CountryMark Flex Contracts Help Reilley Trucking Control Fuel Costs
For Brandon Reilley, the fuel buyer at Reilley Trucking in Ft. Wayne, Indiana, CountryMark’s price risk management tools have helped him better manage fuel costs for the family's growing trucking business.
“We have used the CountryMark flex contracting program to have more control over fuel prices and our fuel budget,” said Reilley. “When I got started using the CountryMark flex contracting program, I was concerned about unexpected contracting expenses and terms that might make it hard for us to use fuel contracts. This past year I contracted 20% of our fuel needs and I can confidently say that CountryMark’s price risk management tools have helped Reilley Trucking better control fuel costs. CountryMark and my local cooperative understand Reilley Trucking and that has made a huge difference for me. The ability to contract the amount of fuel I want and use my fuel contract when it works for me is something that other fuel companies aren’t offering and something that has been valuable to me.”
Brandon’s price risk management strategy begins with identifying a target price.
“I target a fuel price I’m comfortable with,” said Reilley. “It’s that fuel price where I’m confident that we, as a trucking company, can make money. I then share that target price with my local CountryMark cooperative. They know when we get to that target fuel price or close to it; they call me so I can lock in a contract.”
CountryMark offers both fixed and flex contracts. CountryMark’s flex contracts work best for Reilley Trucking.
“With the flex contract, I lock in a fuel price and a number of gallons, and then I have 11 months to buy the gallons I have contracted,” Reilley explained. “During those 11 months, I am able to evaluate with each load of fuel to determine whether I want to use my contract price, or the cash price. That flexibility has made all the difference in my ability to profitably manage my fuel costs.”
CountryMark’s flex contracting program provides Brandon with the tools to accelerate his management skills.
“I’m not calculating my fuel price target every day,” said Reilley. “I do that once, communicate that target price to my cooperative and then they contact me when the markets are in my target range. Once I have locked in a contract, I order fuel like I always have. With this price risk management tool, I order fuel when I need it and with each load I evaluate whether or not I want to pull the contract price or use the cash price. I’m not spending time chasing the lowest fuel price or trying to make fuel last because I think prices will drop later in the week. Really for me, my fuel contracts are like an insurance policy. Contracting fuel insures that I will be able to pull a given number of gallons each year at a guaranteed price that I’m comfortable with and at a price where we can profitably run our trucking business.”
Brandon’s advice to others considering contracting fuel is do your homework, keep good records, and contract no more than 20% of your fuel needs in your first year.
“When I got started contracting fuel, I called my cooperative several times,” said Reilley. “Every time I thought of a question, I called them and they were great to work with. They helped me completely understand the contract concepts and best practices, and that made all the difference for me.”
Keeping good records is also important.
“Every time I pull a load of fuel using my contract, I write down on a notepad the money I saved using the contract price as compared to the cash price,” Reilley explained. “With my records, I know exactly how well my contracts have performed. Again, I contract fuel to control input costs. Anytime I can walk away with fuel savings is a bonus.”
Contracting puts customers in the driver’s seat and less at the mercy of the cash markets.
“It’s always my decision whether I exercise my contract price or the cash price,” said Reilley. “There were times this past year when I would I place a fuel order using the cash price. I appreciated that my account rep was on the ball and knew immediately that my contract price was less than the cash price. However, in those situations, I felt cash fuel prices were going to go higher and I wanted to save my contracted fuel for days when the spread was greater. Those decisions worked very well for me this past year. I like being able to make those decisions and have the opportunity to return greater profits for the company business.”
Like other trucking companies, Reilley Trucking bids certain jobs.
“Being able to lock in fuel prices has also helped with that side of our business,” said Reilley. “If my fuel price is a fixed cost for a particular job, my brother and I can better bid that job, and I believe that puts us in a better position to be competitive on trucking bids.”
Pay as you go
With CountryMark flex contracts there is no upfront expense.
“It’s great that I can lock in a flex contract with no out-of-pocket expense,” said Reilley. “I don’t pay anything on that contract until I pull a load against that contract. I wouldn’t want to tie up cash on pre-paid fuel, and I don’t have to with the CountryMark flex contracts.”
A good manager always knows the worse-case scenario of any purchase, so Brandon calculated his.
“I know that if after 11 months, I haven’t pulled all the fuel from my contract, I’ll pay the difference between my contract price and the cash price, and will multiply the per gallon expense by the number of gallons remaining on my contract,” said Reilley. “Not pulling all the gallons on my contract is my risk. For me, the rewards of being able to better control my fuel expenses far outweighs the potentials risks of the cash markets dropping below my contract price.”
For Brandon Reilley, CountryMark flex contracts provide him with a valuable management tool that helps him protects Reilley Trucking from sudden upswings in fuel prices.
“I like that the CountryMark flex contracting program allows me to choose with every fuel delivery between contract and cash prices, and I like that it allows me to consistently bring in and have access to great quality fuels within my budget,” said Reilley.
Quality fuels, excellent service and the ability to contract smaller fuel quantities are signature elements of CountryMark’s price risk management program.
About Reilley Trucking
In the 1970s, Kim Reilley started Reilley Trucking in Ft. Wayne, Indiana. Over the past 40 years, the family business has grown from a single truck to a bustling business with more than 60 over-the-road trucks. Today, the Reilley Trucking fleet includes an impressive lineup of semis, dump trucks and rolloffs. The Reilley’s run Volvo, Kenworth and International trucks. This home-based fleet specializes in hauling stone, dirt, asphalt, and scrap metal in and around the Hoosier state. Key to the success and growth at Reilley Trucking has been assembling a team of talented trucking professionals, including two of Kim’s son, Brandon and Brett.