An often-overlooked aspect of managing fuel is fuel efficiency, and the impact it has on shipper fuel reimbursement programs and potentially millions of dollars in transportation spend.
As managers of vast transportation networks, meeting or missing budgets often comes down to the details. Transportation professionals spend copious amounts of time negotiating fair rates, fuel reimbursements, accessorial charges, carrier contracts, and service requirements that differ by pennies on the dollar— and any minor fluctuations add up over time. This makes the use of accurate data to determine these costs imperative.
Amid the host of cost factors shippers hold under scrutiny, some parameters fall under the radar as mechanisms out of their control. While fuel reimbursements, routing guides, and base rates are all recognized by transportation professionals as opportunities for cost savings, one detail often undervalued is fuel efficiency.
Why is Managing Fuel Efficiency Important for Transportation Teams?
Using an MPG metric that appropriately reflects the fuel efficiency that carrier fleets realize when hauling freight can be a challenge, but it is likely that shippers underestimate these numbers.
Data shows that most of the shipper community use fuel efficiencies between 5.0 and 6.0 MPG. Comparatively, Breakthrough clients tend to exceed industry standard, using fuel efficiencies that average 6.43 MPG as of June 2019. Though Breakthrough clients do lead the industry, a gap still exists between actual fleet characteristics and reported fuel efficiencies.
According to EPA SmartWay’s most recent results, dry van fuel efficiency increased among carrier fleets by 0.6 MPG among 321 identified carriers since 2011. Even among an advanced cohort, almost half a mile per gallon is left on the table.
These metrics represent a weighted average and any given fleet’s true fuel efficiency may trend much higher, so at the end of the day, shippers underestimate what fleets are capable of, and are paying for more fuel than is needed to move their goods to market.
Technology is Changing the Fuel Efficiencies of Fleets
Every year, new technology is continually being released that is specifically designed to make trucks more efficient. Below are some of the most effective fuel efficiency technologies that are prevalent in fleets today:
Additionally, highly capable drivers and increased automation influence the use and effectiveness of new technology. For example, the 2020 Freightliner Cascadia, one of the industry’s first level 2 autonomous trucks, is over 35 percent more efficient than its original model released in 2007.
New research and data about transportation and fuel efficiency technology are continually being released, and organizations like the EPA’s SmartWay program and the North American Council for Freight Efficiency (NACFE) are proving to the industry that more efficient vehicles are not only possible but accessible today.
In 2017 NACFE hosted its first-ever Run On Less event, which tracked ten real trucks, from ten actual fleets, over their typical lane schedule for three weeks. Over this three-week period, the fleet proved that 10 MPG is achievable in the real world when the right driver is equipped with the right technology.
It is important, however, to understand that just because a fleet can reach a certain fuel efficiency does not mean shippers can demand that precise number in their fuel reimbursement calculations. Additional factors such as regionality, the weight of your typical freight, length of haul, driver training and experience, and others will help shippers and carriers come to a reasonable agreement looking a holistic view of your network.
Under the right conditions, however, a 5.0 MPG fuel efficiency falls short of reality.
You can read NACFE’s full report, as well as their recommendations, confidence reports, and other information on the Run On Less website. Breakthrough is proud to be a sponsor for their second Run On Less event this fall as it highlights new advances in technology and makes new data accessible to a variety of stakeholders.
Using Data Equips Your Strategy for Better Results
Many professionals want to know what is affecting their network today, not ten years down the road. “Under the right conditions” and “with the right technology” may sound like limiting qualifiers that illustrate a futuristic industry of tomorrow.
The data is telling a different story.
Reimbursement calculations, even among some industry-leading clients, lag what the industry can achieve, but diving into smaller segments of carrier fleets shows a deeper divide.
Data from the Federal Motor Carrier Safety Administration show that large and mega carriers are investing more heavily in new equipment, effectively reducing their overall fleet age. With the recent truck ordering environment flooding the market with new vehicles, and therefore new technology. Younger fleets translate to greater fuel efficiency. This divide highlights the danger of averaging data, and conversely the importance of looking at your unique network when making decisions that affect costs.
The difference between reimbursing at a 5.0 and 6.0 MPG leaves a lot of money on the table.
The gap between realized fuel efficiency, leading shippers’ calculations like those of Breakthrough clients, and the rest of the industry sheds light on the gap in understanding and the importance of fuel efficiency strategies. This does not have to be a reality. Technology is changing, fleets are getting younger, and data is readily available to influence your strategic decisions.
How Do Fuel Efficiencies Affect My Budget?
As we covered at the beginning of this post, transportation is a game of slight adjustments that bring massive rewards when scaled. Every penny adds up in a network that spans millions of miles and gallons every year.
Even slight adjustments to your MPG reap cost avoidance that will influence your bottom line. Look at the example below.
When driving from Milwaukee to Atlanta, freight travels 810 miles. The difference between reimbursing at a 6.0 MPG (which, remember, is on the high end of the industry average) and a 6.5 mpg results in almost 8 percent in incremental fuel savings. Adding this up across a large network leads to huge cost avoidance.
It is important to understand the nuances of fuel efficiency and the potential that appropriate management of it could have on your organization. The data indicates that most transportation teams need to take a closer look at their fuel efficiency strategies, and when done appropriately, this process could drive real change for your network.