An often-overlooked aspect of managing the cost of moving goods in the truckload shipping market is fuel efficiency. This one number has a significant impact on the price shippers pay in fuel reimbursements, and can cost millions of dollars in excess transportation spend annually.
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 data accuracy imperative.
Amid the host of cost factors shippers scrutinize, it is easy for some parameters to fall under the radar. 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 a fuel efficiency, or MPG, that appropriately reflects what your carriers can achieve on the road 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. But studies have been done that prove many fleets actually achieve higher fuel efficiencies. According to the EPA SmartWay’s most recent results, dry van fuel efficiency increased among carrier fleets by 0.6 MPG among 321 identified carriers since 2011. To the average consumer, a 0.6 improvement may not seem like much, but those minor adjustments lead to better transparency and a greater degree of accuracy that matters to modern shippers.
*Results limited to EPA SmartWay carriers with identifiable linkage to US DOT miles, according to May 2019 carrier census If multiple SCACs/carrier entities are listed per mode/year, the DOT-level mileage was split evenly so as not to overweight carriers with multiple entities We were able to boost EPA SmartWay DOT # identification by tapping into additional SCAC-to-DOT data sources, including the new NFMTA dataset (a national SCAC registry). This applied in cases where EPA SmartWay only provided a SCAC and no DOT.
Comparatively, Fuel Recovery initiatives place a great deal of focus on continuous improvement based on actual data. For this reason, Breakthrough clients leverage benchmarking data to set their fuel efficiency parameters and tend to exceed the industry standard. Breakthrough client fuel efficiencies tend to average around 6.5 MPG, while many can be much higher.
Technology is Changing the Fuel Efficiencies of Fleets
Every year, new technology is 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. 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 at a holistic view of your network.
Under most conditions, however, a 5.0 MPG fuel efficiency falls short of reality and costs shippers in the reimbursement process.
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 elevated truck ordering environment of 2018 and 2019, the market has been flooded 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.
Accurate Fuel Efficiency Calculations Save You Money
The gap between the fuel efficiency that carriers achieve on the road and what shippers use to calculate their fuel spend sheds light on the importance of managing fuel efficiency strategies.
How Do Fuel Efficiencies Affect My Budget?
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.
Consider the example above: a fuel efficiency discrepancy of merely 0.5 MPG in a truck carrying the same freight on the same lane being carried on the same day, creates an on-cost of over $20. When driving from Milwaukee to Atlanta, freight travels 818 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 over 9 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.
This is why paying attention to fleet technology and trends, and sourcing reliable benchmarking data is important. Breakthrough provides best-in-class industry information to our clients so that they are able to make data-informed decisions about their transportation network.