Managing the Financial Side of Commercial Fleets

How Will Fleet Management Change in 2018 and Beyond?

November 2017, by Andy Lundin - Also by this author

Graphic courtesy of Getty Images.
Graphic courtesy of Getty Images.

The fleet industry is in an interesting period where, while there are some big changes heading down the pipeline, we are already witnessing the initial phases that will bring about the new future of fleet

Indeed, while a continued emphasis on safety, the development of big data, an increased utilization of telematics, and the continued interest in mobility are happening now, this is all just the beginning of what is to come in the next several years. These topics continually pique the interest of fleet professionals, and likely still will in 2018 and beyond.

Fleet Financials reached out to several fleet management company experts to get professionals’ perspectives on the status of hot industry topics and the directions they may head.

Safety is the Future

Essential for drivers, whether it’s now or in 10 years, is the need for safe roads.

While in-vehicle, driver assist technology already exists (e.g., lane departure warnings, rear-view cameras, etc.), and is becoming more readily available in newer model-year vehicles, fleet experts believe that the future of vehicle safety will be heavily dependent on the continued development of the technology.

“There’s definitely a correlation between safer vehicles and less accidents and casualties on the road,” said Mark Bryan, senior vice president for European operations at ARI.

Fleet experts believe the automotive industry still has a long way to go before the tech offered can significantly reduce the number of accidents/death being reported, especially considering the rise of distracted driving.

“I believe we’re in this sort of awkward adolescent phase where we have visibility to problems on the road, but the technology hasn’t quite evolved to do something about it,” said Michele Cunningham, senior vice president of Element Fleet Management.

However, while development of this tech continues, another technological advancement that will heavily impact the future of fleet safety is also the development and implementation of telematics and utilization of the data it provides. Indeed, data from telematics can offer solutions in terms of predictive and prescriptive analytics.

“Telematics is most effective in reducing accidents when real-time data is leveraged. When managers of fleet or administrators can immediately coach drivers with real-time data such as when they see incidents of speeding or aggressively braking or accelerating, this is when we see the most impact on reducing accidents and costs,” said Tom Coffey, vice president of sales and marketing for Merchants Fleet Management.

However, Kristofer Bush, vice president of marketing for LeasePlan USA, observed that the ability of fleets to successfully implement such technology may continue to be a challenge in the coming years.

“Whether it is finally making the move to telematics—or simply upgrading selector lists to include vehicles with more technology and safety features—the challenge to do so within existing financial restrictions may be difficult in many cases,” said Bush. “However, in time I expect data to show subsequent reductions in accident costs as a result of these advancements, which will offset the increase in upfront costs.”

Indeed, as technology continues to evolve, fleet experts believe that continued driver education is key to preventing dangerous driving behaviors in fleet, such as distracted driving, which remains to be an issue for the foreseeable future.

“Requiring drivers to complete safety courses and imposing harsh penalties for violations related to distracted driving can help to curtail these incidents. And while these steps may help, it’ll be difficult to fully eradicate these behaviors. This being so, fleets may want to prepare for the possibility of increased insurance claims and violations due to distracted driving,” said Brad Vliek, VP of client services for EMKAY.

The Mobility Revolution

A concept that gets used regularly in the auto industry is the idea of a “Mobility Revolution,” which is an umbrella phrase that covers many topics, including ride-sharing, autonomous vehicles, etc. This, of course, means that these topics are discussed by fleet managers and professionals regularly. However, fleet experts believe that where the industry stands now in terms of mobility is much different than how it will play out in the coming years.

But, as mentioned, some fleets are beginning to express interest in concepts of mobility. According to Bryan of ARI, some of the FMCs clients are considering a carpooling solution to use in their fleets.

“Instead of having 100% of their fleet, maybe they can go down 90% or 85% of their current fleet because there’s a portion of that population that doesn’t need a vehicle every day,” said Bryan. “But you need some sort of system in place to reserve a vehicle, keep track of where the vehicle is, and know who is in the vehicle at any given moment in time.”

John Korte, VP, mobility business development, Donlen, echoed similar sentiments regarding how mobility solutions may change how fleets look in the future.

“When you look at fleets and the utilization of their vehicles, they may have people that only have 6,000 or 10,000 business miles, maybe much less,” said Korte. “And then there’s the cost of having a company vehicle there. There may be other mobility solutions that you can offer employees like that, that the employee is going to see as more valuable, more economical, for the client in the fleet itself. It may not happen in 2018, but we’re going to see more of that in the next three to five years.”

Kevin Kelley, vice president of Enterprise Fleet Management, noted the significance that these types of models will have on the future of fleet and suggested that it might change how fleet managers address their overall operations, including vehicle ownership.

“At some point I anticipate a transition from a focus on Total Cost of Ownership (TCO) to a Total Cost of Mobility (TCM) model that follows every transportation mode associated with a given driver,” said Kelley.

But what the future will exactly look like remains to be seen. Indeed, the idea of autonomous vehicle is one that is discussed regularly, but is still too early in its developmental stages to safely predict how it will look for fleets, which is why other proactive measures that are relevant to today should be addressed regularly.

