TOOLBOX MANAGEMENT. Executing a successful fuel management. Building afuel

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1 Building afuel MANAGEMENT TOOLBOX An effective fuel management program takes a holistic approach, involving the fleet manager, drivers, vehicle manufacturers, and alternative-fuel producers. BY CINDY BRAUER at a glance Tools available to develop effective fuel management strategies include: Fuel card use, data mining, and card controls. New technologies to improve traditional cost controls. Out-of-the-box approaches. Eco-driver training. OEM-developed advanced vehicle technologies. Alternative fuels. Executing a successful fuel management strategy requires a toolbox of tactics that, in combination, can help control or mitigate the escalating and fluctuating costs of a top fleet expense. This tactical approach involves the fleet manager, drivers, vehicle manufacturers, and alternative-fuel producers. In addition to best practices, out-of-thetoolbox thinking is often effective in minimizing the impact of prices expected to rise again this year near, if not beyond, the $3 per gallon milepost. Fuel Card Capabilities Expand Often, new ways to deploy familiar and proven tools help in the ongoing effort to manage fuel costs. Developed 25 years ago, fleet fuel cards initially provided wide accessibility, expense controls, and Level III data, which includes line item detail, fuel grade, cost per gallon/unit, odometer reading, and driver/pin/vehicle number. The cards now are commonly used expense management tools integrated in fleet management programs. Today, with increasingly advanced technologies, these tools offer critical data mining and control capabilities. Fleets that are most efficient in the marketplace are taking advantage of real-time data capture to monitor fleet activities, said Bernie Kavanagh, VP, corporate payment solutions for Wright Express, a fuel management services company. The tools available range from alerts to fuel-price mapping [with] immediate impact on the bottom line for a fleet, noted Kavanagh. Much of the new fuel card technology is integrated with mobile communications systems. GPS programs providing real-time vehicle location can pinpoint the nearest 14 automotive fleet I April 2010

2 low-cost fuel station. Card controls are growing more sophisticated, according to Bob Cavalli, VP sales, indirect and cobrand, U.S. Bank Voyager Fleet Systems Inc. The ability to control purchases at point of sale is far more extensive than five years ago, said Cavalli. Fleet managers have a huge menu of card controls to pick and choose those that best suit their fleet. These controls could go beyond time of day, week day, daily purchase limits, nonfuel purchases, and fuel grade to GPS realtime data and authorizations. I can see GPS technology tied into a driver using other than a low-cost provider. The fleet manager would get a report and the driver is held responsible, said Cavalli. Controls can be hard or soft, he explained. A soft control would authorize two purchase swipes a day, but require a phone call for an exception on a third swipe. A hard control would simply prohibit the third swipe altogether. Cavalli recommended capturing the fuel card Level III data and, using all card controls available, determine what factors can t be controlled and create daily exception reports. The caveat in structuring fuel card controls and exceptions, noted Cavalli, is to remember the driver s mission. You don t want to make the driver s job more difficult. As technology progresses, Kavanagh envisions such new fuel management tools as RFID, single-source data warehousing, and advanced telematics solutions. Exploring Out-of-the-Box Solutions Some creative fuel management tools aren t found in the traditional toolbox. Karen Healey, PHH Arval director of product management, responsible for environmental, risk, and safety services, cited one such creative solution. According to Healey, one company s truck fleet supports service technicians who carried product parts and equipment in their vehicles. By shipping service parts directly to the customer, the company downsized healey nicholson to smaller service trucks, saving vehicle and fuel costs. Healey also described expanded use of routing software to trim fuel costs. Companies have mined deeper into the software to identify rush-hour bottlenecks and reroute service and delivery drivers to less-congested streets. Another company schedules its product delivery fleet trucks to store sites during off-peak hours. The driver isn t sitting at the store waiting a turn to unload the product, said Healey. The trucks avoid costly idling time, and improved efficient delivery times can add an extra stop to the truck s daily schedule, Healey noted. To uncover wasted fuel expense, BNSF Railway in 2009 piloted a grass-roots, one-on-one program with drivers, reported Todd Nicholson, director of strategic sourcing and supply. BNSF, through its principal operating