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.