It is a question that all managers face. The shareholders, banks, and investors all want a better bottom line and everyone is expected to contribute. Sales must sell more, operations must be more efficient, and manufacturing must be more productive.
Fleet managers have an especially challenging task as it pertains to helping the bottom line.
First, what they manage is a cost. A fleet vehicle helps drivers do their jobs, which creates revenue. But, a fleet budget is an expense, which reduces the overall company bottom line. Second, fleet managers frequently have to manage that cost with limited resources and little or no staff. Finally, at some point, the fleet manager has squeezed most of the obvious waste out of the fleet, and it becomes subject to the law of diminishing returns.
Where should a fleet manager focus his or her efforts? Working to increase productivity (and thus revenue), or continuing cost-reduction efforts?
There are a number of ways internal fleet department productivity can be measured. Telephone statistics (hold times, calls answered, and dropped calls), tracking problem solving (time from initial notification to final resolution), and overall cost/performance are all departmental productivity measures.
How can productivity be measured as it pertains to fleet? Is it limited to drivers and how the vehicles they are assigned help or hurt them in job performance? Or, is it simply the measure of how much work the fleet department/manager can accomplish given the resources they have?
There is no short answer; however, a thorough measure of productivity should include both.
Fleet vehicles are provided for a number of reasons (other than pure compensatory purposes, as with executive fleets). These reasons include:
- To support the sales force.
- To service customers and customer accounts.
- To deliver products to customers.
In each case, productivity can be measured fairly simply by tracking how many sales calls, service calls, or deliveries the driver makes. Changes in the fleet can have an effect on these numbers, both positive and negative, including:
- Downsizing, either the vehicle count or fleet inventory (territory changes).
- Selector changes, different makes and models, body styles, and vehicle types.
- Telematics or GPS products and services.
- Policy and procedural changes.
Internally, there are a number of ways internal fleet department productivity can be measured. Telephone statistics (hold times, calls answered, and dropped calls), tracking problem solving (time from initial notification to final resolution), and overall cost/performance are all departmental productivity measures.
Clearly, fleet management can have an impact on productivity, sometimes a substantial one.
Realizing Cost-Reduction Opportunities
On the other side of the ledger, fleet management can be a fertile ground for cost-reduction efforts, primarily within the operation of the vehicles themselves, but departmentally as well. There are two overwhelming costs that fleets can manage: depreciation (fixed) and fuel (variable). Together, they make up as much as 80 percent or more of a typical vehicle’s lifecycle costs, and, thus, are big targets for a fleet manager’s cost-reduction efforts.
Other cost categories, such as physical damage costs, maintenance/repair, and tires can be managed as well. Although the costs aren’t as large as those for depreciation and fuel, savings can be had.
Departmentally, careful outsourcing can help achieve savings, not just in personnel costs. Cost-reduction efforts can be leveraged by hiring outside expertise, better technology, and more detailed reporting.
Finally, with the new emphasis on procurement and strategic sourcing, fleet managers can be the key product expert that, combined with the negotiation skills of sourcing, can reduce costs by leveraging purchasing power into lower fees and rates. There is little question that the hard work of a savvy fleet manager can bring substantial cost savings to the company.
It’s clear that fleet managers can help both the top and bottom lines of the company income statement. But, certainly fleet managers have fewer resources, and less time to use them, than ever before. A decision has to be made. Should those resources and that time be spent increasing productivity or in reducing cost?