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Impact of Skyrocketing Fuel Costs



The ID panel discussion that was held at this year's National Restaurant Association Show in Chicago further revealed tactics for addressing this rising cost. In particular, panel participant, John Tracy, president, Dot Foods Inc., presented his company's actions to stem their eroding margins through thoughtful driver incentives, implementation of new technology and experimentation.

Dot Foods, headquartered in Mt. Sterling, IL, is a family-owned redistributor serving more than 2,500 customers. The $1.9 billion company, (2004 sales), has a fleet of more than 400 multi-temperature tractor trailers with facilities in Modesto, CA; Vidalia, GA; Williamsport, MD; Liverpool, NY; Chesterfield, MO; and Dallas. To say the least, that's a lot of miles to cover and therefore a lot of fuel to expend.

As a means of containing the day-to-day fuel consumption, the company looks to its human resources to keep controllable costs in check and provides them with the means to do so.

DRIVERS ARE KEY

Tracy's first comments note that Dot Foods uses technology to minimize the amount of miles product travels. Less travel equates to more efficiency and less use of fuel. He states that transportation is the redistributor's highest cost. Consequently, its fuel conservation efforts "start with the driver."

He explains the company's philosophy is to reward leadership, provide meaningful incentives and fun. The company's compensation system, which is not new, pays and provides incentives to their drivers based on miles driven, the speed traveled, and idle time.

Given the rising cost of diesel fuel over the past couple of years, Dot Foods has recently doubled their speed incentive and has made it very easy for their drivers to obtain this reward. Drivers have the choice; they can elect to either drive slow or have the company "turn the truck down" so they can't go any faster than their target speed. Dot Foods uses on-board computers for tracking and those who have had the truck turned down are guaranteed this incentive.

The company also has a contest in-play to incent drivers to reduce miles per gallon fuel use. The first prize is a Harley Davidson motorcycle. Dot Foods is also providing about a dozen other enticing prizes to ensure multiple winners and drivers that are motivated to reduce their miles per gallon report cards.

Dot Foods intends to employ a new technology that they are testing to measure and report driver break use. Measuring break activation will help reduce the amount of variance where truck speed is going up and down. It is anticipated that a reduction in break activation will provide additional equipment related savings and help with the miles per gallon fuel use. If the test results indicate that this is an effective performance measure then the drivers will have an additional compensation incentive as a reward for their compliance efforts.

Tracy states that time and money are invested in directing their people regarding where to buy fuel and how to buy fuel. Dot Foods has a fuel solutions software program that assists the company in routing and communicates to the driver where fuel is to be purchased.

LOOKING TO CONSERVE FUEL CONSUMPTION

Dot Foods pays attention to its equipment. Tracy reports that much time is spent studying what's available now, what might be available in the future, and testing equipment with an eye to efficiency and subsequently specifying exactly what is to be employed.

Tracy notes that Dot Foods has found reefer technology to be going in the right direction with better insulation, which has allowed the company to move their trade cycle down.

Citing the new, upcoming emissions standards, Tracy notes the EPA has "put us in a situation where we will have pay more for technology that is less efficient." This he states, coupled with the continued rising cost of fuel, has prompted Dot Foods to spend more time looking for technical advances and tactics to increase their fleet efficiency.

It is anticipated that these tires will promote fuel efficiency and reduce the weight of the vehicle.
The first example Tracy presents highlights the savings to be captured by paying attention to tires. Dot Foods has been buying fuel-efficient tires for about five or six years. These tires are in use on their trucks and their trailers.

Presently, the company is experimenting with a new tire called X1, which is a single drive tire that is being tested on a test group of their tractors. It is anticipated that these tires will promote fuel efficiency and reduce the weight of the vehicle. If this proves to be true then these tires will be employed throughout the fleet, he indicated.

Dot Foods is also looking into the use of nitrogen rather than air to inflate their tires. It is believed that the use of nitrogen will allow tires to run cooler and retain desired pressures longer. If this is the case then Dot Foods will move to the use of nitrogen to enjoy enhanced fuel efficiency due to its ability to maintain the correct pressure in their fleet's tires. However, at this point Tracy states the company is just beginning to explore this practice's potential.

Tracy notes they have experimented with fuel additives, but have found this tactic to have less promise than what was hoped.

FOCUS ON FUEL

Contracting effectively for fuel, according to Tracy, has not been his organization's strongest suit.

The company does have 150 to 200 truck stops around the country that Dot Foods has negotiated with and this action has been of benefit.

Dot Foods has had some success in buying bulk fuel with certain truck stops getting on a cost plus program.

Tracy notes that effort has been made by Dot Foods to try to monitor and understand exactly what is driving the price of diesel fuel in each market. He notes that they have found the cost drivers to be fairly unique to each locale. With this intelligence, Dot Foods has been able to take advantage of the differences in prices between markets and, when able, steer their drivers to take advantage of cheaper fuel. He also notes that just watching the national reports are somewhat misleading; regional insights are proving to be very beneficial.

Dot Foods is spending some time trying-like everybody else-to figure out the best tactic or tactics to employ to address the unrelenting rise in fuel costs. One tactic under consideration is to contract out a certain percentage of their fuel on a regular basis no matter what the price is in order to deal with a turbulent or unpredictable market.

Tracy's final remarks highlight his belief that foodservice distributors will see more of the same when it comes to fuel costs. He states the fact that like his peers, Dot Foods doesn't really have "the" solution to follow. Nevertheless, does believe in hard work and use of analysis to identify new technologies to stem fuel related costs and notes his company's positive experiences with the use of incremental strategies to save money.

The next article in this series will feature additional tactics for consideration.

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