Craggs Fuel Cards

Our Proposal To You

Current Analysis

United Living Group (ULG) are reviewing their fuel procurement practises in order to:

• identify cost reduction opportunities,
• forecast their value,
• implement a new solution which releases the forecasted cost reductions,
• maintain refuelling opportunities for its card users.
We will analyse your fuel transaction data over the 20 month period (from 01/04/2019 to 30/11/2020)
across its five suppliers comprising of two methods of purchase; network bunkering and ‘traditional’ fuel
cards.

The total volume drawn across the period was 1,991,395 litres.

Benefit To You

The analysis has highlighted 5 main areas for cost reduction:

Premium Diesel Packaged Goods Unleaded Fuel Tesco Drawings Diesel Fuel

1

Our Solution

We are committed to providing our customers with a professional
service saving them time, effort and cost.

We recommend consolidating the maximum Due to market conditions and supplier margin
possible proportion of ULG’s fuel spend on to aspirations towards the average pence per litre
the Keyfuels network where 92% of its existing saving on diesel developed as per the below:
transactions are made but with improved
commercials that better reflects the scale of Dates Average Saving
ULG’s fuel usage. Aside from the cost per litre
reduction implications, remaining on the Jan to Mar 2020 2.10
Keyfuels network would greatly simplify the Apr to Jun 2020 3.12
change management process for the July to Sep 2020
custodians of the change and for the Sep to Nov 2020 5.37
organisation’s fuel card users. 6.89

We propose to provide ULG with The diesel cost reduction based on the 20
Keyfuels cards to replace its Keyfuels usage month period was calculated at £39,244.69 if
across both purchase methods with pricing all Tesco usage transferred to the non-
based on an average weekly lagged platts surcharged sites on the Keyfuels network, or
price; this would serve to eliminate any £27,870.97 + VAT if only half of the volume
uncertainty and risk associated with was displaced.
purchasing fuel on a spot basis whilst also
eliminating the administration required to The sundry items which CFC defines as any
obtain quotes and manage stock levels. The product not UK 10PPM Diesel was calculated
remaining 8% of fuel purchase across Shell, at £8280. Therefore the total cost reduction
BP and Fuel Genie to be provided with should the fuel strategy outlined below be
Keyfuels, UK Fuels, Esso or Texaco as 100% successful would be £46,524.69 + VAT
appropriate. across the 20 month period analysed.

2

Adjusted Diesel Cost Reduction Forecast for EAC & Recent Pricing

We note that the cost reduction forecast may not be a true reflection of cost savings
due to the downturn in ULGs volume due to COVID-19 and the higher level of margin
towards the end of the report period.

Two additional forecasts have been provided below for standard road diesel:

Based on latest 6 months average margin per litre across and
volume 3 months prior to COVID-19:

• Average monthly volume of 117,802 litres
• Average pence per litre difference 5.41ppl
• 117,802 x 5.41ppl = £6373.09 p/m
• £8118.56 x 12 = £76,447.06 p/a

Based on latest 3 months average margin per litre across and
volume 3 months prior to COVID-19:

• Average monthly volume of 117,802 litres
• Average pence per litre difference 6.89ppl
• 117,802 x 6.89ppl = £8118.56 p/m
• £8118.56 x 12 = £97,398.69 p/a

3

Our Cost Reduction Strategy

CFC and ULG have together put forward a 5 point cost reduction strategy encompassing the below:
• Premium diesel – implement a refuelling policy to prohibit the use of premium diesel
• Packaged goods including ad blue – difficult to ascertain the rate paid as the product quantity

is in packs not volume, mid-range assumption at 15L per pack gives 136ppl for FCC and
86ppl CFC proposes to supply at 60ppl through delivery to sites. Ad Blue pumped was at a
76.67ppl, CFC proposes to supply at 30ppl delivered in bulk
• Unleaded fuel – implement a refuelling policy to prohibit the use of all unleaded would save
2.5% on unleaded cost as a minimum
• Tesco drawings – implement a refuelling policy to prohibit the use of premium diesel
• Diesel fuel – CFC proposes to consolidate all fuel purchasing to its Keyfuels cards to simplify
purchasing and stock management whilst delivering the outlined cost reduction

Additional Solutions

We can provide a hedging option for diesel network bunkering for up to 1 year and physical diesel fuel
for the same period but in full load quantities of 36,000L. A hedge would cost more than the current
market price initially and may not provide the most economical price but would allow ULG to work
towards a budget.

