Just when you thought we may have made it through the worst of it, fuel prices are on the rise again. The media will again run endless stories  on the “pain” that higher gas prices are causing consumers. But what about your pain, and just exactly how painful is it? I’ll try to put it in perspective by looking at the impact higher fuel prices have on your business and how GPS can help you bring your fuel costs under control. As you’ll see below, you could see a yearly savings of over $3,000 per route as a result of deploying a Electric Compass GPS solution, so this is serious business. I’ve also included some “fun” facts and resources relating to gas prices to lighten things up a bit.

Fuel Price Changes 2004-2011 - a wild ride!

We’ll start by looking at the average US price for regular gasoline and diesel fuel. In September 2004, regular gas sold for $1.91 per gallon and diesel sold for $2.03. As of 1/16/11, regular gas is at $3.09 per gallon and diesel is selling for $3.38. For our European readers, this may seem cheap, but the recent fuel price increases are being seen worldwide.

Fuel Prices and Distribution Cost Per Mile

Now, we’ll look at what higher fuel prices are doing to cost per mile for a distribution fleet. I've based my analysis on "cost per mile" data for 2004 released by the Food Marketing Institute. 2004 is the latest year for which figures have been released, and it serves as a good baseline. Cost per mile represents the cost of keeping a distribution vehicle on the road for one mile including labor, maintenance, fuel, licenses, insurance, depreciation, taxes, and leases.

In 2004, the FMI figures showed a distribution cost per mile of $2.01. Fuel accounted for about 25% of the total with labor being the largest cost item. Looking only at the fuel cost increases over the period, you see a significant increase in cost per mile. Based on my calculations, at an average price of $3.00 per gallon this would drive the cost per mile up to about $2.27 – a 13% increase just from fuel costs alone.

So what can you do about it?

The best thing you can do to get a handle on rising fuel costs is to gain better control over your field operations to eliminate unneeded miles on the road and unproductive time. GPS provides a powerful means to increase your control of fleet performance.

As we saw in a previous Electric Compass newsletter, adding turn-by-turn navigation to your mobile solution can cut your fuel costs by 16%.

The study which found that drivers using "turn-by-turn" navigation (like Electric Compass's Enterprise Navigator:

• Drove shorter distances (see data chart)
• Spent less time driving (see data chart)
• Had a 12% increase in fuel efficiency, as measured by liters of fuel consumed per 100 kms (see data chart)

The results translated into a yearly 2500 kilometer (1550 mile) drop in distance driven per year per driver, and an average of €416 (US$560) in savings on fuel annually per driver.

In other research, a large field service organization reported that they were able to decrease travel times to service calls by between 15% and 30% by employing a navigation solution. They were also able to add on average, ½ stop per day per service technician.

GPS Return on Investment

Let’s consider a simple example where GPS can save a fleet on average five miles a day per vehicle and an additional half-hour per week of worker time. Based on a $2.27 total cost per mile and $20 per hour for the additional labor time, it works out to a yearly savings from GPS of $3,337.50 per vehicle! These savings result in a payback time of just a few months for a deployment of Electric Compass's Enterprise Navigator solution and a very favorable overall return on investment.

With fuel prices climbing and no relief in sight, I think this makes it pretty clear why a Enterprise Navigator should be part of any mobile computing deployment in distribution or field service.

For more information on Enterprise Navigator, please contact us at info@electriccompass.com

Best Regards,
Mike Forbes
Managing Director
Electric Compass

FUEL FACTS: FUN & IINFURIATING