuel itself - even if they can obtain a discount based on volume. On the other hand, they can have a dramatic impact on their fuel bill through vehicle policy and driver management. A complete fuel solution for a mixed car and commercial fleet requires a combination of low-CO2 vehicle acquisition, fuel cards linked to mileage capture and audit, driver training, telematics (for vans and trucks) and in many cases, changes to the expenses process. There is no effective piecemeal solution.

Paul Hollick is general manager sales development for fleet management specialists Alphabet.

 

 

 


Steve Hall Steve Hall is Editor at Procurement Leaders. Steve oversees the publication of Procurement Leaders Magazine and draws on a decade in business publishing, providing quality coverage to senior business leaders. Follow Steve on Twitter: @thestephenhall

 
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