subsidiary, BNSF Railway Company, operates one of the largest North American rail networks, with about 32,000 route miles in 28 states and two Canadian provinces. The nearly 7,800-vehicle BNSF fleet of light-, medium-, and heavyduty trucks supports crews that maintain the company s rail infrastructure. With the help of its fleet management company Automotive Resources International (ARI), the BNSF pilot program targeted 1,000 vehicles. Drivers with high mpg or cost-per-mile records were identified through fuel card reports and exceptions. An ARI staffer personally contacted each identified driver to review fuel expense-related issues, such as tire pressure monitoring, fuel type, non-fuel purchases, idling, maintenance, and cargo weight. It was a normal discussion with each driver to learn what s going on and suggest best practices, explained Chris Bartley, assistant manager, account management at ARI. Fuel card programs are data-rich, but you can t just send exception reports, said Nicholson. The key was reaching out and talking to the person individually. You really have to have a real human being sitting down in conversation to change driver behavior. Drivers forget s and other non-personal communications. A personal discussion has greater and lasting impact. In the first six months of the pilot program, vehicle mpg increased and premium fuel and non-fuel purchases decreased. One of the areas that we targeted had a history of fraud incidents involving the fuel card. After the pilot program, we have had no incidents of fraud, said Brenda Thowe, BNSF vehicle fleet manager. Word spread like wild fire among drivers that someone was watching and their personal actions mattered, thowe Thowe explained. The pilot program produced $50,000 net savings in the first six months, according to Bartley. And those savings occurred when fuel prices were lower. With this year s increased gas prices, the savings should be more. The program population will expand to 2,500 vehicles, said Nicholson. Reducing fuel-consuming unnecessary vehicle idling simply through driver counseling proved more difficult for the BNSF fleet operation. We ve been working on idling for some time, initially through communication, said Bartley. Now, we re going to more of a technology fix. BNSF vehicles are upfitted with poweron-demand engine features and idle technologies that slow the engine to regular idle rather than the faster rate PTO requires, Bartley explained. Green initiatives often provide fuel cost savings. The general contracting and construction company DPR instituted a corporate green policy targeting a 25-percent reduction in the company s carbon footprint by To help meet the goal, fleet administrator Terri Smith partnered with fleet management company Wheels Inc. to develop a vehicle selection program, expected to also produce significant fuel savings. The Redwood City, Calif.-based DPR will replace the company s Ford F-150 trucks 16 automotive fleet I April 2010

3 (about two-thirds of its total 456-unit fleet) with Ford F-150s equipped with EcoBoost engine technology. The first replacements are expected to begin by early All company vehicles must meet a 20- mpg mandate, said Smith. Drivers in large and mid-size SUVs will transition to more fuel-efficient vehicles, and all sedan drivers will be moved into hybrid vehicles, including Ford Fusion, and Toyota Camry and Prius models. Switching to EcoBoost technology is expected to pay for the advanced engine in fuel savings in one year. Future savings will help fund the transition to hybrid vehicles, according to Smith. Eco-Driver Training Key Even when comprehensive vehicle selection, right-sizing, fuel card data mining, and exception report programs are deployed, effective fuel management ultimately depends on one key player: the driver. Common driver behaviors jackrabbit starts and stops, unnecessary idling, excess weight, inaccurate tire pressure, vehicle maintenance neglect, etc. can drag down mpg rates for each driver. Collectively, a fleet of fuel-wasting drivers can total thousands of dollars in fleet fuel expense. Development of eco-driving techniques and training programs over the past few years has heightened awareness of fuelish driving habits. Driver training is an underutilized fuel management tool, said PHH s Healey. Instruction in fuel-efficiency behaviors that improves mpg by just 5 percent in a 1,000-vehicle fleet can save $180,000 in annual fuel costs, she pointed out. Online resources provide ready and easily accessible help in promoting fuel-smart fleet driving. For example, the Alliance of Automobile Manufacturers sponsors www. ecodrivingusa.com. Designed for driver use, the site offers an eco-calculator for individual eco-scores, interactive eco-quiz, a virtual eco-road test, video presentations, and a 20-item list of driving tips. The Environmental Defense Fund (EDF) Innovation Exchange site greenfleet presents several fleet-related green driving resources. An online module introduces