Managing the Financial Side of Commercial Fleets

Fleet ‘Truisms’ — That Just Aren’t True!

Fleet management is rife with “truisms,” so-called conventional pieces of wisdom, that, although well intentioned, aren’t always true. Here are some examples of such truisms about which fleet managers can, and should, be skeptical.

January 2014, by Bob Cavalli

The world is full of “truisms,” or concepts that are often accepted at face value. Fleet management is no different. Some “fleet truisms” come from fleet managers based on past experience, some from suppliers providing advice and counsel. All are meant to help fleet managers to do the job better.

But, are all of them true? Many are outdated, based on decades-old conditions and circumstances that have changed to the point that they need to be either updated or scrapped altogether. Some never were applicable to a broad enough range of fleets to even be real truisms. Whatever the reason, fleet managers are wise to take a good look at the conventional wisdom with a skeptical, analytical eye.

FALSE TRUTH NO.1: Fleet vehicles should be replaced on a three-year cycle.

This is a fleet truism that is rapidly becoming outdated, and is generally based on circumstances more than three decades old.

In the early days of fleet management, vehicle lifecycles tended to be far shorter. With the accumulation of miles, the failure of major components such as powertrains (engine and transmission), as well as the deterioration of body parts (rust), was not entirely uncommon. A fleet manager with 1,000 vehicles could expect to have to replace a number of transmissions/transaxles, and several engines, each calendar year.

In addition, vehicle warranties generally were limited to 12 months/12,000 miles. As a result, fleet managers — and the truism — called for replacement criteria established to avoid such major expense.

What has changed? Warranties now range from a minimum of three years/36,000 miles to as much as 10 years/100,000 miles for powertrain components. The quality of such components has also improved geometrically (reflected in the increase in warranty coverage). The simple fact is, vehicles are better built and last longer than ever before.

Finally, 21st century technology has not only added to the improvement of major components, but adds real-time diagnosis of potential problems. This makes issues simpler to address now, before they contribute to catastrophic failure.

Fleet managers looking to maximize utility and minimize total cost of ownership should consider extending replacement beyond the 36-month cycle that has been so common (or, for trucks, more than 48 months). The key to the success of such a change is a vigorously applied preventive maintenance schedule; not only will this keep vehicles running longer, but it will ensure that warranty coverage is maintained.

Contrasted with vehicles from the 1970s or 1980s, cars and trucks in the 21st century are better built, constructed with better materials, and (if well maintained) will last longer than ever before.

FALSE TRUTH NO.2: Fleet management is about cars and trucks — only.

When the fleet management profession was in its infancy, and for a long time thereafter, the fleet manager was looked upon as the company’s “car guy.” (Yes, guy, since back then women had barely been allowed over the fleet threshold.) As companies began formalizing the job of fleet management, they more often looked to the car industry for candidates. Dealerships, the used-car industry, repair shops, even those who had served in military motor pools, were considered for the job.

There is nothing innately wrong with these areas as breeding grounds for fleet managers, but, today, the job is really only tangentially about vehicles. As the profession expanded and matured, companies began to realize that the skill set for a successful fleet manager included far more than simply knowing how to sell a car or perform a brake job.

Companies began to look for backgrounds in finance, accounting, procurement/purchasing, administrative services, and more. Asset management — the acquisition, care, and total cost of ownership of the fleet asset — is complex, and requires a more broad-based background. Sadly, too many companies and management teams still believe that just knowing about cars is enough.

FALSE TRUTH NO.3: Maintenance/repair management requires serious technical expertise.

In the 1970s, a relatively new service began to become more and more popular with fleet managers: maintenance management. With major component failures and subsequent repairs far more common than today, and a large percentage of them not covered under warranty, fleet managers generally lacked the in-depth technical knowledge to discuss such repairs with the shop.

Fleet lessors and service providers came up with an outstanding answer — a program that would provide drivers with the means to purchase preventive maintenance, a national network of repair facilities, and, when there are serious repairs to be done, certified technicians to negotiate the repairs on the customer’s behalf.

 Flash forward to 2013: Powertrain warranties are as long as 10 years/100,000 miles, with new-vehicle warranties (bumper to bumper) at as much as five years/50,000 miles. Major component failures are not only rare, but are usually covered under the new warranties.

Thus, the vast majority of activity is preventive maintenance, tires, and brakes. Since tires and brakes are important safety items, they are seldom refused; drivers, or fleet managers, can ask the shop for tread measurements for tires, and make commonsense determinations as to whether a complete brake overhaul is necessary.

Yes, there are definitely times when an experienced mechanic is needed to discuss repairs with a shop, however, those times are rare, especially compared to the same need when maintenance management was first introduced. Fleet managers should carefully analyze whether the monthly fees they’re paying for such programs are really needed.

FALSE TRUTH NO.4: Using multiple suppliers ensures more competition.

There are a number of fleet lessors and service companies that fleet managers can use; some are very large, global suppliers, others regional, still others local. All of them, by necessity, must be aggressive competitors to be successful.

For many years, fleet managers were told that one way to ensure that suppliers compete for their business is to split their business among two or more of them. In this way, these vendors will provide the best pricing and service, with the hope of obtaining a greater portion of their business, and/or retaining that portion they have now.

The competition for fleet business is just as intense today as ever, particularly in the large fleet (1,000-vehicles plus) segment, where the splitting of business more often occurs. Suppliers spend as much time and money “playing defense” as they do seeking new business. Fleet managers should ask an obvious question: Is a supplier more likely to compete for half my business than it is for all of it?

The answer, of course, is no. If suppliers know a fleet has a “policy” of splitting business, it will know that no matter how they price or how aggressive it is, it will never get all of the fleet, and will price, and service, accordingly.

Fleet managers should consider bundling their programs under one supplier for a number of reasons. A single-billing, one-field contact, and one-program supplier is a great deal easier to manage (particularly in an era where so many fleet managers don’t have staff). From a competitive standpoint, a single supplier will compete aggressively when, for example 1,000 vehicles are at stake vs. 500, particularly if the customer has made it known that policy dictates that the business will be doled out to more than one supplier.

FALSE TRUTH NO.5: Fleet lessors want to take over your job.

Okay, perhaps that is a bit severe. But, there is little question that fleet managers can be paranoid about lessors’ intentions when they come calling.

Twenty-five years ago, the introduction of so-called “total fleet management,” today frequently called a “fleet desk,” sent a collective chill down the spines of fleet managers nationwide. The execution of policy, taking phone calls from drivers, combined with more common management programs for maintenance, fuel, and accidents, seemed to many fleet managers to be an effort to eliminate the middleman between the supplier and company management.

 Nothing could be further from the truth. Originally, lessors developed the total management concept in response to requests from the market. There were companies who often had no formal fleet department/manager, and who looked to lessors to provide that process to them. Most lessors recognize that a professional fleet manager is necessary, and have no issue in dealing with him or her.

 Further, dealing with a professional fleet manager is far easier than with someone in the company who is unfamiliar with the job. “Training” a non-fleet professional consumes time and resources that can better be used to service the account. n

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