How to Stretch Your Fleet Dollars
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How can I get the most out of my annual fleet budget? This is a familiar question to all fleet managers. It’s simply viewed as job one by most managers — being a core functional requirement.
As a result, I’m thinking you’d be surprised if this article contained anything startling or revealed any significant new opportunities. And yet, this is my goal and it’s what it will do.
If I can hold your attention, this will introduce you to a different approach of managing fleets. It’s one that yields different answers, new opportunities, and may even redefine your concept of success.
You’ll just need a little patience. Without the required background and understanding, its value and significance will be lost. For most fleets, it will reveal substantial savings previously overlooked, undervalued, or simply ignored.
Of course this isn’t without challenges. These include: being open to new ideas, daring to be different, championing change, and being willing to lead — rather than accepting and following the often limited success of others.
However, if you’re motivated and have the ability, this will reveal a path to success generally unknown.
Typically, answers to questions like “how to stretch your fleet dollars” come from a universally accepted process. In our industry it’s so ingrained that it occurs without any further thought. And, it’s particularly prevalent in technically-oriented support groups. With the fleet industry being one of the oldest of these, it’s easy to understand how it can be more of an issue with us.
If you examine our roots and what we do, it’s easy to understand how we grew this way. First, our support function arose with the introduction of transportation technology in the early 1900s. This makes us an industry that’s evolved into a mature business culture, with long-standing standards and traditions.
With this origin and the ever increasing role of technology, one of the by-products is the belief this is the answer to virtually all issues. Thus, we are, and always have been an industry based on technology. It’s become our default focus and an accepted paradigm.
This role isn’t going change, nor am I suggesting it should. This, combined with another trend, creates another inherent and often unseen liability.
Many fleets are part of a larger organization; whether it’s a private corporation or a public entity. For most of these, the fleet has always been the default service provider. As a result, many have never given any thought to the prospect of competition.
This has created a culture best exemplified by the use of the term users to describe customers. Historically, and even for some fleets today, this continues to be a technically accurate term. However, in the context of an increasingly competitive business environment, it is increasingly problematic and poses unseen risks.
Its use suggests customers are trapped — without choice in their fleet support.
Even if this is the case, its use by fleet personnel sends an ineffective message — it fails to support a successful service culture.
And worse, if you fall short of customers’ expectations, this term only adds to their dissatisfaction. It can prompt an interest in competing services where it otherwise might not have existed. This is an unfavorable direction for any fleet.
The point of this is the fleet industry has acquired an underlying business culture that is increasingly becoming an impediment to success.
Added to this is limiting benchmarking to only like-fleets. Although useful, it contributes to this issue.
What fleet today operates without customers demanding competitive services? In extreme cases, some have had to deal with the threat of privatization — a sobering and redefining reality. Put simply, there are elements of traditional business practices in the fleet industry that must be changed to support success.
Once this is acknowledged, it leads to the realization that fleets are in the business of providing customer service. This redirects the attention to customers. And with it, the focus becomes achieving success by satisfying customers’ needs, wants, and expectations.
And, since their satisfaction is based upon their perception of the fleet and services provided, managing this becomes another task for fleet managers.
It’s no longer mainly about technology. Technology becomes only one of many tools required of fleets to be successful.
Success is identified with satisfying customers. This also introduces the need for further knowledge and perspective, which reveal even further opportunities.
Again, without most of us realizing it, competitive pressures basically redefine the concept of success as well. This is illustrated by what I call the “Hierarchy of Success” business model.
In the context of customer service, success is no longer a specific level. It consists of a progression of customer service success.
At the lowest level, service providers marginally meet their customers’ needs. This is sustainable only with their customers’ de facto acceptance. It’s a survival mode and where the service provider is constantly at risk.
Service providers at this level struggle to survive. And, because their costs remain uncompetitive, the focus is usually on cost-cutting — which in turn basically dooms them to remain in this mode until corrected.
On the other end of the scale, the highest level is where customers’ needs and wants are consistently exceeded beyond all expectations.
It’s best described as “thriving.” It’s where customers are your best advocate. This is a model of success and serves as an inspiration to others. Anyone exhibiting this level of success embodies the best practices and sets the highest standards with everything they do.
It’s also so rare it’s virtually unknown in our industry. As a result, it often viewed as being either unrealistic or impossible.
What’s not realized is that it’s not only real, but it’s based upon proven concepts and best practices available to all customer service providers — including fleets.
This opportunity is revealed with the recognition that customer service fundamentals apply to all service providers — regardless of their industry. This, combined with an examination of the-best-of-the-best encompassing all industries, makes it apparent that the prospect of thriving is real.
With this knowledge and perspective, it basically redefines success beyond the previously accepted norms of our industry.
