[2006 State of the Industry] Gas Pains

Going to the gas pump is painful these days, and the outlook isn’t any brighter. The U.S. Energy Information Administration predicts regular gasoline pump prices to average $2.72 per gallon this year, which is $0.45 higher than last year’s average of $2.27 per gallon. Pump prices are expected to be less in 2007 — $2.67 a gallon — but this forecast may change for the worse.

Higher prices at the pump, coupled with rising insurance and chemical costs, are forcing many pest management professionals to pass along higher expenses to customers.

"It’s pretty tough out there," admits Tracy Hamlin, president, All-Ways Termite & Pest Control, Enterprise, Fla. He says gas prices are up more than 100 percent from when he started his business in 1998. In the past 18 to 24 months, he’s had to more aggressively increase prices with customers.

"It’s not good at all," agrees Western Exterminator Co. Service Manager Jerry LeBlue, Las Vegas. LeBlue says gas costs were up $2,000 for June 2006 compared to a year ago. "That’s just for this office. We have 32 offices."

"It definitely has a significant impact on the branch," says Terminix Branch Manager Mike Escobar, Sacramento, Calif. Costs are up 20 to 25 percent in the last six months, he says.

Craig Thomas, Craig Thomas Pest Control, Hyde Park, N.Y., has seen a 26 percent increase since January, although some of the increase is due to bringing on new technicians. In July, he sent monthly customers price increase letters. "We roll with the punches and try to eat some costs, too," says Thomas, who operates a fleet of 17 trucks. But with the sharp cost increases, "we’re getting less of the bottom line."

Massey Services, Maitland, Fla., which has no plans to raise prices at this time, is focused on improving efficiencies. But that’s not to say rising gas prices haven’t impacted the bottom line, says Adam Jones, vice president and director of quality assurance.

INCREASING EFFICIENCY. Before raising prices, ask what you can do to become more efficient in your service operation, Jones says. Experts agree the only recourse is to manage gas costs more effectively, for example:

Technician Training — Doing the job right the first time means fewer visits to the customer, Hamlin reminds, and is the easiest way to reduce gas expenses. Callbacks waste gasoline, as well as incur other expenses for the company.

Tighten Routes — LeBlue is "crunching" routes, giving technicians smaller, three- to four-mile zones instead of running city-wide. Routing software can help manage fleet efficiencies, says Escobar, who oversees 30 trucks. Truly Nolen District Manager Dan Galvan, Phoenix, employs routing software and GPS to help plan technicians’ days and monitor driving behavior. "(Routing software) is not an option any more," Galvan says.

"It’s a lifeline to saving money not only in gasoline but in payroll, too," adds Thomas, as paying technicians to drive around the city makes no money for the company. It’s enabled Massey Services to see "more efficiencies for every gallon of gasoline we buy," says Jones.

Universal Technician — The idea of a "universal" technician who handles both residential and termite services from one truck sounds more and more appealing, Escobar adds. Despite training hurdles, "the (cost) benefits are amazing."

Purchase Power — Technicians at Craig Thomas Pest Control use gas cards that offer a small savings per gallon at certain stations. "We also try to shop for the cheapest gas," adds Thomas, who uses Web sites to pinpoint pump prices in his area. He also has technicians stay away from stations known locally for their high prices. Jones suggests trading in old fleet vehicles for newer ones with improved fuel economy, such as the Dodge Sprinter cargo van.

Measure Economy — Fleet fueling cards also provide precise measurement, Jones says. Pest management professionals can track mileage per gallon, gas purchasing and driving behavior by vehicle or service center. This data can help identify fleet maintenance needs or driver skill issues. "You can’t manage what you don’t know," Jones says.

Conservation Skills — Reduce gas consumption by using air conditioning conservatively and by employing air "recirculation" features that require less energy than cooling outdoor air, AAA reports. Lighten vehicle loads by transporting only necessary items, drive a moderate speed, and avoid quick starts and sudden stops.

Maximize Maintenance — AAA says vehicle maintenance is critical to maximize gas mileage. Follow vehicle maintenance schedules for replacing spark plugs and air filters, and make sure tires are not under-inflated, a common problem that significantly lowers mileage per gallon. One tire that is under-inflated by only 5 psi will reduce fuel economy by 10 percent, according to Automotive Fleet Magazine.

Pest management professionals agree higher gas prices are here to stay. And, this burden requires new ways of managing the bottom line, company fleets, and customer relationships. "Fuel is a tool for us," Jones says. How are you going to get the most effective use of it?

Unfortunately, it’s not going to be an easy ride.