July 10, 2019

Is Your Construction Materials Company Prepared for a Gas Tax Increase?

Author: Stockpile Reports

Did you know that on July 1st, 2019, eleven states raised their gas tax?

Several of these states have not seen a gas tax increase in over a decade. Several states might see their gas tax spike as high as 45 cents a gallon in the next couple of years! Do you know what this means for your quarry, ready-mix concrete, or asphalt plant?

The gas tax increase is a double-edged sword for most construction materials companies. On one side, a majority of additional gas tax revenues are earmarked for transportation infrastructure improvements such as new highways and bridges. New infrastructure translates to increased aggregates, ready-mix concrete, and asphalt sales. Theoretically, the increased construction materials demand will increase your profits.

On the other side, the biggest operating cost for dump heavy vehicles is fuel. A Class 8 dump truck making short hauls, on average, goes through 3.2 gallons of diesel an hour. Longer haul trucks can burn through 20,000+ gallons a year. This equates to $3,000-$5,000 of additional expenses per vehicle per year for your company to account for.

Your strategy to compensate for rising operating costs might be passing on the costs through increased sale prices. However, this tactic may put you at a disadvantage when your competitors are out-bidding you. Finding other avenues in your operations to reduce costs and offset the gas tax may be your ticket to winning more infrastructure projects.

3 Strategies to Beat Raising Gas Taxes

We have identified three winning strategies that your company can start implementing today in order to offset increased gas taxes. All three strategies are currently being used by our 250+ clients at Stockpile Reports with excellent results. Start small, pick one, and start seeing the benefits propel your company’s competitive advantage.

1) Replace or Upgrade Your Aging Vehicle Fleet

You may be asking yourself, “how will I save money if I have to spend $150,000 on a new truck?” The short answer is that you won’t save money upfront. However, there are several reasons you may want to start replacing the oldest vehicles in your fleet.

An increase in infrastructure spending at a statewide level associated with the gas tax rise means your company needs to ensure they are ready to take on greater workloads and longer continuous hours of vehicle use. New vehicles have greater fuel efficiency which will lessen the impact of high fuel costs. You will make back costs over the lifecycle of the vehicle.

In states such as New York and Oregon, governments are passing new clean diesel laws that will be forcing you to replace pre-2010 trucks to meet tougher emissions standards. The same laws are being proposed in several other states such as California. Now is the ideal time to sell your oldest trucks. Once new emissions standards are enforced, no one will buy your old truck and upgrading your fleet will cost more. Invest in new vehicles, save on fuel costs, and get ahead of any pending clean diesel fuel law. If your competitors aren’t doing the same, you will be lightyears ahead when new emission standards are enforced.

2) Digitize Your Logistics

Do you know the locations of your entire truck fleet right now? This is a question that most companies can’t answer with a yes. The reality is that trucks load up at your plants and then head to job sites. Between those two points, most companies have no idea where their fleet is currently located. However, this fact is starting to change with innovative logistics solutions such as Voyage Control and Element Fleet.

These new solutions install inexpensive GPS systems on your truck fleet and provide centralized data about vehicle locations, the status of product delivery, and operations/maintenance logs. You will be able to see when trucks are sitting idle wasting fuel in traffic or at a job site. The information provides improved insights into dispatching in order to bypass traffic and better time deliveries. The elimination of paper tickets also frees up hundreds of man-hours spent logging data by hand. Ultimately, you will have the information to drive more efficiency with your current fleet of vehicles.

3) Streamline Your Inventory Management

Companies are spending countless hours tracking their inventory with expensive methods or outdated measurement tools. There is no reason a company should be spending hundreds of hours tracking inventory with many technologically advanced options available today. We suggest starting with digitizing paper ticketing systems. Command Alkon’s Apex and MOBILEticket services are great examples of tools that take the paper out of the perpetual inventory process. According to Command Alkon, paperless ticketing for a regional producer saved 30 hours a day and eliminated the need for 4 trucks. Your company can see the same savings and possibly eliminate 4 of your least fuel-efficient trucks.

You can also find massive saving with drone-based stockpile inventory management platforms such as Stockpile Reports. If your company has dozens of sites spread out across hundreds of miles, Stockpile Reports will reduce the road miles and travel time your employees accumulate by deploying a fleet of pilots who will fly for you. What once took a crew of several surveyors driving hundreds of miles between sites incurring high travel costs and increased risk of accidents, will be replaced with highly skilled local pilots who take the workload off your company. According to calculations based off of our clients’ inventory habits, 199 man-hours can be saved on an employee. That equates to $80,000-$90,000 per year in salary costs alone on one employee measuring 10 sites monthly.

Position Your Company to Maximize Profits from Infrastructure Projects

The United States’ infrastructure is in dire need of repair. Recent reports such as the American Society of Civil Engineers’ Infrastructure Report Card points out that every aspect of our country’s infrastructure needs to be replaced or repaired. State governments have taken notice and are starting to raise gas taxes to fund major infrastructure improvement programs. Aggregates producers, ready-mix concrete producers, and asphalt producers have the potential for massive profits.

Take a look around your company and identify areas that could be digitized, streamlined, or modernized. Start making changes now to maximize benefits as your company starts landing infrastructure projects. Raising gas taxes doesn’t just mean higher operating costs. It is a chance to generate huge profits and maximize business efficiency at the same time.