drivers to fuel-smart practices. To help fleet managers implement an ecodriving campaign, a collection of online communications templates includes: announcement to drivers from the CEO. Online announcement article for the company Intranet. Quarterly driver performance report. Fuel-smart driving pledge. List of fuel-smart driving behaviors. Training that truly changes driver behavior must be repetitively reinforced and consistent. A one-time eco-driving session will be soon be forgotten by busy drivers focused on their jobs. An EDF online handbook for fleet managers seeking to operate effective driver engagement programs advises: Use a driver-respected, credible company source to issue eco-driving communications. Draw upon respected third-party sources (Department of Energy, J.D. Power, etc.) when presenting facts. Communicate with drivers through channels they already utilize, e.g., at annual sales or safety meetings, and the company s Intranet site. Leverage existing online or phonebased fleet management tools; for example, post a driving tip of the day on fleet odometer-reporting Web sites. Piggyback on regular electronic newsletters, s, or mailings, such as payroll & benefit notices or new-vehicle paperwork. Provide drivers visual prompts, displayed in vehicles on the sun visor or in cargo areas, for instance. In addition, well-publicized and implemented eco-driving competitions among drivers, business units, etc., can foster permanent fuel-efficient driving habits. Tracked by fuel card or telematics data, winners can be rewarded with recognition, gift cards, or special perks. Vehicle Technologies Advance Responding to increased consumer demand in the face of rising fuel prices, as well as impending new federal standards, automobile manufacturers The Wright Express Universal Fleet Card is good just about anywhere your drivers go. It s accepted at over 90% of retail fuel locations including 50,000 diesel and 45,000 U.S. service locations plus 2,100 fueling sites in Canada. Use our powerful Purchase Control tools to help minimize waste, curtail fraud, and stay within budget, all while enjoying 24X7 customer service. automotive fleet I April

4 are tackling fuel efficiency on several fronts. Car and truck OEMs continue to develop advanced transmission and engine technologies, improved vehicle aerodynamics, and lighter-weight parts and materials. A brief review of major vehicle manufacturers: Ford. EcoBoost technology, delivering up to 20-percent improvement in fuel economy, will launch in 2.0L I-4 engines in North America on SUVs and CUVs, and in a 3.5L V-6 on the Ford F-150. Twin independent variable camshaft timing (TiVCT) will also promote fuel efficiency in selected Ford models. A new 6.2L V-8 gasoline engine and an allnew Ford-built 6.7L V-8 turbo-charged diesel engine deliver best-in-class fuel economy in the 2011 F-Series Super Duty trucks. The work trucks also feature an all-new 6-speed transmission and Live-Drive PTO. The Ford Fusion gas-electric hybrid, with an expected 700 miles per tank of fuel, debuted this year. The Ford Transit Electric small commercial van was launched at the Chicago Auto Show in February. Ford anticipates delivering a electric Focus passenger car in 2011 and a next-generation hybrid and plug-in hybrid in General Motors. The Ecotec 2.4L I-4 engine helps deliver best-in-segment highway fuel economy in the all-new 2010 Chevrolet Equinox of 32 mpg and a highway range of up to 600 miles. GM s small four-cylinder engines (1.0L to 1.4L) will be available in the Chevrolet Cruze and two additional models in While general production is scheduled to begin later this year, 100 all-electric Chevrolet Volt sedans are being tested in utility fleets throughout the U.S. The Vortec 6.0L V-8 engine, standard in 2011 Chevrolet Silverado heavy-duty trucks, provides class-comparable fuel economy. The 2011 Silverado diesel models offer fuel efficiency with a new 6.6L Duramax turbodiesel and Allison speed automatic transmission powertrain. The diesel engine is also B-20 capable. In addition, the Duramax diesel will power Chevrolet Express and GMC Savana full-size vans. GM offers hybrid models in the GMC Sierra and Yukon, Cadillac Escalade, and Chevrolet Silverado and Tahoe. Chrysler. A revamped powertrain lineup will contribute to overall improved vehicle fuel efficiency of more than 25 percent in The vehicles will incorporate Fiat powertrain technologies such as Multiair, direct injection, turbocharging, and transmission systems. Near-future Chrysler models will feature new 1.4L four-cylinder and flex-fuel 3.6L V-6 Pentastar engines. Fiat s 6-speed dual dry clutch transmission, delivering 10-percent improved fuel economy, will migrate to Chrysler Group vehicles in CHOOSING FUEL-efficient vehicles Vehicle selection best practices include right-sizing fleet vehicles to their applications, moving to four-cylinder engine models whenever possible, and choosing the most fuel-efficient vehicles. For the latter