Public Sector

Fuel Strategy Development for a U.S. Federal Agency

A federal agency sought new strategies for its road transportation fuel purchasing.

Challenge
Due to environmental concerns and government regulations, most fuel was purchased through fleet card transactions at retail establishments. Secondary approaches included purchasing bulk fuel at postal installations and allowing suppliers to resell bulk fuel to other suppliers. The agency asked A.T. Kearney to analyze its fuel purchasing behavior and recommend cost-saving strategies.

Approach
Our approach involved analyzing over 30 million fueling transactions with advanced statistical and geo-spatial mapping capabilities to identify center-of-mass fueling points across the nation. This data was used in conjunction with extensive market data and analysis to determine optimal fueling strategies for each center-of-mass fueling point.

Through this approach, we developed methodologies to assess several potential strategies:

Strategic retail sourcing – leverage best-practice and best-fit retail merchants
Expansion of bulk fuel hosting – expand hosting program by aggregating nearby retail purchases at existing locations and creating new locations in high-volume areas
Creation of new bulk fuel locations – add new bulk fuel locations in postal facilities or third-party facilities

Results
As a result of the analysis, we determined that, by leveraging bulk purchases and switching to cost favorable retail merchants, the agency could

Achieve a cost avoidance of $0.06 to $0.08 per gallon
Increase the percent of controlled purchases (i.e., those directed by the agency strategy) by 44%

In the process, A.T. Kearney developed a data-intensive methodology to assess the price competitiveness of any fueling retailer, from individual station to nationwide chains.