Fleet: Key Considerations
Have you ever wondered what other company’s fleets look like? How other companies source their fleet units, parts, and services? What information is needed to begin? The first thing to know, is that no two fleet profiles are the same. The second thing to understand, is that there is no right place to start; it all depends on your corporate procurement goals. Are you trying to maximize upfront funds? Is your goal to streamline services and optimize vehicle performance? Are you attempting to marry two fleets after a merger or acquisition? There are endless scenarios that will benefit from strategic procurement thinking.
Where to start?
Understand your fleet as it operates today. In order to measure the benefit from your sourcing endeavor, first you need to set a baseline. This will require gathering data from your current fleet providers as well as the folks in your organization who utilize products and services from those fleet providers. You will need to collect and review policies, invoices, contracts, and usage reports. This stage can be tedious and time consuming, but it is crucial to creating a successful sourcing strategy. Once you understand where you are today, you can contemplate where you would like to go.
Developing a strategy
The most obvious goal of any sourcing initiative is to save money. In the fleet category, it is also important to consider long-term partnership potential, technology offerings, vehicle efficiency, and the impact of any change to business as usual.
When developing a fleet category sourcing strategy, consider starting with the units themselves. Work with your internal stakeholders to understand acquisition projections over the next three to five years. Long-term agreements allow manufacturers and maintenance providers to get a feel for your fleet needs and help establish a partnership.
- Do(es) your fleet manager(s) have a manufacturer preference?
- Has your fleet team developed standardized specifications or are units acquired ad hoc?
- Has your company set clear fleet replacement policies?
The next key areas to understand before taking the fleet category to market are purchase and payment requirements. A clear understanding of payment logistics can help streamline pricing and contract negotiations.
- Is your company buying units outright or financing them?
- Is your fleet made up of employee-owned units?
- What are your corporate preferred payment terms?
- How much flexibility does your financial department have with regard to payment terms?
Now that you have determined the units you will acquire and how they will be paid for, it is time to consider how they will be maintained. A solid maintenance partner can mean the difference between an efficient, safe fleet and a disorganized, costly one.
- What is your company’s geographic footprint and will it stay steady or is it likely to change over the next few years?
- Do you plan to maintain units through a managed maintenance program or will you reimburse your drivers based on mileage?
- Do you have a corporate expense program for fuel purchases or will you need to engage a fuel card provider?
- Is your fleet large enough to justify on-site fuel tanks or on-site fueling services?
- Are you changing the way your fleet operates today or continuing business as usual?
- Do you plan to implement any technologies to improve your fleet performance or monitor driver behavior?
- How much involvement does your fleet manager want in the day-to-day running of the fleet?
The largest spend areas for fleets are typically the units, maintenance services, and fuel. This leaves fleet tail spend, or the various products and services that make up the minority portion of your annual spend. Depending on your maintenance strategy preferences, this may include driver training services, telematics devices and subscriptions, tires, replacement parts, disposables (oils, lubricants, filters), washing services, and/or up-fitting parts and services. Each of these smaller categories will require a unique strategy that compliments your unit acquisition, maintenance, and fuel strategies.
While fleet sourcing can be complex and requires multiple departments to coordinate, it can be very rewarding to your bottom line. I have seen incredible results from well-managed, coordinated sourcing efforts with hard dollar savings in the millions of dollars for large fleets. I highly recommend a comprehensive sourcing approach with an eye toward leveraging corporate-level fleet spend to consolidate the supply base and execute long-term agreements to optimize your fleet performance.