Another requirement identified by the customer service functional imperative, combined with further insights from the “Hierarchy of Success,” is need for an entirely new three-part strategy. I call it a “Triple Strategy” consisting of: 1) optimum service performance (entailing competitive costs and exceptional quality service), 2) effectively managing customer perception with an aggressive marketing strategy, and 3) seeking win-win relationships and results — all exceeding everyone’s expectations in unexpected ways.
One of the resulting requirements is the need to realign previous goals. For example, a goal to be the best is replaced by one to be recognized as the best, thus becoming your customers’ first choice.
It’s a subtle, but critical difference.
With the identification of service providers that best model thriving, a number of further observations can be made. One is that most of these (but not all) are relatively new organizations. And, typically they often are technology-related start-ups.
This might lead some to think that only new tech firms can thrive. But remember, this means only that they have less baggage. There are others embodying this success that don’t deal with technology; having created a new market with innovative products, combined with outstanding customer service.
Typically, we get stuck in our own limited perspective; and fail to notice these models of success or think they have no relevance to what we do.
In actuality, nothing could be farther from the case. We just have to see it, be open to it, and learn from it.
With this realization, we can all become students of customer service and success — with a focus of learning and applying the business tools these firms model.
With this in mind, I’ve identified seven best practices that can be applied directly to fleets. In addition, there are required supporting business tools that most fleet managers already utilize.
No. 1 Asset Management
The first best practice addresses service performance with the most critical asset in the fleet — managing the vehicles and equipment. Depending upon your situation, there may also be substantial opportunities to improve customer perception and create win-win results.
We all manage these assets, but this is from a different perspective. The principle goal here is to achieve the lowest life costs with every decision a fleet makes.
This entails every aspect of the fleet, from procuring, maintaining, operating, and retiring fleet equipment. Relative to this, how many fleets procure their equipment based upon life costs? Similarly, how many utilize equipment lowest cost life-cycles to determine when they’re replaced?
The most commonly used procurement Request For Proposal (RFP) processes often evaluate proposals based on meeting requirements, price, and delivery. This process typically does not result in lowest life costs.
Similarly, how many fleets develop specifications to minimize procurement costs as opposed to minimizing life costs? Again, not a successful strategy.
These are only two obvious examples of how misguided goals can lead to higher costs and lower customer satisfaction.
If achieving lowest costs is not the defining goal with everything you do, then you possess an immediate opportunity.
No. 2 Service Management
Fleets are required to provide a wide variety of diverse services supporting their customers’ equipment needs. This is another best practice supporting service performance, as well as the other two elements of the Triple Strategy.
The question relating to this best practice is: are your fleet’s decisions on how and who provides these services based solely on what’s best for your customers?
For example, when the fleet chooses not to outsource a function like bodywork, fabrication, or other specialized services; is it based on service performance (cost and quality), or, perhaps prestige or political considerations? Some managers still think value immediate control and department size. In reality, in a competitive environment these can be inherent weaknesses limiting success.
No. 3 Customer Experience Management
A back-to-basics review of customer service fundamentals reveals the fundamental value of managing customer satisfaction and perceptions. This is equally important to managing service performance, but in the fleet industry how many managers do this?
Other related questions include: Do you manage your customers’ fleet experience from beginning to end? Does this involve specific guidelines with appearance, behavior, relationship, and results?
This is an integral part of any successful marketing strategy.
No. 4 Relationships & Behavior
I know, some of you will laugh at this. But, with the goal of customer satisfaction in mind, how can the importance of managing this be underestimated. Without defined goals and supporting business tools, you basically leave this to chance.
This isn’t how anyone would manage service performance.
No. 5 Information & Communications
This is another key component of any service provider’s marketing strategy. Fleets have opportunities to define customer relationships, perceptions, and provide information to better manage the fleet and lower costs.
How many fleets provide periodic benchmarking reports to customers reporting actual vehicle-specific costs?
Without this, how can customers be expected to effectively manage their portions of the operating costs? What’s worse, fleets without this relationship or ability have to dictate to customers in an attempt to manage these costs. This is entirely counterproductive to customer satisfaction. As a customer, how do you like being told what you can, and can’t do?
No. 6 Teams/Teaming With Customers
To best achieve optimum customer satisfaction and particularly win-win results, teaming with customers is a valuable business tool. Additionally, utilizing teamwork in the fleet provides remarkable savings, with the added benefits to the other two elements of the Triple Strategy.
Unfortunately, some fleets misunderstand the concept and requirements of a true team environment. With subsequent results falling below expectations, teams can be mistakenly viewed unfavorably. In reality, teamwork can literally redefine many fleets success.
No. 7 Fleet Total Cost Management
One of the principal customers of fleets is their executive or owner(s) management. A common expectation of this group is for the fleet to manage the total fleet expense.
For many fleets this is frustrating since portions of the operating expenses depend upon how the equipment is used — which can be a customer responsibility. These include managing operating conditions; equipment accidents, damage, and abuse; routing, scheduling, and utilization. All of these can have a major impact on overall fleet costs.
