A vital question that fleet practitioners must consistently ask themselves in relation to their organisation’s plant and vehicle fleet is what do we manage to increase effectiveness and drive down costs. IPWEA FLEET recently posed this question to two industry experts and a practicing fleet manager presenting at the first session of IPWEA’s Fleet Winter Webinar Series. There were a number of fundamental steps that were shared with attendees.
The importance of using a structured approach to be more effective was immediately highlighted during the session. Brett Hay, Principal Consultant with Expense Reduction Analysts (ERA), said that in order to manage costs effectively “it’s important to follow a process.” Brett then talked about fleet managers “needing data” to raise awareness of trends internally within the organisation. He suggested that fleet practitioners “need to understand what is going on within the organisation and that needs to happen fairly regularly.” He then stated that “spend data should be well analysed and quite relevant.” Brett also touched on the importance of benchmarking data, leveraging internal or external expertise, developing fleet policies, managing costs constantly and producing reports regularly.
One of the key drivers in managing costs is understanding and applying the concept of Total Cost of Operation or Ownership. Tom Debney, a session co-presenter and Principal Consultant at ERA, remarked that “TCO is probably the most important thing that you can introduce in the management of your fleet.” Tom stated that “TCO is essentially all costs associated with operating vehicles that your employees are using and for which Council or company are paying.” He went on to say that TCO “will probably be the second highest cost in the organisation after wages and salaries.” Given this, it is imperative to understand the components that make up the total costs to own and operate your fleet.
Once the break-up of costs is understood then it is a matter of considering the areas where costs can be saved. Some examples discussed during the session included
- Securing fixed price servicing
- Standardising with a single OEM,
- Knowing your lease rates,
- Understanding what the likely residual value will be at time of purchase; and
- Working with leasing companies to share the profit on resale of returned vehicles, to name a few.
Actual cost saving measures were shared by Nathan Reynolds, Manager-Asset Projects for charitable organisation Life Without Barriers (LWB). Nathan showed how he applied a framework to achieve a 16% reduction in costs over a 3-year period, which has saved the organisation millions of dollars. His cost saving journey includes recognising, defining, measuring, analysing, improving and controlling costs.
Significant steps were taken by LWB to achieve such a successful outcome. “There were multiple aspects to this project and the backbone to everything that we have done was telematics” Nathan acknowledged. He continued, “there is no way we could go and re-shape a fleet like ours to the size and the scale that we had and the spread like ours without telematics data.”
Once LWB rolled out an ability to capture data in various ways, the organisation identified areas of cost savings. This included having too many vehicle models, not understanding how vehicles were used, vehicles being overdue for service and fuel management to name a few. It became obvious to the organisation where savings could occur and action that was required.
Helpful tips to manage costs presented at the FWW session included:
- Use a structured approach
- Understand your whole of life costs or TCO
- Do not underestimate the value of data
- Develop reports and dashboards
- Prioritise to build your business case
- Don’t try to do everything all at once
- Measure and celebrate success
- Always think continuous improvement
There are still 3 more sessions to come in our Fleet Winter Webinars. Click here for more information or to register.
Also, further information on cost management can be found in the Plant and Vehicle Management Manual Edition 4, which is available for purchase now.