How much input do fleet drivers have when choosing vehicle selectors? How much emphasis is placed on single sourcing from one manufacturer to attain maximum-tier incentives at bid time? What is management’s philosophy when balancing employee satisfaction versus hard cost savings?
Depending on the fleet, drivers often can only select color when ordering new vehicles. In other fleets, managers cater to the driver for purposes of employee satisfaction and retention, offering many driver-paid comfort and safety options to enhance job performance.
In addition to taking full advantage of rifle-shot savings, fleet managers admit providing a limited selector makes their job easier, and some offer choices within their selector. Company image and choosing the appropriate vehicle for the job are commonly factored into the decision-making process. Here’s a look at how four different fleet personnel manage their company’s vehicle selection process.
Lorillard Tobacco Maximizes Fuel Efficiency
Jim Anselmi, fleet manager for Lorillard Tobacco, based in Greensboro, N.C., oversees a GE and Wheels-managed DaimlerChrysler fleet of 1,290 vehicles, including 1,100 minivans. With fuel prices sailing to new heights almost daily, fuel efficiency has never been more crucial when selecting vehicles. Therefore, Anselmi conducts an annual total cost benefit analysis to determine fuel efficiency for the company’s chosen selector.
Anselmi orders 450 vehicles each fall. Some are delivered in October, while the rest are delivered in the spring. Order-to-delivery (OTD) times are less than 8-10 weeks. Drivers are only allowed to pick vehicle color, simplifying the ordering process because Lorillard only has one spec for each category, says Anselmi.
“This year was a home run. Between the Stow ‘n Go seats for the minivan and the Chrysler 300 at various equipment levels for the managers in the field, I was a hero this year.”
Resale value, maintenance, and operating costs are all factors in the overall picture in vehicle selection. Average lifecycle is 34-35 months or 65,000 miles.
Looking at the Overall Package
For management, the advantage to offering a limited selector is it enables the company to reach the top manufacturer incentive tier. Anselmi says he can guarantee a vehicle’s price because he controls what he purchases, as opposed to choosing from several manufacturers. The only down side, according to Anselmi, is that drivers like to have choices. On the other hand, offering various selector levels helps minimize risk in the event of a recall or problem within a particular model.
“We look at the total overall package, not just an individual rife shot but overall lifecycle and operating costs. If our minivans and cars from the same manufacturer give us a better overall bottom line or savings, we may pay a little extra for the car.”
Next to fuel efficiency, depreciation is the most critical factor in Anselmi’s decision-making process. “Once I’m able to buy that vehicle at the best possible price, my next goal is to sell it three years later for as much as I can to manage that depreciation,” he explains.
Alcon Focuses on Employee Satisfaction
Pat Turner, fleet manager for Alcon in Ft. Worth, Texas, oversees a GE and Wheels-managed GM fleet of 1,000 vehicles and an additional 250 vehicles for pharmaceutical company Galderma. Sales reps drive Chevrolet Trailblazer SUVs. Turner orders vehicles year-round and OTD times are 75 days. Average lifecycle is 75,000 miles.
Because the company allows employee and spouse personal use driving privileges, Alcon’s first priority is the driver. “Driver satisfaction is the main reason we use the SUV. It does the job. The minivan is not a popular vehicle among our drivers,” says Turner. “We also consider usability, serviceability, will it do the job we need, and price. Driver satisfaction is not only a hiring tool, it’s a retention tool.”
Resale value is another crucial factor. Drivers are provided a selector with four vehicles to choose from: an SUV, minivan, sedan, and an Equinox. Some salespeople choose a Silverado crew-cab pickup as their selector because they carry large equipment used for laser surgery, says Turner. Drivers can pick color and add options if they choose.
“We sell vehicles to our drivers 25 percent of the time. If they put money into it, they’re more likely to buy the vehicle at the end of the lease,” says Turner. [PAGEBREAK]
Reflecting Company Image and Vehicle Serviceability
The budget is not Alcon’s primary consideration when ordering vehicles, according to Turner. Instead, the company stresses image and serviceability. Alcon still purchases SUVs, even though 16 mpg is the average and there are vehicles able to perform the job that achieve better mileage, admits Turner.
“The company at this point is willing to pay that deferential. We’ll see how that plays out in the next year. Some people think we’re just looking at a spike in gas prices and they’re going to come back down. I don’t embrace that. I think we’re going to see these kinds of prices for quite a while and maybe never see very much below $2 per gallon in our area.”
Vehicles are ordered online by management to ensure the right vehicle is purchased with the proper equipment. Turner agrees that providing a limited selector makes his job easier, but can also leave him vulnerable when problems arise. “We had a problem with the rear hatch on one of our models, which caused downtime because a number of our vehicles experienced that problem, some on multiple occasions,” he says. “Other than that, I don’t see the big danger in being single-sourced. Because of today’s technology, there aren’t too many recalls that pull the car off the road for any length of time.”
GM’s CAP incentive program played a role in winning Alcon’s business because money was significant in ’04, says Turner.
Managing Depreciation and Resale Value
“Depreciation is our biggest cost. It’s one of the reasons we retain the SUV, because it experiences as good a residual value as any on the market,” says Turner. “We have to look at what our individual needs are and fill those needs first. It’s much cheaper to operate an SUV depreciation-wise than it is a minivan. The bigger subject is the method of disposal, where you have the best chance of controlling depreciation.”
