Managing the Financial Side of Commercial Fleets

Slow Recovery Requires Fleet Managers to Adapt to the 'New Normal'

With the economy in a continued slow-motion recovery, fleet managers have had to be resilient and creative in doing more with less. The result: Budgets may have shrunk, but the bottom line has increased.

January 2012, by Grace Suizo & Chris Wolski

The Best Vehicle for the Job

Best Buy is also in the process of replacing 636 full-size cargo vans with smaller vehicles, such as the Ford Transit Connect. It has replaced 772 V-8 engine cargo vans with smaller six-cylinder vehicles that produce better fuel economy.

Likewise, ThyssenKrupp Elevator has transitioned to the four-cylinder Ford Transit Connect, increasing its fuel economy by 8 mpg. The company has also introduced propane autogas pickup trucks into its fleet, for lower fuel costs and an unexpected time savings, since these vehicles are eligible for high occupancy vehicle (HOV) lane access reducing fleet drivers' time on the road.

Fuel producer Valero saw the immediate economic benefits of rightsizing when it transitioned its car fleet from the V-6 Ford Taurus to the four-cylinder Ford Fusion. The result has been a 6.5-cents-per-mile savings for each vehicle - a lifetime savings over 47 months of almost $575,000.

Leaning on FMCs

Ongoing pressure to cut costs has prompted some fleets to rely more heavily on services from fleet management company (FMC) partners.
Pharmaceutical company Pfizer said it is increasing its reliance on FMCs as the ability to perform the basic functions (e.g., good customer service and acquiring market-competitive vehicles) while also striving to improve operations and cut costs has become more challenging.

Best Buy has worked with its FMC to manage fleet and DOT operations. In addition to the 19-percent decrease in cost per vehicle per month and a 15-percent reduction in total carbon emissions since 2009, the company has also worked closely with its FMC on major projects that include quantifying the optimal lifecycle and protocols for vehicle branding, participation in annual vehicle reviews and analytics to understand the appropriate vehicle for each job function, establishment of a vehicle retirement policy and retirement planning, and management of major ancillary Best Buy fleets.

FMCs have also been working with fleets to develop mobile applications as a way to help lower fleet costs, increase driver efficiency, and improve fleet management control.

Best Buy, for example, uses its FMC's telematics application to monitor and report to field teams how well it is managing vehicle expenses.

Making Do

Keeping vehicles in service longer is another approach fleets have been taking to reduce costs. While not a one-size-fits-all solution, it has been effective for several fleets.   

American Family Mutual Insurance Co. stretched out its existing models an extra six months and 15,000 miles, going from a replacement cycle of 36 months/60,000 miles to 42 months/75,000 miles.

PPG Industries has been gradually extending its vehicles 10,000 miles each year (from its original 65,000-mile cycle), and currently has a standard 95,000-mile replacement schedule. The fleet has experienced significant cost savings, with only minimal maintenance cost increases.   
Advance Auto Parts has also been able to go an extra year keeping the same vehicles and without growing its fleet unnecessarily. To avoid spending money on purchasing more units, it has successfully managed to shift several hundred underutilized vehicles across its U.S. operations to fill in where needed.

In addition to stretching the service lives of vehicles, more fleets have also adopted longer oil change intervals, by using, for example, synthetic products to help save costs on oil changes. Keeping up with service intervals that match vehicle usage is another way fleets have explored to minimize oil drain charges.

The Bottom Line

These are only a few examples of how savvy, cost-conscious fleet managers are conducting fleet business in today's "new normal" of tight budgets and ever-shrinking resources.

What these fleets show is that, instead of being a detriment, necessity has become the "mother of invention," pushing fleets to operate at peak performance for the benefit of drivers, the company, and customers. FF

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