Rising fuel prices are starting to take a bite out of the budgets of transportation managers in the supermarket industry.
With gasoline prices, at a 16-year high, approaching $2 a gallon in some parts of the country right now and dire predictions that prices may go as high as $3 a gallon this summer, food retailers are starting to worry.
Self-distributing supermarket operators and wholesalers alike report that recent fuel price surges are forcing them to take an even closer look at budgets that have already been pared down to account for the downturn in the economy.
Measures being taken in an effort to save on fuel costs include reducing idle time, cutting back on the amount of deliveries, increasing the size of loads and providing incentives for driving more efficiently.
"We are trying to be very conservative and intend to eliminate costs going downstream," said Ralph Branden, director of central transportation, A&P, Montvale, N.J. "We intend to operate more efficiently and not pass along costs to our customers."
Most operators SN spoke with had not anticipated the recent spike in fuel costs.
Price Chopper, Schenectady, N.Y., had budgeted a 10% increase this year for fuel expenses. However, at the current pace, officials there expect fuel costs to come in about 27% over last year.
"We definitely have adjusted our operations by strictly controlling idle time and critically evaluating the number of deliveries made," said Ron Cellupica, vice president of distribution at Price Chopper.
"Because we are a self-servicing retailer, it is difficult to pass along the increases. We just need to balance this expense with other cost-saving measures and run as efficient an operation in total that we possibly can."
Price Chopper operates more than 50 tractors, consuming more than 600,000 gallons of fuel per month, servicing 101 stores in six Northeastern states.
Laurel Grocery Co. has also been caught off guard by the fuel price hikes.
Originally, Laurel budgeted for a 10% to 12% fuel price increase this year, said Kenton Reynolds, outbound trucking and transportation manager for the London, Ky.-based wholesaler. Now, he added, it is figuring on a 30% increase.
To trim operations impacted by fuel consumption, Laurel Grocery is increasing load sizes and reducing trips.
"We may be looking at reducing deliveries to two or three deliveries to each customer," said Reynolds.
The wholesaler is also paying its drivers incentives of $50 per month or $100 per quarter to hold to speed limits and reduce idle time.
"These things do increase fuel mileage," said Reynolds. "We originally instituted the bonus system a couple of years ago, but now in light of fuel costs, we are re-enforcing the bonus system."
The wholesaler is seeking to save one-half mile per gallon as a result of these measures, Reynolds said.
Laurel Grocery Co. operates 41 vehicles and consumes 20,000 gallons of fuel per week.
A&P is also initiating alternative methods to make sure its trucking operations are efficient.
"We are making sure our cubing out is done so that as many full loads go out as possible. We are making sure we communicate with our drivers that they keep mindful of tire pressure and reduce idle times," said Branden.
"We are also looking to have our drivers reduce the RPMs, shifting at the right points, and keep an eye on their speedometers."
Additionally, the chain is striving to reduce bringing in excess refrigerated product so that delivered loads will be quickly off-loaded, saving energy usage.
A&P operates 375 tractors and more than 1,000 refrigerated trailers. Transportation consumes 425,000 gallons of fuel per month.
Minneapolis-based Nash Finch had forecast an increase for fuel and is coming in on target, according to Daniel Davidson, vice president, Midwest Region, distribution and logistics. "We forecast the price hike," he said.
Still, Nash Finch is looking to improve efficiencies on a daily basis.
"While we can't do a whole lot when crunch time comes, we can communicate with our retailers when and why we are reducing deliveries," said Davidson.
The wholesaler also works with retailers to determine whether delivery windows are flexible. "This gives us the opportunity to route differently, if need be," Davidson said.
While keeping an eye on routing, Nash Finch also watches that it cubes out its trailers fully to reduce the number of outbound loads.
Nash Finch operates 320 tractors. Its fuel use ranges from 65,000 to 70,000 gallons per week.
Other operational systems should be examined for inefficiencies, said Joe Andraski, senior vice president, OMI, a Schaumburg, Ill.-based supply-chain provider.
"The steps operators are taking are relevant and important, and, broadly speaking, they are substantial. However, there is still an underutilization of transportation equipment. Ways should be sought to efficiently move product with collaborative transportation management, moving more full truckloads and reducing delivery time.
"It's not just fuel -- it's total utilization of existing assets. This would bring transportation management into a holistic program," he added.
"We have been operating over the last few years with low fuel costs," said Andraski. "This has lulled operators into complacency. Now we need to look at load factors and find ways to consolidate multiple manufacturers to deliver better to retailers. We need to better utilize equipment."
In addition to tightening transportation operations, some retailers and wholesalers are looking toward technology to reduce fuel consumption.
Nash Finch employs on-board monitors to collect and analyze idle times, the number of stops made and the number of miles traveled.
"When fuel prices go up, we concentrate more on analyzing this data," said Davidson. "These are reoccurring topics, but when fuel prices go up, we want to find ways to reduce costs."
C H Robinson, Minneapolis, a third-party logistics provider, is leaning on its T-Chek Systems to reduce costs in its long-haul operations. This management system tells the driver where to stop for fuel along the route. In real time, it gives pricing, locations and the amount of fuel to purchase based upon current market conditions.
To make up for rising fuel expenses, some operators are considering putting surcharges into effect. "Just like any transportation company, we will absorb some of the cost and our customers will absorb some of the cost," said Davidson.
Laurel Grocery is also looking at surcharges based upon distance to various areas.
"This added fuel surcharge will just be a token," said Reynolds. "The charge will in no way cover the total costs. As tough a time as it is, we have to absorb most of the costs."
While A&P does not plan at this time to pass along increased fuel costs to customers, fuel surcharges incurred by the operator on freight picked up on behalf of manufacturers will be charged back to the vendor.
"Fuel surcharges will offset some costs and can be somewhat compensating," said Barry Butzow, senior vice president, C H Robinson.
