Work Smarter, Not Harder
If you work in fleet management, have you ever thought “How do I know we’ve selected the most cost effective vehicle type for our fleet?”
Well, trust me, you are not alone, it’s a common issue that all fleet managers face and some might not be aware that there is a formula you can use to find out the answer.
That formula is not the focus of this that article so I will leave you to read up on it yourself.
I’m also going to gloss over ‘Fit for Purpose’ (as this is an article in it’s own right) and in fact Im going to assume you have a methodology you use already and its some combination of purchase price, lowest fuel consumption, lowest maintenance & servicing costs, and sometimes even a vehicles re-sale value- and holding cost.
Total Cost of Ownership
The full combination of all of these factors is called ‘Whole of life’ or sometimes ‘Total cost of ownership’ or TCO. Im going to use TCO because that’s what the new and sexy ‘mobility’ world uses.
There are a multitude of formulas I’ve seen used to calculate a subset of TCO, but it never ceases to amaze me, that once completed it’ simply filed away and never looked at again.
For me, it forms an essential part of fleet control because if you ignore it then:
- You have no idea if something is wrong. You continue to purchase vehicles where the theoretical and practical don’t meet.
- Someone external to the original decision can point the finger at you and make statements like “We spend too much on service & maintenance. Our vehicles are total duds!”Most of us, myself included then feel under pressure to react with an emotionally charged action, to fix the perceived inadequacies – even though the higher maintenance regime is why the resale is so strong and the calculated TCO lower.
- You’re told to cut 10% of your fleet operating spend immediately. Well, where does the 10% come from? Consider this, imagine cutting 10% from your rego budget! You cant of course, which means you’re now trying to find 12 or 13% elsewhere to achieve an overall 10% drop.
Now, If you’re doing all that work at the outset anyway, then I strongly recommend you take the time to set up a budget for every vehicle exactly as per your TCO breakdown, remember these were the reasons you chose the vehicle in the first place. Then charge against these broken down budgets.
Why this is important
I’ve never had to look at the performance of a vehicle if it runs inside my TCO and operating parameters. If any vehicle deviates I know immediately and I can act to rectify efficiently.
Case Study 1:
A tyre budget went into the red. A quick look showed they were chopping out between 12,000 and 14,000 km. It was a torquey little diesel making it tough for the driver to identify if the steering was pulling slightly.
So I costed up a preventative rotate and balance program. I then reinserted the cost into the TCO to answer the question whether it was still the best choice.
The answer was YES and therefore the program executed and the TCO budgets adjusted accordingly. This meant that I did not have to review this issue ever again because, if it ever deviated, I would be alerted straight away.
Case Study 2:
How often do you hear “We are spending too much on our fleet, we are going to have to reduce costs”.
Not sure about you, but there where times I felt a bit like Danny Glover in Lethal Weapon, thinking “Im getting too old for this __ ” so I actually just don’t allow myself to get caught out.
My approach is now much more systematic:
- “Are you worried the vehicles are being under-utilised?”
- “Are you concerned more about the private use of the vehicles?”
- “Has the usage requirement changed or are we are simply using the wrong type of cars?”
If the answer is NO to these, then it means we are currently spending exactly the right amount on our fleet.
Now, imagine how good it feel to face your CEO, CFO or Manager and be able to reply with something like this…
“We chose our vehicle strategically identifying the TCO, we are currently 3% under our planned and unplanned repairs and maintenance and..we are also currently under budget for our tyres and for servicing.”
“We HAD an issue with our tyres back in May which would have impacted our costs by $8k over the next 12months, however we identified this issue immediately and therefore limited the potential costs to only $800 by executing a preventative initiative straight away, what led you to believe we are spending too much?”
Boom! Game over!
It may be a bit old school, but time motion studies & research in fleet management prove that by being proactive you can cut your admin time by 80%, yes you read that right…80%.
From experience, I know you are most likely super busy and the thought of doing more of what sounds like hard work is unrealistic.
Which is why you need to get your technology working for you. Today’s modern cloud based systems are now cheaper than ever and it doesn’t matter whether you’re a small fleet owner or a million car leasing provider.
In the fleet world today, granular visibility and a real time understanding of cost deviation is essential.
As essential as the ability to set and forget knowing you will be the first to know in the event you need to take an action.