Finding ways to keep fuel costs in check

Jan. 1, 2020
For Undercar Warehouse, eliminating hot shot delivery from its services to save fuel costs wasn't an option if it was going to stay in business.
For Undercar Warehouse, eliminating hot shot delivery from its services to save fuel costs wasn't an option if it was going to stay in business.

"We're 100 percent hot shot delivery. That's our advantage," says Jeremy Marchy, parts manager for the single location jobber based in Modesto, Calif.

It serves shops in a 20-mile radius with five to 12 drivers.

"We're one of the fastest in the area and it helps bring us business," he continues. "We've gained quite a bit of business from all the places that have gone to a timed delivery. People don't want to wait one or two hours for parts."

To maintain its first-call status, Undercar Warehouse made some adjustments to its delivery fleet in lieu of rising gas prices.

"We run (our delivery service) as an independent service," explains Marchy. "Our drivers use their own vehicles so we don't have the extra overhead of managing a delivery fleet. The drivers take better care of the vehicles because they're their own. Plus, we can send a driver home after their deliveries are complete, eliminating the need to keep employees after hours to make sure all the trucks are in and locked up."

The jobber compensates its drivers through pay and a mileage reimbursement, which combined costs less than maintaining their own fleet. And because Undercar's inventory is mostly small parts, drivers can be even more fuel efficient in their Honda Civics.

Record-breaking prices

Gas prices set a record in early June as the national average for a gallon of gasoline climbed to $4.043 a gallon. That's about 30 percent higher than the $3.091 average a year ago, according to AAA figures.

It's evident that a double-digit increase in operating expenses requires some sort of business adjustment, although the path isn't always clear. The immediate relief of a fuel surcharge is tempting, for example, but many in the aftermarket are hesitant to pass fuel surcharges down the channel because of competition.

"One of our members said he would love to have a surcharge, but since competitors are not doing it, there is little chance for him to implement one," offers Bill Maggs, president of National Pronto Association. "All in all, our members are working on growing the business with existing accounts, which helps off-set some of the added costs."

Trends & Market Analysis

Marchy states that customers don't want to see surcharges on their invoices. "What they get quoted is what they want to pay," which is why Undercar has found other ways to curb costs, like delivery options and parts pricing.

With 14 stores, United Auto Supply hasn't started charging technicians for fuel costs.

"I personally believe that the installer wants his cost when we quote him a price," says Dick Beirne, president, United Auto Supply. "He doesn't want cost, plus a fuel surcharge, plus a delivery charge. We don't put our health insurance cost as a line item on our invoices. I don't see how fuel is any different."

However others, such as Aftermarket Auto Parts Alliance president and CEO Richard Morgan, believe it's a step we have to take. At a recent meeting of Alliance members, he recommended that members implement fuel surcharges at the jobber and technician levels.

"I think everyone in the industry is going to have to do it," he explains. "It's just something that we can't sit back and worry about the competition and going out of business. Airlines are doing it, car dealerships are doing it...it's time that we do it."

Derek Kaufman, CEO of C3 Network, Inc. says companies might be trying to add surcharges, but it may not be a solution because gas prices don't look as if they'll come back down anytime soon. "I think we're talking about a determined ratcheting up of prices."

C3 Network, Inc. helps companies launch new products and provides communications assistance.

Cost-saving initiatives

United Auto is currently researching GPS to help reduce fuel costs — a rapidly growing line item for every auto parts store.

"We run approximately 1 million miles a year of free delivery. Since last year, (costs) are up one-third; over a two-year span the cost has doubled," Beirne offers, adding that increased supplier costs means the financial crunch is hitting them from both sides. "You can't cut back on service – it's too competitive out there – but we haven't cut back on deliveries at this point, either."

Last year, the jobber began what they term a "smart service" initiative to better analyze deliveries, avoid duplicate trips and train counterpeople to use more caution when taking orders so there are fewer errors.

GPS Fleet Solutions, headquartered in Tampa, Fla., is a national wholesaler and limited direct supplier of GPS vehicle tracking technology for businesses and individuals. This May, GPS Fleet Solutions had the largest sales month in company history.

"I'm confident that it's due to increasing pressure on all sides," notes Harold Gardner, vice president of sales for GPS Fleet. "Customer service requirements are higher, people need to be more productive and, of course, businesses need to reduce costs associated with delivering parts and services."

Gardner states almost everyone in the service business (with the exception of the construction industry) is "rapidly and aggressively" using some type of vehicle tracking solution. GPS can be as basic or as complex as businesses want, performing tasks such as route planning, speed monitoring and driver identification.

"We can identify and eliminate idling, which is a real source of gas usage," he says. "If a vehicle is stopped for 10 seconds, it's more efficient to turn the engine off and restart it than to idle. Based on a company's circumstances, we have comprehensive systems that charge monthly fees and basic systems that don't."

Alternative vehicles are another option being investigated.

"As we have upgraded, we have looked at some alternatives, such as electric rechargeable vehicles," notes Beirne of United Auto Supply. "At this point, I don't know those would have enough run time for us to be effective, plus we need trucks that can handle heavy loads."

Regardless, fuel mileage is an important issue and they are taking whatever steps they can to minimize the impact, he says.

An end in sight?

"I think we're going to be closer to $5 (a gallon) by the end of the year," shares Kaufman. "I've said before, if you're not managing your company around $6 fuel, you're missing the boat. What it will force people to do is get into technology that allows them to plan routes around fuel economy, such as telematics."

Kaufman, who is speaking about telematics at this month's Aftermarket eForum, says today's fuel situation is reminiscent of the late 1970s.

"I think we'll see some changes in retail buying patterns," he states. "I was reading (recently) that in May, 45.6 percent of vehicles purchased were four cylinder engines. That's how fast the market can turn."

According to Kaufman, the automotive industry must push both alternative fuel sources and better fuel refining at the same time.

"I have thought all along that clean diesel was a very good interim solution," he suggests. "Right now because of the refining capacity of diesel, it's a higher price per gallon, but it's also a higher mileage solution, so I think it has potential to be overall net-net gain."

When it comes to the bottom line, everyone is looking at ways to curb fuel costs depending on their situation.

"Some places have been able to add a small fee, others have implemented a minimum order requirement85every place is doing something different," says Marchy. "But I know everyone's looking at it somehow because that's the biggest business expense right now. And it's not fixed like it used to be — it varies from day to day."

Although gas prices may fluctuate, the role fuel plays in our businesses will not.

"I think that fuel costs now rules the day and it will for some years to come," Kaufman states. "We've reached a very substantial market change that is going to make us do things differently."