Our Commitment to Continued Cost Reduction

To ensure that the forecasted savings are achieved we propose to provide ULG with periodic fuel
drawings analyses at a frequency of weekly for the first two months, fortnightly for the preceding two
months and monthly thereafter. The higher frequency reporting proposed initially will provide ULG with
the information required to establish compliance levels with the new refuelling policy. As the changes
are adopted the frequency decreases to serve as a periodic refuelling policy check.

The analysis will centre on the five cost reduction areas that have been identified and also look to
identity any new cost inefficiencies; these may develop due to changes in refuelling patterns and/or
changes to the pricing structure of sites on the fuel card network(s) being utilised by ULG.

In the event that we reduce our premiums by way of an improvement to its weekly lagged contract or a
reduction in its handling fee it will adjust the price charged to ULG in accordance with the reduction. In
the event that we introduce a product that is more cost effective on a unit price basis it will notify
Rebate & Contract Term

4

Rebate & Contract Term

Margins in diesel supply are relatively low in comparison with other industries at around 3ppl
across a customer base. Due to ULG purchasing through a bunkering account CFC has provided
a solution capable of displacing bunker account volume. The margin made will be around one-fifth
of the typical margin, adding a rebate would only serve to increase the margin. If this is a required
component we can provide an option for this.
We propose a two year contract with a review to be held at the beginning of month eleven of each
year to ensure that we are using our own economies of scale to provide the most advantageous
pricing available, including but not limited to; a reduction in its handling fee, a reduction in its
weekly lagged platts contract premium and changes in the premiums of individual filling stations.

Service Levels & Key Performance Indicators

It is proposed that the following key performance indicators are set:

Card Turnaround Times

1. CFC will make all reasonable efforts to ensure that ULG’s fuel cards are sent on the day of
receipt, and via Royal Mail’s First Class post.

2. At the time of this proposal, and on the basis that a card order is submitted to CFC before 16:00
on a working day, CFC receives its Keyfuels fuel cards within 2 working days; equating to a card
turnaround time of 3 to 4 working.

3. CFC can provide fuel cards to ULG on a 2 to 3 working day turnaround at a cost of £5 excluding
VAT for each card order batch.

4. CFC can provide fuel cards the next working day for a cost of £15 excluding VAT for each batch.
5. CFC will allocate a renewal month to ULG’s Keyfuels fuel cards.
6. CFC will provide a fuel card renewal report annually to include the last usage date of each fuel

card and no later than the fifth working day of the month prior to the expiry month of the fuel
cards card.

5

Account Management
1. CFC will provide dedicated account management through two full time employees at all times.
2. CFC will acknowledge all email requests by return of email on the day of the request being made

provided it is made on a working day and prior to 16:30.
3. All email requests by ULG will be sent to its allocated account managers with a carbon copy

[email protected].
4. CFC will configure its email server to display all email requests made by ULG email domains, and to

its allocated account managers, in Outlook’s ‘New Item Alert’ window.
5. CFC will make all reasonable efforts to provide an estimated response time where it is required to

seek information from external parties.

Ongoing Analysis
1. CFC can at any time provide a report to demonstrate the cost reduction ULG has achieved against

the week average retail pump price for diesel as reported by the Government.
2. CFC will provide ULG with periodic fuel drawings analyses at a frequency of weekly for the first two

months, fortnightly for the preceding two months and monthly thereafter.
3. In month eleven of each year CFC will seek to ensure that it is using its own economies of scale to

provide the most advantageous pricing available, including but not limited to; a reduction in its
handling fee, a reduction in its weekly lagged platts contract premium and changes in the premiums
of individual filling stations.

6

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CONTACT US: t: 01282 334508 | e: [email protected]

www.craggsfuelcards.co.uk