How are dealers with fleets of service vans and delivery trucks addressing soaring fuel costs?
– Karen Caylor, Controller
Lift Truck Sales & Services, Inc. (Knoxville, TN)
Dave Griffith: We have a fuel surcharge.
Richard Donnelly: We charge travel time and mileage for our service van and a pickup and delivery expense for our delivery trucks. We have calculated our fuel cost per mile and have adjusted our rates upward for the increase in fuel expense. On preventive maintenance contracts where we do not charge travel time and mileage, we have increased our rates to cover the increased expense. If fuel prices drop, then we will adjust our rates downward. We explain to the customer that we are trying to cover our cost for operating the vehicles and not make a profit. If he does not want to pay the cost, then he can bring his lift truck to our facility. Some of our competitors do not charge mileage or pickup and delivery; however, we have elected to continue because it is a major expense.
Rex Mecham: We have switched to synthetic oils in our service vehicles and find that it has added about one mile per gallon. We also have installed K&N air filters, reusable metal filters which allow more air to flow into the turbos. The biggest thing we’ve done is added a fuel surcharge to our field service work. Everyone recognizes that fuel prices have soared, and they understand this is simply a current cost of doing business.
Greg Morrison: The obvious response is to charge a fuel surcharge, but we elected to not go that way. We took the problem to our employees and asked them what to do. They brainstormed together and came up with a number of fuel efficiency ideas. Some of the many ideas we’ve implemented include having proper tire pressure, removing excess weight from vehicles, delivering correct service parts the first time, dispatching better, utilizing Mapquest, vehicle tune-ups, eliminating idle time, reducing morning engine warm-up (we are in Michigan), combining PMs with service calls if possible, verifying the gas mileage on all vehicles, etc. Even if our costs go up, it is worth getting our employees involved and coming up with solutions.
Duncan Murphy: In a word, inadequately. We did institute a fuel surcharge that is covering much of the added fuel expense. Most customers accept it. Do not be afraid to raise labor rates. Contract and flat rates remain a problem. We are also looking at improved dispatching using zones to minimize travel. So far, we have no solutions for our sales and other vehicles other than looking at mileage ratings on vehicle replacements.
Fred Oram: Our MHEDA-NET group discussed this very subject during a recent teleconference. Group members were levying fuel surcharges for each field service call ranging from $3 to $10 per work order. One distributor reported that a $10 surcharge provided 45 percent recovery of total corporate fuel expense, which included salespeople’s fuel expense reimbursement at 10 cents per mile.
Dave Reder: We have increased our labor rate to cover some of our increased costs. We recently added what we hope will be only a short-term fuel surcharge with the most recent jump in oil prices.
Stan Sewell: We did two things to help mitigate soaring fuel costs. In 2003, we changed from gasoline to diesel service vans in our replacement cycle. The change to Sprinter diesel vans from Ford gas models improved our fuel consumption from 10-12 mpg to 20-23 mpg. We believe the residual value, lower maintenance and better fuel economy offset the higher acquisition cost of the Sprinters. We have also added a flat rate fuel surcharge to our road service invoices.
Jerry Weidmann: We monitor fuel costs on a continual basis. With the initial increases of fuel prices, we increased our service labor rates, cartage rates and zone charges to compensate. In the last quarter, we implemented a fuel surcharge on cartage and service calls. This surcharge will be adjusted based on the cost of fuel. Our intention was to reflect the majority of the fuel cost increase in our base labor rate, as the cost of fuel is unlikely to return to pre-2004 levels. The fuel surcharge should provide the mechanism to adjust for fuel costs in excess of $2.50 per gallon.