Fleet management is often in the top two or three cost drivers at an organisation. That’s why fleet managers need to take a strategic approach to improve operational effectiveness.
The first step is to understand assets only exist for one reason – to support organisational objectives. It’s not easy. Management can fall into the trap of simply accepting the fleet is there to do what needs to be done. Meanwhile, fleet managers can think it’s as simple as keeping the fleet services moving and replacing vehicles at the right time.
The fact is good fleet management will determine an organisation’s success or failure. Think about the inherent importance of vehicles and transport to local governments, waste collection, emergency services, ambulances and transport companies, to name a few.
Put simply, fleet management is a multi-disciplinary field that includes engineering, commercial, financial and human elements, along with a good understanding of the organisation using the fleet. By definition, a vehicle carries the same obligations as an office, factory or depot.
As management guru Peter Drucker says, “If you can’t measure it, you can’t improve it.” This is also true in fleet management, where we measure attributes of the fleet and monitor these metrics to guide decision-making and identify opportunities for improvement.
What you measure will depend on a range of factors, including your strategic objectives, risks and current focus. To do this, the fleet manager needs to know what lies ahead, such as:
- Projects being wound up
- Merging or acquiring new business
- Tightening capital budgets.
A fleet manager needs to consider a capital works contractor whose contract with a utility is winding up in 18 months. In this instance, the fleet manager should be considering how to re-deploy assets, defer replacements or modify lease terms.
Making sure assets are fit-for-purpose means they will be safer, more reliable and less costly over time. This process needs to be deliberate and methodical. Do this by:
- Understanding the tasks – Consider if current procedures define what needs to be done
- Engaging end users – They provide valuable insight and encourage buy-in on decisions.
It’s also crucial to understand the cost drivers and capture good management accounting data on your fleet. The broad heading ‘aggregate costs’ doesn’t provide the granularity you need to manage costs effectively.
Make sure you capture a breakdown of all maintenance costs under categories such as servicing, repairs, crash repairs and tyres to provide insights into poor performing assets, and high-cost operators or departments.
Bear in mind the most inefficient vehicle in your fleet is the one you don’t need, so make sure to review your fleet utilisation and consider whether a restructure, such as pooling vehicles, could be a more efficient use of resources. To be effective, pools need to be supported by management commitment, policy and procedure.
Lastly, consider the reliability of the fleet. Poor reliability doesn’t only impact operationally, it carries reputational risk and financial consequences. This is crucial because equipment downtime is often the hidden cost of fleet management. Downtime includes replacement costs, idle staff costs, associated equipment downtime, overhead costs and deprecation.