The impact of rising costs on fuel logistics

17 February 2023
The impact of rising costs on fuel logistics
The ongoing rising costs and inflation are unfortunately not
new news, and with the UK inflation rate at 10.1% in January 2023, costs are
unlikely to decrease in the coming months. It does not seem possible to put
this rise in inflation down to one particular event and instead seems to have
stemmed from the COVID-19 pandemic, the war in Ukraine, UK political decisions
and economic policies, as well as increasing energy prices and supply chain
bottlenecks.
The impact of this is being seen and felt everywhere, with
both businesses and consumers feeling the pinch and looking at ways to reduce
their spending to help combat the price changes. Fuel logistics is no different
and some businesses will be struggling to provide excellent service to
customers for the same prices they were last year.
Here, we look at how the various rising costs are impacting
the fuel logistics industry and the considerations that come along with this.
Rising costs
Energy
The unfortunate war in Ukraine has had a huge impact on the
cost of energy, not just in the UK but all across Europe. The rise in prices
has affected both businesses and households in an unsustainable way. Plus, with
more and more staff heading back to the office, many businesses are facing
these unprecedentedly high energy bills at a time when their energy usage is
increasing in a post-pandemic world of work.
The UK Government has stepped in to help combat the
increased costs. For businesses, this help came in the form of the “Energy
Bills Relief Scheme” from October 2022 to March 2023 which could be claimed by
businesses, including in the fuel logistics sector, to help mitigate the rise
in energy costs. From April 2023, it will be replaced by the “Energy Bills
Discount Scheme”.
Many do not believe that either of these schemes is enough to
help support businesses moving forward and there are further calls from the
government to do more to reduce the strain of inflation and provide a
sustainable way forward for businesses.
Fuel
Fuel is everything to the logistics sector and is needed to
transport items from A to B, no matter if it’s oil and gas for businesses or
food for supermarkets. Therefore, the cost of fuel plays a key role in the cost
of deliveries and the total costs a business has to pay to continue operating.
It can have a series of knock-on effects on the cost of
goods.
Businesses must factor in the supply chain costs when purchasing goods
such as oil and gas, and fuel logistics companies have no choice but, in line
with the higher cost of fuel, to increase their customer prices or potentially
lose money.
Staff
Many members of staff will be affected by inflation and
having increased costs of living in their personal lives. Because of this, some
may seek pay rises to help combat this, meaning higher staffing costs across
the business including drivers and office staff.
In addition, with a driver shortage, businesses may need to
offer a more attractive benefits package to attract new staff, including
increased wages. This means they will cost more to hire, and potentially take
time to train on your specific fuel logistics technology so, as a business,
you’ll be paying more for your staff when you need them the most.
Considerations
There are a number of challenges and considerations that
need to be thought about in the fuel logistics industry when costs continue to
rise across multiple areas.
Should we pass on rising costs to customers? Although this can lead to customer dissatisfaction and potential
loss of customers who cannot afford the increased cost themselves, continuing
to absorb any price rises isn’t always a sustainable option for many businesses
in the fuel logistics industry. Passing the higher prices on may be inevitable
but doing it only when necessary and with plenty of warning is a way to help minimise
any loss of customers.
Is it possible to optimise delivery routes to reduce fuel usage?
Optimising your delivery routes to reduce your fuel
consumption may be possible so, as a business, you are using less fuel to
deliver oil or gas to your customers. Although this may not make a big
difference for each delivery, if you have a fleet of lorries, the benefits
could soon add up.
Is it possible to consolidate deliveries of fuel to customers?
If it’s not possible to optimise your delivery routes any
further, is it possible to review your current delivery list and consolidate
any deliveries? They may take drivers further out of their way to deliver the
oil or gas, but if it saves a tanker going out for only one or two drop-offs, it
may be a better use of staff time and fuel.
Should we reduce our delivery area to only use the most cost-effective
routes?
Each business will have a key service area they deliver to
and sometimes this area moves and shifts with demand and prices. Taking another
look at your service area to either consolidate or remove customers could be a
good way to reduce your costs, both in terms of fuel and how long staff are on
the road.
Should I invest in new technology?
Investing in new technology in a time of rising costs may
not seem like the best decision. But, if it can help optimise routes, reduce
wasted time, provide in-depth data about your current routes and help you make
an informed decision on any changes to the business you’re considering, the
return on your investment could be valuable and you could see the benefits
quickly.
How we can help?
In a world of rising costs, it can be difficult to know what
will happen and it can be a difficult decision to invest in new technologies.
However, here at TouchStar, we are always here to help digitise and optimise
your logistics to help save you time and money in the long run. Our team of
experts are on hand and more than happy to discuss any queries you may have. Get in touch today to find out
more.