Special thanks to Source One Management Services for this guest post
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With volatile cost components like fuel and regionally variable maintenance labor rates, fleet operations can be an intimidating area to source and identify savings while maintaining program consistency. Where does one even start? After conducting multiple fleet sourcing initiatives with clients of varied sizes and nature, I have learned a few lessons. If one thing is certain, it is that no two fleet operations are the same. Each requires custom management and unique approaches to cost savings. Here are a few key considerations for reviewing and assessing cost-saving opportunities within your fleet operations.
Original Equipment Manufacturer (OEM)
- What types of vehicles make up your fleet?
- Are they fairly similar?
- Can you stratify your fleet into distinct categories based on their daily use?
If your replacement volume is large enough, you may want to consider contacting an OEM to get contract pricing for your most often purchased/leased vehicles (by large enough, I mean you are purchasing at least 5 vehicles a year). This will standardize your fleet and allow you to push some cost control on to your dealers, as well as allow your team to better prepare for future vehicle acquisitions. Standardizing your fleet can help lower maintenance costs by limiting the variety of parts you will need to up-fit, repair, and maintain your fleet. According to Automotive Fleet, some companies have seen savings of $500 per vehicle on average.
- Who is your primary leasing provider?
- Are you leasing from multiple companies?
- How are your dealer incentives structured?
Some dealers offer a fixed discount on all vehicles leased through their program. While this will give a consistent dollar value discount, you could be saving more by negotiating a percent off, rather than a fixed price. Also, take into consideration your leasing habits. Are you entering into closed or open-ended leases? What are you doing with the vehicles once the lease term is up? Keeping a consistent replacement schedule will increase vehicle resale profits and incentivize refreshing your fleet with the newest, most fuel-efficient models on the road.
- Do you have a fuel card program?
- Do your locations have tanks onsite?
- Does your fleet utilize wet hosing services?
These are three common ways of fueling a fleet. A fuel card allows drivers the flexibility to fill up when needed and can simplify invoicing. The downside, it can be difficult to ensure drivers only use the fuel cards on the company vehicles. Some cards offer protection by tying the card to the vehicle, rather than the driver. While convenient, fuel cards also mean you’re paying retail fuel rates. For heavy-vehicle fleets, if your fleet is large enough, you should be able to leverage your fuel volume and utilize bulk fueling via wet hosing services (direct to vehicle) or onsite tank (if available). To clarify, wet hosing services are when a fuel truck comes to your site and fills the vehicles up for you.
Wet hose services come at a premium, compared to tank fueling, but they have several benefits. Your fleet is fueled and ready to go when your drivers arrive at work, cutting down the time they would otherwise use fueling the vehicle. You do not have to worry about the capital investment to install and maintain an on-site fuel tank, either.
On-site fuel tanks can offer cost savings as you pay less than retail and less then wet hose rates. However, tanks come with capital investment and maintenance costs. Depending on your fleet goals, these three options should be explored.
Administration, Management, and Technology
- Who is monitoring your fleet for Department of Transportation (DOT) compliance?
- Who is tracking your vehicle inventory and managing replacement schedules and remarketing activities?
Your firm is likely utilizing one or more third-party providers to maintain your fleet from an administrative perspective. Consider contracting with a supplier that offers a full suite of management options to cut down on internal cost to manage separate invoicing and payment terms. Many fleet providers offer telematics technologies (the integration of telecommunications and on-board information systems). These technologies can deliver real-time information on vehicle driving patterns and location data, which can be leveraged to monitor efficiency and policy compliance.
While a data-driven smart fleet seems fantastic, we must not forget the effects “big brother” can have on drivers. I might not like to be tracked at all times, would you? One suggestion is to implement a superior driver rewards and recognition program (several fleet management companies offer a rewards program with their telematics technology). This incentivizes good driving behavior and will go a long way toward keeping positive driver morale.
- Does your fleet have full service maintenance leasing contracts?
- Are you utilizing in-house mechanics to maintain your fleet?
- Do you have your vehicles regularly serviced?
- Or, do you only have work done on an as-needed basis?
Depending on your fleet size, vehicle use patterns, and replacement cycle you could be overpaying or under maintaining your fleet. Seemingly straight forward, having best practices with regard to planned/scheduled maintenance can go a long way to maintaining safe, efficient vehicles and ensuring high resale values. Reparative maintenance, while necessary, is an unplanned cost usually having to do with an accident or poor scheduled-maintenance adherence. Full-service leases take care of a portion of maintenance-related activities by charging a maintenance-per-mile fee.
An alternative to consider is to separate leasing and maintenance services. Your fleet management provider likely has a relationship with a qualified maintenance network. You can leverage the size of your fleet to receive discounted maintenance pricing and service level guarantees. Other maintenance-related items to consider are your replacements parts, disposables, and washing & cleaning services. Replacement parts can be generic or branded in nature. I recommend you work with a tire OEM to leverage your fleet volumes and maintain optimal vehicle fuel efficiency. Disposables are your oils, lubricants, filters, etc., typically included in the scheduled-maintenance. Finally, you have cleaning and washing services, keeping your units clean and in good repair speak volumes of your organization and can help ensure high resale values.
While this blog post is not all-encompassing, it does provide a starting point for your fleet review. Taking a holistic approach to evaluating your fleet operations is critical to saving time & money while increasing the efficiency of your fleet. Source One Management Services has the in-house capabilities to review your fleet and suggest cost-effective alternatives to fit your unique fleet needs.