task, the federal government provides online resources. The Department of Energy, Environmental Protection Agency, and the Office of Energy Efficiency and Renewable Energy partnered to publish the 2010-MY Fuel Economy Guide, The 30-page guide lists mpg, engine size, transmission type, fuel type and actual costs, and mileage range for cars, light-duty pickups, and vans. Alternatives to gasoline-powered vehicles are also covered in the guide, including hybrid-electric, ethanol flex-fuel, diesel, CNG, and fuel cell vehicles. The annual fuel cost estimates in the electronic fuel economy guide are updated weekly to match the Energy Information Administration s current national average prices for gasoline and diesel fuel. A TIMELESS CLASSIC, SERVICING FLEETS FOR OVER 25 YEARS.. GREAT SERVICE. WIDE ACCEPTANCE. INNOVATIVE SOLUTIONS. For more than 25 years you have trusted Wright Express to deliver the most complete fleet management solutions at a fair price. We are dedicated to delivering true universal acceptance and control, best-in-class customer service, and innovative solutions. Make sure you partner with the industry leader. automotive fleet I April

5 Fuel Management Source: U.S. Department of Energy fuel Overall Average Fuel Prices 10/09 Nationwide Average Price 10/09 Nationwide Average Price 7/09 Change in Price 10/9 vs. 7/09 Units of Measurement Gasoline (Regular) $2.64 $2.44 $0.20 per gallon Diesel $2.79 $2.54 $0.26 per gallon CNG $1.86 $1.73 $0.13 per gas/gallon equivalent Ethanol (E-85) $2.27 $2.13 $0.14 per gallon Propane $2.69 $2.48 $0.21 per gallon Biodiesel (B-20) $2.88 $2.69 $0.19 per gallon Biodiesel (B-99-B-100) $3.19 $3.08 $0.11 per gallon 2010-MY Chrysler, Jeep, Dodge, and Ram vehicles offer active transfer case and front-axle disconnect, providing a fuel economy improvement of 1 mpg (combined city/highway). The automaker is developing a Ram 1500 with traditional hybrid capability for Chrysler LLC is also developing concept cars with electric motors: an electric performance sedan, the Chrysler 200C; Chrysler Town & Country minivan; Jeep Patriot, and Wrangler Unlimited. A fifth concept car, the Dodge Circuit, is a true electric vehicle. Toyota. The third-generation 2010 Prius and the 2010 Lexus HS 250h hybrid models were launched last year. The 2010 Prius Plug-in Hybrid debuted in North America last fall. Honda. The all-new 2010 Honda Insight hybrid is powered by a 1.3L i-vtec gasoline engine and a 10-kW electric motor that delivers an EPA-estimated 40/43 city/highway mpg. In addition to continued development of the FXC Clarity fuel cell vehicle, Honda is working on expanding the refueling infrastructure to support the Civic GX natural gas-powered sedan. Alt-Fuel Potential Unrealized Even as gasoline and petroleum diesel prices fluctuate in the short term, the era of $2 per gallon is over. Fuel and economic experts expect prices to continue their long-term rise in the next few years, impacted most heavily by dramatically increasing demand in China and India. Issues of fuel independence, environment, and government mandates are prompting development of alternative fuels and the vehicles they power. According to the latest available Department of Energy figures (see Overall Average Fuel Prices chart), U.S. pump prices for ethanol and natural gas have been less than gasoline or petroleum diesel, while B-20 biodiesel and propane are less than 10 cents more in price. Adequate fueling infrastructure, economic production feasibility, and higher alt-fuel vehicle prices remain significant obstacles in widespread use of alternative fuels in the U.S. Federal initiatives, including the American Recovery and Reinvestment Act of 2009 and clean energy policies, offer tax incentives and grants that aim to ease the roadblocks. In addition, states and companies such as GM, Honda, and alt-fuel producers are partnering to develop wider alternative-fuel accessibility. Prompted by regulatory mandates, the public sector leads in adopting and promoting alternatively powered vehicle use. Fuel management vendors can assist fleets in surmounting alt-fuel availability difficulties. For example, said Kavanagh of Wright Express, his company is helping one of our largest fleets meet a corporate mandate around alt-fuel usage by looking at the marketplace and helping the customer deploy the right vehicles to the areas where alt fuels are available. This allows for the most efficient routing and less driver diversion, while still meeting the mandate around alt-fuel usage. AF With Wright Express you have a partner with you every step of the way. Our fleet fueling tools are current and robust and our dedicated account managers are experts in applying them to your business. We provide strategic support for complex accounts, ensuring the highest levels of accuracy, responsiveness and professionalism. We support you, at whatever level you need, providing help and ideas to save you time and money throughout the relationship. automotive fleet I April