Managing the Financial Side of Commercial Fleets

How to Minimize the Impact of Fleet Management 'Pain Points'

May 2015, by Staff

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“Pain points” are not major crises or terrible events — they’re just simple fleet management issues that fleet managers must deal with as part of the job. They happen daily, they’re often predictable, and they can make a fleet manager’s day miserable.

Most fleet managers know what these pain points are, but not all of them know how or care to do much to avoid or at least manage them. However, there are steps fleet managers can take to minimize their impact.

Alleviating Build-Out Anxiety

It’s always a time of anxiety when the model year comes to a close and manufacturers halt factory production for the summer. Inevitably fleet managers have an order or orders, which are in the banks, and now will have to find out which will be built and which will be moved out to the next model-year. This can lead to:

  • Out-of-stock purchases (and the ensuing price premiums).
  • Higher mileage on cars that would have been replaced, with additional maintenance and repair, and further erosion of residual values.
  • Frustrated drivers, who expected to already be in their new vehicle.

Now, the fleet manager must scramble to first find out what orders will be produced, and then figure out what to do about those that will be moved out to the next model-year’s production. And, unlike build outs 20 years ago, when manufacturers would introduce the new model-year and stop production within narrow time periods, today intros and build outs are spread throughout the year, and are much more difficult to predict and manage.
What can be done to alleviate the impact of build out on a fleet operation? Several steps can be taken:

  • Stay in touch with the manufacturer’s fleet reps. Make certain they know how critical it is for you to know when the models on your selector will cease production.
  • Be prepared and go over your replacement schedule. Determine which vehicles must be replaced, and which can be extended for additional miles. Do this from the beginning of the model year, so that, when the general build-out window arrives (late winter, early spring), you can decide what orders to place.
  • Communicate with drivers and their managers. Let them know as soon as you get definitive notice on build-out dates, and prepare them for the possibility that some vehicles may have to remain in service through the summer.
  • Track and manage your inventory. Fleet managers may be able to move cars that have been turned in prior to build out to drivers whose orders won’t be produced until the next model-year.

Managing Fuel Costs

Fleet managers must budget for both operating and fixed costs. Fuel costs are by far the largest operating expense, and can often be a major pain point for fleet managers, many or most of whose job performance is in no small part determined by results compared to budget.

Think for a moment back to 2008, when fuel costs went on a roller coaster ride, from roughly $3 per gallon in January, spiking to $4.11 per gallon in July, then plummeting to $1.64 per gallon by Christmas. How does a fleet manager budget for that?

However, there are definite actions that fleet managers can take to mitigate wildly swinging fuel prices:

  • Manage fuel expense as reported, not fuel prices at the pump. Fleet fuel card programs can provide enough detail to show “slippage” — that is, non-fuel purchases that are flowing into the fuel cost category when transactions are posted. Make certain that what is reported as fuel is indeed fuel.
  • Use the controls that fuel card programs provide not only to limit fuel purchases (number of transactions in a week, dollar limits, etc.), but also to report exceptions such as gallons purchased in excess of the tank capacity of the company-provided vehicle. 
  • Train drivers to use fuel price applications, often provided by a fuel card supplier, to find the lowest price available. 
  • Research fuel prices, particularly projections of future prices, before budgeting.
  • Don’t budget a flat-fuel expense amount for the year; fuel prices nearly always spike during the spring and summer driving seasons.
  • Document everything related to fuel — pre-budget research, fuel pump prices, and your efforts to manage fraud, slippage, and exceptions. 
  • Consider alternative-fuel vehicles where practical, including standard and plug-in hybrids, electric vehicles, and even liquefied natural gas (LNG) and propane autogas. Research the costs and the payback on investments. 

What this all adds up to is, put simply, a fleet manager just doing the job. All of the above should be a fundamental part of a fleet manager’s responsibilities.

Facing Meddling Management

Of all the pain points fleet managers often face, few are more frustrating than having to deal with managers who meddle in the fleet operation. On one hand, fleet managers need to recognize that meddling managers have egos that sometimes need to be massaged. On the other hand, though, they lack the experience and expertise that are needed to manage the fleet properly.

Here are some ways to help ease the pain of meddling management:

  • Establish yourself with management; if the fleet manager is new, use meetings with managers to establish your fleet management bona fides. 
  • If the manager is new, be fully prepared with key data, such as benchmarking data not only against like fleets but against prior years, any analysis done for vehicle selection, and key policy such as replacement criteria.
  • Know who all of the stakeholders are on the executive floor. Finance, sales/marketing, and operations are among the key areas that could be sources of fleet meddling. Also, know the areas of the fleet operations in which they might be tempted to meddle.
  • Understand that fleet suppliers’ sales personnel are encouraged to go as high in the organization as possible to make their pitch. There is nothing whatever wrong with this — in some cases, the fleet manager isn’t the ultimate decision maker, and sales persons always want to talk to decision makers. But, make certain that you have your numbers ready, since. in most cases. that decision maker will contact the fleet manager to discuss a proposal. 
  • Develop relationships wherever and whenever possible. Know the stakeholders, and make certain they know you. Keep them informed, at various levels, on all major decisions, and the analysis and research behind them.
  • When it comes to meddling management, deal with it carefully — one doesn’t get that high in the organization without an ego, one that is easily bruised. However, with proper preparation, the pain of dealing with this area can be at least made palatable. 