The previously mentioned periodic benchmark reporting of accurate individual costs can decide your ability to meet this executive-level customer expectation. Without this, a fleet’s ability to do this is severely limited.
This area is an example where applying cost-effective technology can support success. It begins with an accurate equipment database. One in-sink with the overall organization’s financial and accounting functions.
I’ve already identified the critical importance to fleets for accurate, timely, and effective benchmarking reports to customers using fleet equipment. These need to consist of at least cost and utilization information (equipment downtime would add to this capability) to ensure win-win results are achieved in lowering the overall fleet expense.
Additional internal, industry, and general benchmarking ensure the required perspective to a fleet manager’s ability to achieve and ensure continuing success.
And, not to overlook the critical importance of fuel and vehicle scheduling/routing tools — including telematics.
Thus, what we have here is an entirely new approach, coming from added knowledge and a new perspective.
This basically redefines how fleets do business. And, it is best accomplished by following a process aimed at optimal success. It simply ensures a number of critical requirements aren’t forgotten or overlooked.
With this fundamental understanding of customer service and success, a broader perspective, combined with the Triple Strategy identifying the important value of the previous seven best practices and related business tool requirements; a fleet manager is in a position to answer any difficult question or challenges that may arise.
In the context of this article’s question; this should change your entire perspective on how to stretch your fleet dollars.
It doesn’t remove the focus on reducing costs; it’s with the added realization that solely cutting costs does not produce optimum success — it would doom a fleet to struggling to survive.
It’s also with the realization that there are many opportunities. And, while they may be challenging in many respects, they also offer the most rewards.
So, with this in mind, here are some specific answers to the question how to stretch your fleet dollars.
If your fleet doesn’t make every decision based upon achieving the lowest life costs of equipment, then here’s an immediate direction to follow.
There are a number of specific opportunities that are worth reviewing. Two have already been mentioned, with an RFP selection process and equipment retirement schedules based upon achieving lowest life costs.
Another hidden opportunity for many fleets purchasing equipment is to consider using an operating lease approach. Many fleets, such as utilities, have never really examined leasing because it doesn’t fit their traditional financial model — where their profits are based upon asset investment, rather than sales.
As a result, many analyses are typically limited only to comparing procurement costs. For smaller utilities there typically are enormous savings opportunities to be gained with the added purchasing power of a national fleet firm.
But, this is only the beginning of lease savings. Leasing firms typically will support your specification requirements, resulting in being able to outsource much of this requirement. Additionally, with the often new-found ability to replace equipment based upon lowest life-cycle costs, leasing firms remove the fleet’s need to determine these life-cycles.
Similarly, if your fleet relies on an annual budget process, this and the related extensive prioritization and customer coordination involved can be entirely eliminated as non-value-added tasks.
Many leasing firms can also manage the pre-delivery stages and licensing requirements. This is another opportunity to outsource and benefit from their economies-of-scale.
Depending upon your situation, similar further opportunities may be available with scheduled and other maintenance support requirements.
And, finally leasing firms make vehicle retirements both seamless and cost-effective.
Leasing is a viable direction. If not for all fleets, it can at least serve as an impressive model for improved efficiencies and customer satisfaction.
And, finally there’s the opportunity to utilize teamwork in the fleet. This takes two basic forms. The first is teaming with customers — creating partnerships and win-win relations. Applying this can even remove the need for service writers, further improving customer-technician communications.
The second is to create teams within the fleet. This approach again supports all three elements of the Triple Strategy. But, in this context it has the potential to dramatically reduce staffing with the resultant labor savings.
Combined with the eliminated maintenance from utilizing the lowest life cost approach, and the inherent savings of a leasing approach (whether actually leasing or another procurement methodology), most fleet managers wouldn’t believe the potential to reduce staffing and related expenses until they experience it.
For those who may still have doubts, all of these opportunities are based upon proven concepts and real experience.
This isn’t theory. I’ve witnessed all of this first-hand. It’s a passion with me, trying to share this information to help others achieve a level of previously unimagined success.
However, this is all about leadership. And, nobody said it would be easy. For many it’s difficult enough just to overcome the unseen barriers necessary to gain a broader knowledge and perspective. And, this is the easy part.
Adopting many of these best practices and business tools requires process redesign — a formidable challenge both for the leaders involved, the fleet as a whole, and in some cases their overall organization.
This is an entirely new level of change. It’s disruptive, not really comparable to everyone’s experience with process improvement.
It not only requires motivation and ability, but also guts and perseverance. But, it’s also where the opportunities are.
Authors Note:This article is only an introduction to this opportunity for fleet managers and leaders. For those interested, this is the subject of a book the author published entitled FLEET SERVICES – Managing to Redefine Success and available through the SAE International at their website http://books.sae.org/r-447/