“Until full-fledged autonomy is a reality, fleets must implement a truly comprehensive approach to safety,” said Kelley of Enterprise Fleet Management. “In addition to leveraging new vehicle technology, each customized fleet safety plan should include: driver training, a telematics platform that affords visibility to driver records and behavior, and a proper preventive maintenance plan.”

However, once the technology does become ubiquitous to fleets, there are countless possibilities that could be taken advantage of.

“I’m really excited about the future because I think it will open up a lot of possibilities for fleet management,” said Dan Frank, CEO of Wheels, Inc. “Not only will new autonomous vehicles provide a safer and more productive workforce, it is going to enable new options for fleet we hadn’t even considered before.” However, Frank did note that there are numerous challenges that the technology must address before it can become ubiquitous to everyday life.

Bob White, executive vice president of ARI, echoed similar sentiments, regarding the uncertainty toward autonomy.

“I think the path forward is still somewhat unclear. What’s clear is there’s a lot of players moving into the market with different strategies,” said White. “I think there are many companies and many large, well-capitalized organizations that are spending significant amounts of their money trying to play more and more in that space.”

But the unanimous consensus is that change is coming, and fleets should at least consider future developments.

“Change is coming, no question. My advice would be twofold. One, listen to your drivers. After all they are the ones that need to be mobile. Gather their feedback. Ask them what makes sense when it comes to getting the job done,” said Bush of LeasePlan USA. “And secondly, partner with companies that are forward thinking and looking to the future.”

Handling Big Data

With the advent of technologies that provide fleets with a deeper scope into their operations, such as influx of data from telematics, the future is certainly looking bright to the professionals who continuously want to improve upon their operations. But because of this technology there is now an abundance of data that was once not previously available and is readily available, but may be difficult for fleets to fully assess. Fleets are now tasked with the practice of taking the data, making it actionable, and applying it to their operations.

“As the amount of data available continues to grow, fleets need to work on organizing the data to help them plan and execute both in the short- and long-term,” observed Kelley of Enterprise.

Making things tricky for fleets is the fact that the data comes in many different forms, as noted by Vliek of EMKAY.

“Data will become more readily available to fleet managers and drivers alike. Report generation and interpretation is slowly becoming systematic and automated into digestible snapshots pertaining to fleet performance,” said Vliek. “Although more granular-level snapshots of fleet data still require a trained eye for proper interpretation, the summary level perspectives are now readily available on the fly to assist with strategic decision making.”

Cunningham of Element suggested that the utilization of Big Data will continue to play a big role in fleet and will soon become a company best practice.

“The terms ‘Big Data’ and ‘Predictive Analytics’ are thrown around loosely,” Cunningham said. “Particularly in the year ahead, we’ll start to see some tangible deliverables against the promise, potential and perhaps the hype of predictive analytics. It feels like we’re moving into the moment where these terms stop being buzzwords and start becoming part of how well-run fleets are managed.”

But, directing the data to the appropriate figures in a fleet operation is a crucial step to making the abundance of data actionable.

“There’s more and more data that continues to be available,” said Korte of Donlen. “Now with the advent of telematics and all of the data that is being transmitted out of that vehicle, fleet management companies are really challenged with taking all of that data and then working with fleets to come up with prescriptive solutions, so we can help take all of that data, disseminate it down to a form where they can make actionable decisions on what kind of vehicle their using.”

Bryan of ARI echoed similar thoughts on the matter, and suggested spotting the outliers in the data.

“What people need to adjust and do differently is to focus on the outliers,” he said. “People should examine their data and ask themselves ‘what are the outliers to what I’m seeing?’ And more important, what impact are those outliers having on the performance in the TCO of my fleet? What insight can I gain from that analysis that will drive an action or a change in behavior, either from a management standpoint, or from a driver’s standpoint.”

Accounting Changes

Another subject that is pertinent to fleets are the fast approaching reforms on new accounting standards for reporting lease transactions.

The Financial Accounting Standards Board (FASB) voted in 2015 to move forward with a new standard that would require companies and organizations to include lease obligations on their balance sheets.

“(This is) not a prediction or a trend, but more of a reminder that the new lease accounting standards go into effect in January 2019,” noted Bush of LeasePlan. “This means fleet managers need to begin collecting data for comparable financial statements. It’s important for fleets to get input from their company’s finance experts and/or accounting firms to ensure they’re prepared for the transition.”

These changes will be implementing in 2019, though fleets will have to state backward two years (2018, 2017) for comparables, but 2019 will be the official year that it goes into effect, noted Frank of Wheels, Inc.

He also expressed the importance of fleet managers talking to an account manager to best handle the incoming changes.

Coffey of Merchants also offered some thoughts to the subject, which he observed is an essential discussion fleets should be having.

“A lot of companies right now are grappling on how to properly show their leasing costs on their financial statements. All kinds of assets including fleet vehicles that have been off balance sheet will now be required to come on balance sheet. It is important companies consult their accounting and audit staff as to how best make this transition over the next two years,” said Coffey of Merchants.

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