Written on: February 14, 2022 by Phillip J. Baratz
As we enter 2022, the No. 1 answer to the question—What would make you sleep better at night?—is almost always—More drivers!
Driving a truck went from a decent way to earn a living to a job that is highly compensated, yet few have an interest in pursuing. The existing workforce is aging out and is being replaced by a new generation whose top request is: Can I work remotely? This puts a career of driving a truck way down on their list of career choices, regardless of compensation.
This question has captivated the country as we emerge from the COVID-19 pandemic and are faced with multiple supply-chain issues. Even if we can find what we need, how do we get it from “there to here?”
The answer is simply more drivers, right? Maybe not. What if you already have more drivers (and trucks) than you need? Now you can sleep better at night, right?
As an industry, we have generally solved process problems by hiring more people:
• We need to make more deliveries. Hire more drivers.
• We need to do more cleanings. Hire more service techs.
• We need to send out more bills. Hire more clerical workers.
We have become so used to solving current challenges with solutions of the past that we don’t even consider our own goals. The goal of an oil company is (typically) to deliver fuel to customers at a competitive price that will generate sufficient profits. To achieve this, operations must run smoothly, efficiently and optimally.
We want to define “optimal” in our industry as: Using required resources, including equipment and people, in the most efficient manner to deliver all required gallons with an acceptably low risk of run- outs.
Though it is hard to argue with that definition (those readers who disagree can skip the rest of this article and go directly to the ads for testing kits and fuel additives), a reasonable disagreement can arise as to how to accomplish that optimization.
Bottom-up or top-down?
If you know your average delivery size, then you know how many deliveries you need to make over the course of the year. If you know how many stops you make in a typical day, you know how many dispatched trucks you need to have over the course of the year. If you know what your peak needs are (January), and you know your average delivery size, then you know how many trucks and drivers you need in January.
Once all that is known, you have set the number of trucks you must own and can spend the rest of the year juggling how many full-time drivers you need and how many part-time drivers you can get away with. That is bottom-up planning—starting with average delivery size and the peak demand, and then letting the rest fall into place. Top-down planning starts with the bigger picture:
• How many gallons can you get out of a truck?
• How many gallons per stop can you average?
• How many stops can you make in a typical day?
Instead of letting history dictate what you can and cannot do, we prefer to rely on data to inform us of what we should do.
• The data says your average deliveries are well smaller than your optimal (targeted) delivery size, and your deliveries in the Summer, despite a far lower concern of run-outs, are well smaller than those in the Winter. The reasons can be complex, but the data shows the reality and shows how to increase those towards your optimal.
• The data shows >95% of your tanks (of the same size) have the same reserve level every day of the year regardless of the tank-owner’s consumption. You set up your reserves to protect against run-outs in the winter, but have no mechanism to target larger deliveries in the Spring, Summer and Fall.
• The data shows your delivery trucks operate at ~40% efficiency (on the road only 100 out of 250 workdays per year), with a subset only being used for a couple of weeks per year. Expanding deliveries into shoulder months (when temperatures outside sit comfortably between 45–65°F)—especially before the season—can increase the number of days on the road, increase the annual volume per truck and create excess capacity in the winter by flattening the peak.
You could use an adding machine, but you choose to use a spreadsheet. You could use a walkie-talkie, but you choose to use a cell phone. You can try to keep your profits where you want them by constantly raising your prices to offset your increased operating expenses—or you can realize that data and processing power can combine to lower your delivery costs in a substantial way.
You don’t earn your profits per delivery; you earn them per gallon. Doesn’t it make sense to use the information you already have to lower your operating costs per gallon?
You don’t need more drivers, a.k.a. higher expenses. You need to make the most of what you have—and the most is a lot more than you think! ICM