Managing the Financial Side of Commercial Fleets

Change Propels State Farm to Success

Managing one of the largest corporate fleets in the nation is a big responsibility. State Farm Insurance’s Dick Malcom, the company’s fleet administrator, has the resume to do the job.

July 2012, by Staff

In the fleet industry, it often seems that so many of the professionals have “fallen” into the job, or “volunteered” by standing still while everyone else stepped back.

For Dick Malcom, fleet administrator at State Farm Mutual Automobile Insurance Company, it’s a very different story. “I have always felt that my entire working career happened in order to help me prepare for my job at State Farm,” he said.

Preparing for Fleet
Malcom’s “preparation” began at the University of Illinois, where he earned a B.S. degree in recreation park administration. He immediately segued into the automotive business after graduation.

“I spent seven years working at a family-owned Ford dealership,” he related. “It was a job that helped prepare me for my next position at Country Financial.” Malcom spent the next 17 years with the financial firm in its fleet and public lease department. It was his formal entry into the fleet world.

His next career move was to State Farm, taking over the fleet in 2000.

Making a Mark
Not many fleet managers can boast a background that includes fleet leasing, automotive, and dealership experience. For the past 11 years, Malcom has leveraged his resume to the fullest. That resume is important when one looks at the State Farm fleet.

“Dick does an excellent job of ensuring we have the most efficient cost-effective fleet of vehicles available for our associates to accomplish their jobs,” said Malcom’s supervisor David Matzinger, manager – administrative services. “He is well respected in the field and worked hard to establish relationships with the manufacturers and key contacts in the industry.”

In December 2000, the company operated more than 20,000 vehicles, with many of them used as pool vehicles, assigned daily to adjusters to visit customers, write estimates, and negotiate repair prices with shops.

By late June 2012, Malcom had overseen the reduction of the fleet to slightly more than 12,000 units, consisting of sedans, vans, and light trucks, resulting in substantial savings. The reduction was accomplished in a number of ways.

“Since 2001, we have increased the mileage we drive our sedans from 60,000 to 85,000 miles,” Malcom explained.

He also took a close look at how the fleet used its pool vehicles. “We have reduced our pool car portion of the fleet by augmenting with rental vehicles,” he said. “This allows us to increase the utilization on the remaining pool cars and hold a smaller number in this category.”

While many large fleets are leased, State Farm has opted for ownership. “Based on the current cost of money, and the depreciation options made available by the federal government, we find owning our vehicles to be the best option for State Farm Insurance Companies,” Malcom said. The fleet is currently 98-percent owned, on its way to 100 percent.

Implementing Best Practices
Malcom sees his mission clearly. “It’s to provide the safest, most economical vehicles available that will handle the necessary job requirements of each position,” he explained. “And, equip those vehicles with a group of standard comfort features.”

Some fleets prefer to bundle key fleet management tools with one or two suppliers. Programs such as leasing, maintenance management, accident management, and fuel are sourced via a single fleet management company (FMC).

Malcom exhibits a preference for the “best practices” method, where each process is sourced separately, and the result is that the State Farm fleet uses a number of internal, as well as outsourced, programs. “Although we’re company owned, we source our vehicles via a purchase program,” he said. “We can leverage our buying power with it, and the program, in turn, leverages its buying power with the manufacturers.” This enables State Farm to purchase vehicles at the lowest cost possible, according to Malcom.

Fleets that prefer to outsource key functions use a lessor or fleet service company’s online tool to manage costs and inventories. Malcom has chosen a different route for State Farm: a fleet software package that is in-house, which enables it to manage as well as own its data.

“Earlier this year, we implemented new fleet management software,” Malcom said. “This tool assists us in tracking our expenses, including mileage, usage, drivers, and vehicles.”

The software replaces a “home-grown” solution the company had used since 1996. “The old system was good,” he said. “But, we believe we will be able to obtain a good deal of additional information from this system to help us manage our fleet more efficiently.”

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