Equipment Executive: Manage Fuel Like It Matters

By Andy Agoos, Contributing Editor | November 10, 2010

As a general rule for most construction equipment, one-third of your total owning and operating (O&O) costs is your depreciation, one-third of your O&O costs is repair and maintenance related, and one-third is fuel related. I suspect you intuitively agree with this. I am amazed, then, that less than 25 percent of good construction companies simply pass when it comes to fuel management. It’s not that difficult. Let’s review the value of fuel management. Consider the following three rules:

Rule No. 1
All fuel is not created equal. Buy and use the right fuel. Most North American companies specify No. 2 diesel that meets the American Society of Testing Materials base specification ASTM D975 with <15 ppm of sulfur (ultra-low sulfur diesel, or ULSD). Some companies in cold climates spec a No. 1 diesel, some spec fuels <500 ppm of sulfur, and some spec biodiesel (usually B20, blended 20 percent biodiesel and 80 percent mineral diesel). Talk to your equipment dealer and choose the right diesel for your equipment spread.

When you select a fuel supplier, test at least the first several loads or request a “certificate of analysis” to ensure you’re getting what you ordered. To be safe, pull a sample of every load, label it, and hang on to that sample for several months in case there are fuel-related problems. I’ve been told that fuel typically has been in eight tanks by the time it reaches your tank. That’s eight chances for cross-contamination.

Rule No. 2
Store and handle fuel correctly and securely. There are all kinds of proper, and improper, procedures to receive, store and redistribute fuel. Your company should have a written Standard Operating Procedure on this topic. Diesel is currently running somewhere between $2.50 and $3.00 a gallon, and it is likely headed higher. I absolutely promise you that your company gets the short end of the stick if you don’t carefully receive, store and dispense fuel. Biodiesel brings significant challenges because of its storage, gelling and solvency problems, and we could go on forever discussing the pros and cons of fuel additives and fuel conditioners.

Have a defined, written plan, and hold someone accountable. Execute the plan.

Rule No. 3
Track the fuel usage by individual machine for all major equipment. This is, by far, the toughest of the three rules. We’ve all heard the adage, “What gets measured can be managed.” We’re accustomed to tracking fuel usage for on-road trucks because of the tax issues. But you should track fuel usage for all major equipment. There are many good suppliers of fuel control systems to help you. Google “Fuel Management Systems” for an extensive list.

There are many paybacks for tracking fuel usage. You can accurately evaluate and compare different machine makes and models. Does your Volvo plant loader use more or less fuel per ton than your John Deere plant loader? You can compare different operators and different operations. You can use the hourly fuel consumption information for accurate rate calculations or as a basis for severity-based oil changes and maintenance.

Another obvious advantage is the message you send to every employee, every vendor, and to every former employee and vendor. If you manage fuel carefully, your company can determine if someone is playing games. You don’t want to be an uninformed victim.

Implementing a fuel-management program is the easiest and fastest way to save big money. You spend one-third of your total equipment costs on fuel, and if you’re like most construction companies, it’s the least managed piece of the jigsaw puzzle.

Think about it.