Many organisations do not recognise their vehicles as a fleet, but rather as assets required to facilitate delivery of goods and services.
These assets may be owned, leased or a mixture of both, and are represented by cars, light commercial vehicles, large trucks, motorcycles, forklifts, heavy machinery/plant, trains or even planes. Typically, vehicle assets have a range of purposes including transportation of raw materials or products, transport for sales staff and those who install and maintain equipment, deliver services or simply use them as an employee benefit.
A fleet can be as small as two or three vehicles, however it is often the third-largest expense for an organisation after rent and wages. Just 30 vehicles can represent $1 million in assets and potentially $300,000 a year in operational expenses.
There are five key steps throughout a vehicle's life cycle: procurement, operational management, equipment and driver safety, risk management and remarketing. The co-ordination of these comprises fleet management, which depending on the size of an organisation is performed by one or more people from varying departments.
The management of a particular fleet involves complexity beyond its core function, and evolves from the knowledge and skills of those responsible. While the basic function achieves the required goals, the evolved management delivers a superior result more closely aligning with organisational goals, increased safety and sustainability, and reduced operational expenses.
Procurement is the simple act of obtaining goods or services, however fleet management evolution is far more complex. Before obtaining/purchasing a vehicle, you need to understand the organisation's current and future needs, which vehicles meet these needs, and potentially, what specialised equipment must be fitted to the vehicle. Other considerations might include an organisation's safety and sustainability policies.
Intricacies of the evolution
Once you understand which vehicles are fit-for-purpose you need to obtain and compare the cost of each, taking into consideration its purchase price, running costs such as fuel, maintenance, tyres, insurance, and the vehicle's value at the time you expect to replace it. These items allow the calculation of a vehicle's whole-of-life cost. Obtaining vehicle costs can be as simple as calling several suppliers outlining your needs or through a formal tender process, noting the future value of a vehicle is an estimation based on several factors.
Operational management is as simple as providing fuel, toll passes and ensuring vehicles are serviced and repaired in accordance with manufacturer requirements. The evolution explores the benefits of different retail fuel stations and may incorporate on-site fuel, a difference in payment methods such as corporate credit card or specific fuel and maintenance cards, and how alignment with one provider could generate cost savings through fuel rebates, reduced card fees and the like. Reporting and fleet management systems are essential for cost transparency and to reduce the opportunity for theft. Other operational issues include vehicle infringement management for parking and speeding fines, and management of alternative vehicles when one or more vehicles are unavailable due to servicing or collision repairs.
The function of equipment and driver safety relates to operating the vehicle. It can be as simple as providing a driver with a vehicle induction, highlighting its features and benefits while delivering a broad driver policy requiring them to abide by road laws and respect all road users. A more evolved solution will include a vehicle induction considering any special equipment fitted and driver policies that include specific topics based on the use of the vehicle such as load restraint guidelines or fatigue management.
Policy specifics
Other specific policy items may include personal use of the vehicle, home garaging, drug and alcohol policies, safe use of mobile phones in vehicles and driver distraction. As this function matures, organisations may provide specific driver training and incorporate in-car driver training through telematics. These initiatives may reduce vehicle accidents and reduce operational costs for fuel and brakes.
Risk management involves insurance of your fleet; its evolution requires a detailed understanding of the risks associated with your fleet. This includes managing the so-called grey fleet (vehicles used by drivers that you do not own or control such as car allowance vehicles); potential damage to reputation from incidents involving your vehicles, customers and/or the public; creating a safety culture among your drivers; and introducing processes and behaviours that reduce accidents and thus insurance claims and costs.
Remarketing a vehicle relates to disposing of it at the end of its effective life. Often the simplest method is to trade it in with the purchase of its replacement. The evolution of remarketing explores the different mechanisms for selling the vehicle, how it should be presented and to which markets. Vehicles can be offered to an organisation's employees or marketed directly to motor dealers and consumers though different types of auctions, be they physical or online. Understanding supply and demand in different markets may provide opportunities to sell in different states where they are achieving higher prices.
On the face of it, managing assets or fleet management is a simple process. However, its evolution brings complexities that often deliver superior results more closely aligned with an organisation's goals, while increasing safety and sustainability and reducing operational expenses.
Mace Hartley is executive director of the Australasian Fleet Management Association.
