“Eat here and get gas” Let’s get creative with e-procurement tools.

June 18th, 2008

The above quote was on a sign at a small restaurant/gas station in New Hampshire in the 1960’s and the play on words and the imagery it evokes also caused it to appear in Readers Digest.

As a kid, my family used to pass it every time we went to Lake Winnipesaukee during summer vacation. Obviously my parents would ultimately tell us all to settle down once we began playing sick and other shenanigans.

Maybe the way that signage caused us to be creative can serve to inspire us as we all continue to be sickened by the price of oil and the resulting cost of a gallon of gas today. I can’t imagine what one of those trips would have cost back in the 1960’s at today’s gas prices. It was 360 miles round trip so being fair and assuming my dad’s station wagon got 15 miles per gallon that would be twenty four gallons at $4.20 per gallon or slightly over $100.00. We most likely would have been staying home. I’m sure my dads company would not have given him a raise to make things more affordable.

How can we use e-procurement tools today to make high gas prices more palatable to employees? Let’s assume that a company we’ll call Friendly to Employees Inc. were to conduct a survey of their one hundred employees as to how much gas they used each week to get to work. Resulting survey data indicted that the average commute was 60 miles round trip for a total of 30,000 miles per week for the one hundred associates. If we assume twenty miles per gallon as an average, that translate into 1,500 gallons per week or 78,000 gallons per year. This would represent $319,800.00 in total annual expense. At gas industry or fuel stop gross margins of 15% that would represent $47,970 in new margin if all of the business went to location. Not to mention sales opportunities on additional convenience items carried in most fuel stops today.

So, now the company owner selects 4 or 5 independent fuel stops in the area and indicates that the company will guarantee incremental fuel sales on 78,000 gallons per year and that there will be a reverse auction to lock in the price. They just have to agree to participate. If the company decided to eat this cost, it would represent about a 3% hit to payroll. This is less than the average salary increases budgeted for most companies. Can you image the associate satisfaction, improved moral, reduced turnover and probably even a tick up in productivity if this program were announced today at a company meeting.

Obviously, there are more details involved with an idea like this.

I look forward to your opinions.

Ron

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