Fuel costs have hit a record high in the past month, staying above $3 a gallon, and that is causing no shortage of headaches in the distribution world. Past surveys done by MDM in collaboration with Channel Marketing Group, Raleigh, NC, indicate that many distributors simply pass on the increased fuel costs to customers. (Stem the Tide: Rising Fuel Costs, MDM, May 25, 2006)
Distributors have implemented a fuel surcharge or service change for deliveries, increased existing charges, or implemented a delivery charge on orders under a minimum-dollar value. Some are integrating the added cost into the product price.
In light of higher fuel costs, look at your current minimum order size. Should it be higher? Can smaller orders wait until it's more economical to deliver?
There are ways to recoup costs outside of passing them onto customers, including consolidating delivery runs or using smarter routing – either manually or by using smart software that will do truck routing for you. Some distributors have limited special runs. Improving maintenance on company vehicles can also improve miles per gallon.
Look outside the industry for ideas as well. Type "rising fuel costs" into a Google News search, and several articles detailing how businesses are coping should appear. One article, from the Norwich Bulletin in Connecticut, looked at how 1-800-GOT-JUNK? is coping with fuel costs by running more efficient routes and combining local routes to make sure drivers aren't backtracking and wasting time on the road.
Another option is purchasing a navigation system to keep drivers on the best route. Avoiding gridlock is key to saving dollars on gas. Radio traffic reports can help avoid clogged roadways.
Fuel will likely hover around $3 a gallon the rest of the summer, and we may never see a significant decrease, so now is the time to evaluate if you are doing all you can to manage these costs effectively.
What are you doing to manage your fuel costs? Any good ideas to share?
