Post on 11-May-2015
S
Increased EfficiencyDarin Finley
GEB 3213-199806-11-14
Overview
Fuel costs are on the rise
These increase in price of diesel is taking away from profit sharing for employees
Price per case delivered could be decreased to compensate for increased fuel expenses
Routes could even be cut in order to save money from fuel expenses
Introduction
Rising fuel costs are putting a burden on the company
Older inefficient trucks are showing signs of wear and tear
If expenses continue to rise, it could negatively effect Great Bay and its employees
There are few opportunities that can be looked into
The Opportunity
The International trucks average about 4 miles per gallon
Each truck averages 375 miles per week
There are 45 active trucks used daily in the trade
This equates to 16,875 miles driven and 4,219 gallons of diesel fuel used each week
National average of diesel fuel today(June 22nd) is $3.92 (Source: AAA)
Doing the math, this comes to about $16,538.48 per week in fuel
The Opportunity cont.
The new Class 8 Peterbilt 587 costs about $150,000
Gas mileage is rated at 9.9 miles per gallon
This equates to less than half the fuel consumption as the International trucks
Fuel savings would come to about $9854.88 per week
That’s over $512,000.00 per year in savings!
Fuel Price History
Source: www.overdriveonline.com
The Current Situation
Diesel fuel has been rising over the past year
If this continues, the added expense could impact the bottom line for the company and employees
A plan of action needs to be taken in order to alleviate this added expense off employees wages
Key Success factors
Great Bay needs to be financially ready to invest into new vehicles
If cost of diesel continues to steadily rise, this would provide a need for change
Older International trucks begin to break down, which would require replacing
The drivers that deliver our product start to lose money out of their paychecks
Analysis of Alternative
If we retain the current trucks, fuel costs could continue to rise, and financial cutbacks would take place, such as:
Lowering driver salary
Cutting some routes and laying off some employees
Let the company take the hit, which would effect the companies bottom line
Strategic Option
Begin by slowly purchasing a few trucks at a time
After a few months of visible savings on fuel, use the accumulated savings to invest into more trucks
Continue this process until the entire fleet is switched over
Benefits
Old trucks
Already paid for
Have plenty of life left in them
No down time in between transition phase
New trucks
Decreased fuel costs
Good investment
Show the community that we are trying to be more green
Risks
Old trucks
Fuel expenses could hurt the company
Fuel expenses could hurt the drivers salary
Older trucks that have more mileage are more inclined to break down
New trucks
Large investment could put the company in financial strains for a while
If the trucks don’t reach the predicted numbers, investment could cause financial loss
Final Recommendation
After careful consideration, investing in the Class 8 Peterbilt trucks would be a good financial investment for the company
The savings per year on fuel would pay for the Class 8 Peterbuilt trucks over a short period of time
Newer trucks will eventually need to be purchased
These newer trucks will last for many years to come
Highlighted References
Agar, B. J., Baetz, B. W., & Wilson, B. G. (2007). Fuel Consumption, Emissions Estimation, and Emissions Cost Estimates Using Global Positioning Data. Journal Of The Air & Waste Management Association (Air & Waste Management Association), 57(3), 348-354.
De Borger, B., & Mulalic, I. (2012). The determinants of fuel use in the trucking industry—volume, fleet characteristics and the rebound effect. Transport Policy, 24284-295. doi:10.1016/j.tranpol.2012.08.011
McKittrick, E. (2014). A Fossil Fuel Economy in a Climate Change Vulnerable State. Environment, 56(3), 25-35. doi:10.1080/00139157.2014.901838
Peña Puerto', J., & Mendoza, M. (2008). Sustitución de fuel oil por gas natural en ANDERCOL Medellín. (Spanish). Producción Más Limpia, 3(1), 61-76.
Sarewitz, D., & Pielke Jr., R. (2013). Learning to Live With Fossil Fuels. Atlantic, 311(4), 59.
Staff, O. (2013, October 1) [illustration]. Diesel price continues to fall nationally, down 16 cents year-over-year. Overdrive Magazine. Retrieved June 26, 2014, from http://www.overdriveonline.com/diesel-price-continues-to-fall-nationally-down-16-cents-year-over-year/
Tannert, C. (2013, April 4). Why a 10 MPG Peterbilt semi is a really big deal. Road & Track. Retrieved June 25, 2014, from http://www.roadandtrack.com/go/news/news-peterbilt-cummins-tractor-trailer-fuel-economy