Selecting Vehicles

The simple process of choosing which vehicles the company will use can also be a pain point in a number of ways:

  • The aforementioned meddling executives, who often have make/model biases that they may attempt to use to influence a fleet manager’s decision.
  • Drivers also have make/model biases, and are generally not shy about making them known. In addition, those who are “too tall” or “too big” to fit into the vehicles on the selector may look for special exemptions that might get them a bigger vehicle.
  • Regarding vehicles, whether there is no “selector” (that is, all vehicles are the same, as in a service-type fleet), or a selector contains several different choices, it is inevitable that there will be recalls, mechanical problems not quite to recall levels, and even sometimes residual proceeds that aren’t up to projections.

These, and other issues, almost always contribute to a fleet manager’s misery. Selector issues won’t ever go away, but there are ways to soften their blows:

  • Fleet managers need to guard against personal biases when putting together a selector. Analysis of the numbers will generally lead to the right decision.
  • Most driver complaints aren’t worth action; a 6-foot-2-inch driver may prefer a bigger car, but, unless the fleet is using subcompacts, he’ll fit in the driver’s seat just fine. But, in extreme cases — a driver who is 6-feet 9-inches tall, or weighs 300 pounds, and is a good performer in the job (verify that with his or her supervisor) — it may be worthwhile to quietly consider an exception. 
  • See the previous section about meddling managers. If the relationships have been established, the fleet manager has made clear his or her experience and skills, and all of the analysis is carefully documented, most — if not all — senior managers will back off.
  • Unless a fleet uses only one type of vehicle, provide drivers with multiple vehicle options. This will help reduce driver bias-based complaints.

Remember: these pain points won’t be eliminated. The goal is to alleviate the impact they have on the fleet operation. Dealing with drivers, who are seldom hesitant to inflict their strong (negative) opinions on fleet managers, won’t — and, for that matter, shouldn’t — be silenced altogether. 

Enforcing Policy

There are aspects of fleet policy that are ripe targets for criticism and can result in frustration and pain.

We can begin with safety policy. Many fleets have a process through which accidents are reviewed by a panel, or committee, to determine whether they are chargeable to the driver or not. Have more than one chargeable accident in a fixed period of time and there are consequences, sometimes severe.

Similarly, the review of motor vehicle records (MVRs) reveals violations which — again, if they are repeated — will also result in consequences for the driver. That is where the pain can come in. What fleet manager, when attempting to enforce safety policy, hasn’t been at some point greeted with the lament, “But, he/she is our best performer”?

Unsafe driving, where manifested in chargeable accidents or the increased risk indicated by multiple violations on an MVR, costs the company time, money, and other resources. As with all other fleet policies, safety policy must be enforced consistently for all, from senior management to the “best performers” in the field and everyone in between:

  • Get an endorsement of the policy, up front, from as high in the organization as possible — and get it in writing. 
  • Provide a regular, consistent message to the field, indicating how chargeability is determined, and what the ultimate costs are to the company when a driver has an accident. Use the “gross up” method to exhibit those costs: multiply the full cost by the company’s net after-tax profit margin, which will show how many dollars in revenue the company will need to offset the accident costs.
  • Don’t give in. Once a fleet manager makes an exception for one driver, a bad precedent has been set, and drivers and their managers will take full advantage. An accident is either chargeable or it isn’t; make the decision and stick with it.

Because the consequences for multiple chargeable accidents, or serious moving violations, can be severe — up to and including revocation of company vehicle privileges and even termination — drivers will cause a fleet manager as much pain as they can when facing them.

Dealing with Executive Vehicles

Another potential major pain point for a fleet manager is dealing with executive vehicles. A company car is a very personal thing to an executive who gets one as compensation. That, and the fact that senior managers bring with them egos commensurate with their position, can make a fleet manager’s day miserable.

That said, a senior executive’s time is very valuable to the company, and, in some instances, the attention is worth the effort — if anything, because some senior executives are stakeholders in the fleet operation, and will have direct input into a fleet manager’s decisions.

Fleet managers can make dealing with executive vehicles as painless as possible by trying to develop direct relationships with senior executive drivers. Make it clear (if subtly) to these drivers that your primary responsibility is the safety and dependability of the fleet, on which the company depends for revenues and customer service.

Ultimately, although pain points are an inevitable part of the fleet manager’s job, there are things fleet managers can do to help alleviate the pain and reduce their impact on company fleet operations.

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