Managing the Financial Side of Commercial Fleets

Implementing Successful Strategies To Cut Fleet Costs

March 2016, by Kat Sandoval - Also by this author

Photo courtesy of
Photo courtesy of

Fleet managers are always on the lookout for the best ways to reduce costs, when possible, while maintaining the same level of efficiency. Running a cost-effective and efficient fleet requires reliance on the knowledge and expertise of fleet managers.

Fleet Financials reviewed fleet managers’ strategies for cutting costs from its archives and compiled a list of the top four ways fleet managers can reduce fleet costs and add value to their fleet operations.

Handling Fleet Operations In-House

When deciding whether a fleet management company (FMC) works for their operations, fleet managers should consider running certain areas of fleet in-house to reduce costs.

For example, Western Refining Wholesale’s Phoenix location handles its fleet maintenance operations seamlessly, without FMC assistance.

After careful evaluation, Jared Hanis, director, procurement and contract services for Western Refining, and his team decided to run maintenance for the fleet’s vehicle in-house.

By cutting out the need for a maintenance provider and doing it themselves, Western Refining Wholesale ensured that processes were streamlined.

Further, maintenance is handled through the company’s internal total maintenance track (TMT) program, which is administered by Kristen Signor, the fleet’s asset maintenance administrator.

Similar to Western Refining Services’ in-house management of maintenance, Dean Foods, a processor and distributor of dairy products, does maintenance in-house when possible. Although the fleet has third-party providers (Penske and Ryder), Dean Foods places a strong emphasis on getting maintenance done right the first time the vehicle comes in.

The company’s trained technicians, as well as its third-party providers, help to ensure vehicles are repaired correctly the first time. By focusing on preventive maintenance (PM) Michael Ahart, Dean Foods VP of Transportation, helps his fleet avoid unnecessary expenditures on maintenance.

Western Refining Wholesale has also simplified the process for the sourcing of its equipment by transitioning to direct sourcing.

Cost savings are directly associated with direct sourcing of equipment because the company goes to the manufacturer that offers the best incentives and warranties that meet the fleets current and future equipment supply needs.

Moreover, the company even created its own fleet card, which has allowed the company to reduce fuel costs. The card can be used at any CFN or Fuelman location, since it is part of the CFN Fueling Network. The fuel card allows fleet administrators and managers to view fuel transactions in real time, which holds drivers more accountable for their fueling practices.

Developing Strong Relationships

Fleet managers that manage large fleets dispersed throughout the U.S. and other countries understand how important it is to have and maintain strong relationships with the people and companies that work with the fleet, at whatever capacity that may be.

Commercial real estate services provider, CBRE’s North American operations are dispersed throughout the U.S., Canada, and Puerto Rico. This makes fleet management sometimes challenging for J.J. Keig, CAFM, corporate fleet manager for CBRE, Inc. But, because of the well-built relationships CBRE has with its clients, nothing is lost in translation. Thus, they provide the proper upfits and vehicles without mistakes, which eliminate any additional costs going in to remedy wrong vehicle orders and etc. And, as a result, their fleet portfolio continues to grow.

By creating maintenance guidelines and relying on their leasing company’s maintenance department, CBRE provides preventive maintenance (PM) when needed and is able to cut out unnecessary services that would cost the fleet not only time, but also money.

This approach to maintenance ultimately leads to lower total cost of ownership rates without compromising safety or quality.

Additionally, similar to Western Refining Wholesale, CBRE looks to fuel as an area to reduce costs. CBRE relies on oil like monitoring systems, which aids the company with the elimination of unnecessary oil changes. And, this is another area where the company saves time, money and its resources.

Through its working relationships, especially with its maintenance provider, CBRE avoids needless maintenance, repairs, and depletion of resources while cutting costs.

Standardizing Operations

Developing uniform procedures for the fleet is something fleet managers strive for. Fleet managers often have a hard time determining where a strict protocol or set of procedures need to be set in place or when to have flexibility, but have a mix of both will help fleet in the long run.

For example, agricultural machinery manufacturer AGCO’s fleet manager Ralf Wessel understands the need for uniform procedures in such areas as its personal-use policy and more flexible ones in other areas.

Previously, the company was losing money because of the flexibility in its personal-use policy. But, after careful consideration, Wessel and his team were able to develop a global standard for personal-use of company vehicles. The policy now clearly delineates who can and cannot drive the vehicle, and it states that an MVR check must be done before the person can drive the vehicle.

Other ways the company was able to reduce costs were through the standardization of fleet vehicle levels (e.g. personal-use vehicle, work-only vehicles, etc.), this standard carries over globally; creating a streamlined accident review process; and overall improvement of its safety program.

By implementing the changes above, the company also experienced a cut in insurance costs.

Similarly, ADP, a human capital management company was able to see results through the standardization of its operations.

The company’s fleet spans the U.S. and Europe and it experienced complexity with more than 35 different makes. By developing a set number of manufacturer groups, from which the European side of its fleet would get its vehicles, the company was able to standardize manufacturer groups.

Furthermore, the company was able to reduce the number of leasing companies for its European fleets from 25 to three.

This level of standardization allows the fleet to avoid wasting time and money, and creates a uniform process and pool of vehicles and lessors, instead of having too many to choose from.

Additionally, the company saw savings once vehicle insurance was managed in-house to its global risk management group instead of through its leasing companies.

By doing so, the company is saving money, but also has developed a standard for the future.

Exploring New Initiatives and Setting Goals

By focusing on areas that can be improved, such as the fleet’s carbon footprint, the fleet manager is opening the door to plans or programs that could reduce costs.

Setting up goals or targets for reducing greenhouse gas (GHG) emissions can help the fleet manager see reduction in costs.

ADP’s fleet took on a CO2 reduction plan in conjunction with a global safety initiative. With the introduction of greener vehicles, ADP’s U.S. fleet is currently 100-percent hybrid or runs on high-mileage diesel and has seen a significant reduction in GHG emissions. In turn, this also produces cost savings for the company.

Reduction in GHG emissions plus the integration of greener vehicles leads to overall savings to the fleet. And, as gasoline prices fluctuate, the fleet will remain stable because their vehicles run on cleaner fuels. Fuel savings lead to cost savings.

By the same token, Dean Foods’ fleet also set a GHG reduction goal for its distribution fleet. To meet its goals, the company also created an initiative to optimize routes, maximize fuel economy, provide training for its drivers, and invest in new technology and equipment. Its fleet runs on diesel and the company continually strives to reduce fuel use. This plays an integral part in cost savings and meeting the goals outlined in their sustainability initiatives.

The Bottom Line

Fleet managers have to thoroughly analyze their fleet operations before determining areas where they can cut costs from.

Every fleet manager’s reality is that there is always room for improvement and savings to be attained.

Understanding what other fleets are able to do to increase cost savings and improve operations is especially helpful in opening the fleet manager’s mind to an idea they had yet to consider.

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