Corona virus showed us how important our supply chains are. The uptick in online shopping during the pandemic provided many companies continued revenue and the need to move product throughout the entire country. PPE had to make it to hospitals and essential businesses on time. Tractors delivered items across the United States putting many miles on the vehicles. Fleet management became an extremely important topic as financial efficiency was made a top priority for organizations around the world.
Fleet Management is the management of expenditures related to fleet assets (trucks, trailers, sedans, other company vehicles, etc.). This can be from purchasing, to the disposal or resale of the vehicles, to preventative maintenance or driver training. Many fleet managers focus on purchasing vehicles at a low price, with the thought that this constitutes “good” fleet management. However, would you be surprised to learn that on average, eighty percent of the vehicle’s total cost of ownership is not related to its price tag? Most of the costs associated with your fleet is for maintenance, fuel, running costs, and parts.
Many fleet managers will spend a large amount of their time and energy negotiating the unit cost of the vehicles down. This is beneficial and should not be overlooked. However, once purchased the analysis should be increased rather than forgot. The ability to keep costs down is even greater now that the asset is yours. How and where will you buy parts? What are the maintenance management programs you will create policies for? Are you buying fuel at an effective price with rebates baked in? These are the questions I want to address so you can manage that other eighty percent of addressable spend.
Preventative Maintenance Considerations and Policies
Anyone who owns a vehicle understands the benefits of preventative maintenance. We grow up being told to get the oil changed at a specific interval, or that if we take care of our car it will take care of us in return. When you expand that to tens, hundreds, or thousands of vehicles the costs become drastic. But when we remember the costs of repairs when we neglected preventative maintenance the benefits are clear. Spend a little per vehicle now rather than a lot down the line.
This opens many other considerations for fleet managers to address. Who will complete the repairs? What mileage should services be completed at? Will the maintenance be completed in house or outsourced? These all are additional opportunities for smarter purchasing. If your organization does not want to spend a lot of money for maintenance, remember again that eighty percent of the costs were not in purchasing the asset. Remind them they cannot afford to NOT spend the money. Avoiding maintenance can cause breakdowns, legal issues, the need to buy replacement vehicles and can harm the resell value at the end of the asset’s life.
Define exactly what maintenance needs to take place in an official company policy. This will keep organization and compliance throughout the company. Fleet managers will know exactly what to repair, when, and where to get it completed. Define the need for drivers to continually visually assess the vehicle to shine light on issues that may not be covered in the policy. The main key is to catch things early so they do not turn into huge expenditures down the road.
Managing Fuel Costs
The cost of fuel is always fluctuating and is one of the biggest considerations when managing a fleet. This fluctuation means that assessing exactly what you will pay per vehicle is difficult. However, one thing that we can usually rely on is that it will increase over time. So how do we manage it and keep costs as low as possible?
One way to lower fuel costs is focusing on the driver’s habits. Poor habits can cause excessive costs that do not need to be present. If a driver is idling too often or driving too aggressively, removing these habits can provide savings. GPS systems and ELD (electronic logging device) usage can provide some information on driver’s habits as they track the fleet vehicle in real time. Improving driver habits also provides the benefit of less tickets and traffic violations.
Most likely the best way to mitigate excessive fuel costs is to utilize a fuel management card with rebates. With many of the top cards, the larger your fleet the more you will save. Even for small and medium size fleets, savings can be found. It is important to confirm solid coverage when selecting the card. If you do not have routes near the stations accepting the card, you will not take advantage of the maximum benefit. Some fuel cards offer a rebate of up to six cents per gallon! That amount can really add up to impressive, easy savings.
Effectively Purchasing Parts for Repair and Maintenance
Another great way to lower your fleet cost is to be wise about how and where you purchase your vehicle parts. The goal is to purchase the cheapest parts that maintain the quality you require. Every single discount adds up when extended across the hundreds, or even thousands, of vehicles in your fleet. Signing contracts with individual suppliers can be very effective, but there is an even better way.
Fleet GPO’s (group purchasing organizations) are a great way to get the parts you need at a great price. This will not only leverage the size of your fleet, but it also leverages the fleet size of every member in the GPO. Corcentric offers GPO programs for tires, repair parts, lift gates, drive train parts, windshields, route planners, and many other categories fleet and not fleet related. For each category, we also offer multiple choices of suppliers. If you prefer Goodyear tires, we can lock in a better discount. If Yokohama is your preferred tire supplier, we can aid you in receiving a better rate than you are currently paying. This applies to batteries, heavy duty and light duty parts, and so much more.
A GPO also allows a smaller fleet to take advantage of better pricing. All the members of the group purchasing organization will pool their spend figures. The agreement with the supplier considers a larger amount of spend because the GPO contains multiple members. The supplier receives drastically more business via Corcentric’s pooling of demand, so they are willing to offer a better per unit price for each part and better back end incentives. It is possibly the simplest way to gain immediate and vast savings for your fleet.
Always remember to think of the other eighty percent of fleet spend. The price tag of each vehicle is absolutely an important consideration. However, it is not the only consideration. It may not even be the most important area to focus on when attempting to control fleet management costs. Understand your spend, be wise about purchasing parts, and never wait until minor maintenance issues turn into huge expenditures. This will take your fleet management to the next level.