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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