Considerable fuel cost savings have been progressed!
Significant cost reductions in logistics have been delivered during the last decade. Effectively delivered by being smarter with the fuel consumption solutions such as increasing pay-loads, volumes, engine- & vessel efficiency and route optimisation. On average a significant fuel cost reduction of approx 20%.
Are the logistic cost reducing for your customers?
The cost levels of freight logistics, as published by the EU commission fact finding study for freight logistics of 27 countries, have been increased significantly in the years 2006-2012. Main contributors on the freight logistics cost changes were the increase on personnel cost +15%, fuel cost +35% and a decrease average financing cost with -6%.
What’s fuel size of the total cost pie?
A significant fuel cost portion of the total cost is about 9%-32%, varying per EU country, for road/rail/sea going freight or more for inland waterway or air freight, as shared in the EU commission fact finding study for the year 2012. Although the cost of fuel dropped with a significant 50% in 2015, there is still a material opportunity to reduce the fuel bill.
Three tips on how to reduce the fuel bill even further?
The 20% cost reductions were mainly captured by the quantity side of the fuel cost formula. The 3 tips on how to reduce the fuel bill even further is mainly focussed on the price side of the fuel cost formula.
- The first tip, it’s about actively managing your fuel purchases. Knowing what the future fuel consumption will be, gives you leverage in negotiations. Suppliers of fuels will be sensitive in agreeing specific demand levels.
- The second tip, neutralising your fuel consumption and supply price timing will even further reduce your fuel costs. Here your exposure to fuels price will be netted against the same price levels in your bunkers or tanks.
- The third tip is a step change, it is offsetting your sales with your purchase commitments will kill two birds with one stone; it gives leverage in logistic tenders with the ability to offer lumpsum all-in offerings to logistics customers and gives further leverage in your negotiations to enhance fuel price even further.
The latter is often practiced by major logistic service providers, but isn’t restricted at all to large or medium size companies to benefit from significant cost reductions.
Where can we help?
The key to the success of the above comes with good sales and purchase strategy and its execution. Our BloomingContracts.com advisers are able to help in assessing the potential value and developing the route map to implement for your business.