WHEN COSTS RISE, EFFICIENCY BECOMES MARGIN PROTECTION

The Executive Challenge

Fuel and transportation costs are no longer a short-term disruption. They are a continuing pressure on operating economics across many industries. Higher diesel prices, tighter refined product supplies, increased freight costs, and global uncertainty are affecting the cost of moving people, products, equipment, and energy.

For many organizations, the immediate question is how much of these higher costs must be passed to customers. That may be part of the answer, but it should not be the only one.

The stronger leadership question is:

How can we improve the productivity of our existing resources so our operation absorbs more of the cost pressure without sacrificing profitability, service, or long-term customer relationships?

“We cannot control the environment in which we operate. But we can control how efficiently, prepared, and adaptable our operations are when that environment changes.”— Marco Perez

Today’s Operating Environment

Key Developments Impacting Operations

Diesel

U.S. average retail diesel has moved above $6.00 per gallon for the first time, according to GasBuddy.

Crude Oil

Brent crude is trading above $100 per barrel, driven by ongoing geopolitical tensions and disruptions to global energy flows.

Distillate Supplies

EIA is forecasting U.S. distillate inventories to fall below 100 million barrels this month and remain below the five-year low through most of 2027.

Transportation and Freight

Higher fuel costs, increased war-risk premiums, and routing disruptions are raising the cost and complexity of moving products globally and domestically.

Broader Impact

Rising energy and transportation costs affect not only fuel distributors, but also natural gas operations, electric utilities, construction, field services, manufacturing, and other industries that rely on physical delivery and mobile assets.

Finding Inefficiency Before It Finds Your Profits

Where operating costs increase—and how to identify the opportunities inside your operation.

Cost Pressure Shows Up in More Places

Higher fuel and transportation costs do not just affect the fuel line on a financial statement. They move through the entire operation, impacting multiple areas at the same time.

The real question is not just “What is costing more?” but “Where are we using more resources than necessary to get the same result?”

Below are common areas where increased costs show up and questions leadership should be asking now.

Routing and Dispatch

Are routes efficient? Are we minimizing miles, backtracking, and low-density stops?

Delivery / Job Productivity

Are we maximizing gallons, product, or work per stop? Are there too many small deliveries or low-productivity service calls?

Asset Utilization

Are our trucks, equipment, and people being used effectively? Do we have idle time, duplicate coverage, or underutilized assets?

Terminal and Supply Strategy

Are we using the most cost-effective supply points when total delivered cost is considered, not just rack price?

Labor and Overtime

Are overtime hours planned and productive, or are they the result of inefficiency, late starts, or avoidable repeat work?

Maintenance

Are we staying ahead of maintenance to avoid breakdowns, lower fuel economy, and emergency repairs?

Return and Empty Miles

Are we making unnecessary return trips, deadhead miles, or inefficient repositioning moves?

Inventory and Storage

Are we using existing storage effectively to reduce rush loads and take advantage of favorable supply and freight options?

Administrative Processes

Are scheduling, communication, and paperwork efficient, or are they creating delays and extra vehicle movements?

Customer Mix

Which customers, routes, or locations truly contribute to margin after delivery and service costs are included?

Signs of Hidden Inefficiency

Many operations are busy—but busyness does not always equal efficiency. These are common signs that costs may be increasing faster than necessary:

• More miles but not more productive work
• Increasing overtime without a clear reason
• More frequent terminal runs or emergency loads
• Growing number of small deliveries or low-volume stops
• Repeat service calls for the same issue
• Trucks or equipment waiting instead of working
• Rising maintenance costs and lower fuel economy
• More manual work and paperwork
• Customer or route profitability declining
• Managers reacting to problems instead of preventing them

Turning Pressure Into Performance

Practical ways to improve operational efficiency without sacrificing service or profitability.

Rising fuel and transportation costs are a reality, but they do not have to result in lower margins or reduced service. This page focuses on practical, proven approaches that help organizations get more value from the resources they already have.

1. Operate With Greater Discipline Strong operations are built on consistent execution of the basics—planning, scheduling, dispatch, and communication. When these activities are disciplined, organizations reduce unnecessary miles, minimize idle time, and improve the productivity of their people, vehicles, and equipment. Discipline does not require new technology. It requires leadership attention and follow-through.
2. Get More Output From Each Movement Every trip, delivery, or service call should be evaluated for the value it produces. Higher gallons or product per stop, more stops per route (where appropriate), and better route sequencing lower the cost per completed job. The goal is not to do more for the sake of activity, but to increase the economic output of each movement.
3. Use Data to Make Better Decisions Good data turns opinions into facts. Tracking key indicators such as cost per delivery, miles per stop, overtime hours, and asset utilization allows leaders to identify trends early and take action. The organizations that perform best do not just react to problems—they measure, review, and adjust continuously.
4. Optimize Supply and Transportation Strategy Total delivered cost is what matters, not just rack price. Evaluating supply points, transportation options, contract structures, and inventory positioning can reduce overall costs and increase flexibility. A well-designed supply strategy also helps avoid rushed purchases and premium freight during periods of tight supply.
5. Empower Your People Employees at all levels can contribute to efficiency when they understand the goals and are given the authority to help solve problems. Encourage ideas from drivers, technicians, dispatchers, and branch managers. Many of the most effective improvements come from the people closest to the work.
6. Protect What Drives Long-Term Value Efficiency should never come at the expense of safety, maintenance, customer service, or employee development. Delaying maintenance, reducing training, or cutting people too aggressively often leads to higher costs later. The objective is to build a leaner, stronger operation—not a weaker one.

“Efficiency is not doing less. Efficiency is producing more value from what you already have.”— Marco Perez

7. Review, Adapt, and Improve Continuously

Cost pressure will not be a one-time event. The most successful organizations establish a regular operating review process to measure progress, identify new opportunities, and adapt to changing conditions. Continuous improvement is not a project—it is a management habit.

From Insight to Action

Turning today’s cost pressure into a stronger, more resilient tomorrow.

Rising fuel and operating costs are a challenge—but they also create an opportunity. Organizations that respond with discipline, focus, and operational improvement will be better positioned to protect margins, deliver value to customers, and remain competitive through whatever comes next.

Key Questions for Leadership

A Stronger Conversation Starts Here.

• Do we know what it really costs to complete a delivery, job, or service call?
• Where are we spending more resources than necessary to get the same result?
• Which routes, locations, or assets are producing the strongest return—and which are not?
• What can we improve inside our operation before passing additional costs to customers?
• Are we as prepared as we should be for a prolonged period of higher energy and transportation costs?

“Uncertainty will always be part of our business. A well-managed operation is what allows us to succeed in spite of it.”— Marco Perez

How PAM Intelligence Can Help

Practical Experience. Real-World Results.

PAM Intelligence helps owners, CEOs, presidents, and operational leaders identify, measure, interpret, and improve the factors they can control. Drawing on hands-on propane and energy operations experience, we provide objective insight and practical solutions that strengthen performance, improve efficiency, and build operational resilience.

Areas of Focus Include:

• Operational performance assessments
• Cost of delivery and distribution analysis
• Route, fleet, and field operations optimization
• Supply and storage strategy review
• Organizational and branch assessments
• Leadership and manager development
• Custom advisory support for your specific operational challenges