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July 2012, Fleet Financials - Feature

The Pros & Cons of Centralized or Decentralized Fleet Operations

Some companies determine that the best way to manage their fleets is by decentralizing fleet management; others believe centralized fleet management is the most efficient and cost-effective.

by Staff

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As with any number of departmental functions, senior management must determine whether fleet management should be a staff or line-management function. The decision is one of allocating precious company resources (money, people, and time) to their most productive uses.

Some companies determine that the best way to manage their fleets is by decentralizing fleet management, delegating fleet responsibilities among various regional or internal operations.

No matter how a fleet decides to run its internal operations, one thing is a must: a clear, well-written fleet policy.

Defining The Fleet’s Mission
The first step in determining whether to centralize or decentralize fleet functions is to ensure there is a thorough understanding of the fleet’s mission.

Utility and delivery companies cannot operate without the cargo capacity required for their jobs. The mission is part and parcel of each company’s existence. For a consumer product company or insurance provider, it can be less clear cut. True, employees are provided vehicles due to the high mileage they accumulate; however, there is the reasonable possibility that employees can use their own vehicles and be reimbursed. This is not an option for a utility. Expecting a potential hire to have a bucket truck is a stretch.

Centralizing Operations
The more integral a company vehicle is to the overall mission, the more it lends itself to centralized management. It is perhaps simplest, or at least the most obvious, to put the responsibility for fleet management in the corporate office.

The primary benefit is that the overall administration requirements are limited, and, thus, a higher level of concentrated expertise can be achieved.

The recruitment and hiring of professional fleet management staff is focused in a single department, as is the building of staff functions. But, personnel advantages are only one of a number of advantages of centralizing fleet management.

Vehicle Selection: Some companies have homogenous fleets — the fleet mission is consistent throughout the field. Others have multiple missions with diverse requirements. Either way, centralized vehicle selection provides both high consistency and expertise that may not be available at the divisional or branch level.

Fleet Management Services: This includes primarily fuel, maintenance/repair, and collision management/subrogation recovery. The question of centralization of the provision of services is a little more complicated. The purchase of fuel, maintenance/repairs, tires, and collision repairs involves regular, ongoing activity at a local level. The economies of scale that can be achieved via centralization aren’t always evident here. A local branch, for example, may be able to contract with local suppliers that, in return for the regular flow of business and prompt payment, can provide substantial discounts, including vehicle delivery and pick-up.

The primary advantage of centralization is truly the collection, storage, and dissemination of the cost data that services generate. A single, centralized service offers a single data source, with the ability to run and schedule reports in one place at one time.

Fleet Administration: Many of the day-to-day activities required to run a
fleet can be handled at the corporate level. Interaction with vendors, establishment of policy/procedures, driver communication, record maintenance, etc., are functions that field operations are generally not equipped to handle — either from a personnel or resources standpoint. Keeping a smooth flow of communication and information is often best handled from a single source.

In most cases, the centralization decision is one of availability and allocation of resources. Frequently, the corporate office is better equipped to handle many departmental functions, including fleet. Arguments can be made, however, for decentralizing at least some fleet functions.

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