In terms of resale value, Turner is dismayed at the industry’s dependence on AMR values. “The whole industry seems to think that the only way we can operate is if we utilize AMR values as the standard benchmark for resale values. In the past few years, many in the industry have questioned the accuracy and completeness of AMR data. My latest AMR book doesn’t even have a 2003-model Ford Explorer or 2004-model Trailblazer,” he says. “We’ve talked with them on more than one occasion about this. It seems that most accept AMR as being the Bible for car values. Most leasing companies compare their results to AMR. Many point to the fact that they consistently achieve 100-plus percent on their sales as compared to AMR. But my concern is that AMR may not be the most accurate guide available. It is really not difficult to get 100 percent of AMR on most vehicles.”
McDonald’s Stresses Safety, Comfort, and Image
Sue Miller, senior fleet manager for McDonald’s in Oak Brook, Ill., supervises a Ford-owned fleet of 3,400 sedans, SUVs, and minivans. She orders between 400-600 vehicles at a time in the spring and fall, depending on order cycles. OTD time is 8-10 weeks. Although the fleet is owned, McDonald’s uses LeasePlan’s ePlan fleet management system to manage inventory, for accident repair, maintenance management, and for its online ordering system.
ePlan enables drivers to log on and view the vehicle description they are eligible to order. They are also limited to specs and a few options per spec. “What’s unique about our fleet is that we package our cars for retail. We don’t decontent our vehicles as much as other fleets may,” says Miller.
For McDonald’s, safety, resale value, driver perception of comfort, and marketplace perception of vehicle image are key factors when purchasing vehicles. Replacement parameters are four years/80,000 miles and employees have the first opportunity to buy.
Offering a Broad Selection to Accommodate Drivers
Miller believes the advantage to offering a limited selector is ease of administration. “The disadvantage is the proverbial ‘egg-in-one-basket’ story. If there’s a recall, or fall in the market, for resale, we’d take a big hit in one place. If you have a broad selector with a good mix of vehicles and something goes wrong with a particular model, it’s not going to affect us as badly.”
Miller currently carries a mix of compact and full-size SUVs in her fleet. “We’ve got one of the more popular vehicles, so our resale expectations are pretty solid. I’m concerned about the bigger SUVs, but they are balanced out by the other vehicles on our selector.”
Drivers can pick vehicle color. There are several vehicles which they can upgrade at the driver’s expense and the company attempts to be sensitive to their needs beyond what it feels is necessary for business.
“We offer Explorers, Mountaineers, and small SUVs and minivans because our drivers also have families and we wanted to accommodate them to the extent that we could.”
Miller says her drivers are offered a broad selection, and online ordering enables them to narrow down the decisions, simplifying the administrative process. “Online ordering could open windows for those with limited selectors because you can offer more selection without all the work a manual process causes.”
To attain maximum depreciation value, Miller chooses an XLT versus an XL package. “It’s worth the money upfront because it’s going to pay off at the back end. We make sure our cars are equipped for the next pre-owned buyer.”
When ordering, Miller considers how vehicles will be used and what’s important to her drivers, how much the company can spend to satisfy both objectives, and finds a balance between the two. “We have to mitigate our expense, but yet we need to support our employees so that they can do the best job possible.”
CIGNA Embraces Appropriateness & Total Cost
Mark Mills, who works in strategic sourcing for CIGNA, based in Philadelphia, has selector responsibility for a fleet of 600 primarily GM sedans.
Drivers, who are involved in case management, sales, and client management, order 150-200 vehicles online per year through CIGNA’s fleet management company, PHH Arval. These purchases are made over two semi-annual replacement cycles. Lifecycles are three years or 65,000 miles.
CIGNA’s purchasing organization encompasses sourcing and purchasing operations. As a sourcing manager, Mills is involved in the negotiation and contract process when he goes to bid with the company’s chosen manufacturer and fleet administrator.
For CIGNA, the most important factor when selecting vehicles, besides budget, is that drivers are given a productive, high-value tool negotiated at the best total cost, says Mills.
CIGNA’s main focus when ordering is identifying the type of vehicle the company needs for the job based on job function, safety, and fuel efficiency. Mills designates a compact vehicle for case management and, for sales, a larger vehicle to accommodate clients. “ Ultimately, the choice is made based upon appropriateness and total cost, including resale value which affects depreciation rate, and overall maintenance costs and fuel,” says Mills.
Taking Advantage of Incentives
According to Mills, a broad selection offers employees a greater choice of vehicles. The problem, however, is the company’s incentive tiers deteriorate if the choice crosses over manufacturers. “The more we dilute our tiers, the worse it is for bottom-line costs, so we try to stay with one core manufacturer,” says Mills. “Also, if we choose the best vehicle types among a few nameplates, we feel everyone can use them. This way we don’t have an expanding array of different costs that would exist among various vehicles.”
Obtaining Driver Feedback
CIGNA management encourages driver feedback to help purchase the right vehicles. Mills collects information based on feedback from fleet administrators and managers about which vehicles are appropriate. The company offers some driver-paid options, but finds the packages offered by the manufacturer are broadly suitable.
An employer-provided vehicle enables management to have some control over safety, appropriateness, and appearance. “It’s also a good way of managing costs because we have leverage and can bundle all our purchases. Having a fleet program in place in terms of cost-per-mile puts us below the 40.5 cents IRS rate that we would reimburse high-mileage business drivers,” says Mills.
The disadvantage to providing a vehicle is that it requires internal management from a sourcing and operations standpoint. Even though it’s factored into the total cost equation, providing a company car presents more liability exposure because CIGNA bears the entire insurance burden.
Summing It Up
An abundance of factors should be considered when selecting employee vehicles. In addition to the overall total cost package, be sure to involve drivers in the selection process and account for safety and comfort to ensure employee satisfaction and retention. Provide the opportunity for employee-paid options and, finally, look at what practices competitors are implementing in terms of vehicle selection as an industry benchmark.
Originally posted on Automotive Fleet