Assessing performance in any job is key to improvement and success. Fleet managers must ask the same questions of themselves and of fleet management vendors who help do the job.
Most fleet managers perform reviews of their efforts to produce desired results. Sometimes, however, the process is less formal and not as thorough as should be. A fleet performance review should evaluate both internal staff/processes, as well as those vendors on which the company depends to provide resources and services.
Set Benchmarks First
Performance can only be judged if benchmarks are set for comparison. These benchmarks should be established for internal (administrative) and asset expense and processes. The first step is defining areas of measurable fleet performance, then establishing benchmarks and proceeding with analysis.
Department performance reviews must begin with the basic benchmark for performance — the fleet departmental budget. Assessing performance versus budget is relatively simple; most fleets track this on a monthly or annual basis. However, other performance indicators generally don't appear in a budget document:
- Projects. How successful has the department been in completing special projects defined at the beginning of the year?
- Communication. Is departmental staff prompt in returning calls and e-mailed requests? How many calls are "dropped" (callers who disconnect while on hold or before they can be answered)?
- Innovation. Have cost-saving ideas been presented? If so, how many have been adopted and what kinds of savings have resulted?
Fleet managers want staff members who are productive, communicate well, and contribute to the efficient running of the fleet. Make certain to discuss these and any other performance measures so staff knows what is expected. (Keep in mind that this is not a human resources review, where HR-related matters such as attendance are assessed.)
Fleet budgets — capital and expense budgets for fleet vehicles— are usually tracked throughout the year. Fleet departments generally review "budget versus actual" at least quarterly, often monthly, when they can see how dollars going out the door stack up against the plan.
Make certain any variances are significant enough to matter and special circumstances surrounding the variance are taken into consideration. For example, if the capital budget for new-vehicle acquisition varies dramatically (above or below budget), consider changes that have been made in the fleet size or composition. Fleet selector changes may also impact variable expense, i.e., moving from a six-cylinder midsize to an eight-cylinder SUV results in fuel and tire expense much greater than originally planned.
Focus on Fleet Data
Fleet management generates substantial amounts of data: fixed and variable cost data, administrative data (title, tax, and registration), statistical data on communications, and much more. Much of this data can be categorized as "interesting, but useless" information. The key to tracking fleet performance and judging its effectiveness is to focus on that data in which the majority of fleet expense resides.
Most fleets use some level of outsourcing to help manage expense and administrative processes. The primary categories of such programs are:
- Leasing/Procurement. Whether fleet units are leased or company-owned, an outside entity is contracted to enable the company to acquire vehicles.
- Maintenance/Repair. Programs that provide drivers the means by which maintenance, repairs, and tires are purchased. Fleet managers are sent the cost data these transactions produce.
- Collision Repair/ Subrogation. Many fleets are self-insured for physical damage. Accident management programs provide reporting, repair management, replacement rental vehicles, and subrogation recovery.
- Fuel. Fuel management programs provide fuel cards for driver use, as well as tools to mine fuel expense data.
- Fleet Administration. A broad category of services, ranging from payment of parking tickets to so-called "total fleet management."
In general, each of these processes can be reviewed for both the effectiveness in cost control and quality of service.
Analyze Lease Costs & Services
Fleet leasing is generally accomplished via a master lease agreement under which the fleet orders and places new vehicles into service, and turns in old ones for sale. Lessors thus provide a service with financial, operational, and administrative repercussions, and each should be analyzed and judged for effectiveness.
The financial component of a fleet lease contract includes:
- The lease rate itself, consisting of a reserve for depreciation, an administrative fee, and a return on investment (interest).
- Monthly billing for active vehicles that accounts for vehicles coming into and out of service.
- The sale of off-lease vehicles (for an open-end TRAC lease) or chargebacks for excess wear and tear and/or mileage (for a closed-end lease).
Timing is the measure to track performance for many items in a leasing program. Does the vendor accomplish the task within a predetermined, acceptable period of time? Most new-vehicle orders, for example, should have an order-to-delivery time of six to eight weeks. If not, discuss with your lessor what level of performance is reasonable and acceptable.
Performance Indicator: What is the average order-to-delivery time for new vehicle orders?
Monthly billings are generally routine. Tracking occasional errors isn't usually a performance issue; it is handled on a day-to-day basis. However, if the fleet is leased under an open-end TRAC lease, vehicles coming out of service are sold, with proceeds applied against the unamortized "book" value. Excesses and shortfalls in these proceeds versus book value are either charged back or credited to the lessee.
Performance Indicator: How much time elapses between the notification of sale and the crediting of proceeds on the billing? Is the average "accounting" a charge or a credit?
The second question speaks to the lessor's performance in selling vehicles and the quality of advice on the lease depreciation rate. The first question speaks to the lessor's efficiency in accounting for the sale, and usually reflects overall responsiveness.
A few other areas can be assessed, most of which deal with the quality of the lessor's consultative service in the aforementioned depreciation process and other areas. For example, lessors usually offer several ways to finance leases: fixed or floating, various financial instruments for funding, and replacement cycling.
Performance Indicator: Has the lessor offered quality consultation with regards to financing and replacement cycling?
Keeping vehicles in service too long or replacing them too soon can result in additional expense. If a fleet manager depends upon the lessor for advice on these matters, the lessor should be held accountable for performance.
For closed-end leases, the lessor usually advises as to the proper lease term, and the contract itself provides penalties when vehicles are turned in.
Performance Indicator: Under a closed-end lease, are the lease terms, and thus the damage and excess mileage penalties, properly structured for your fleet operation?
Fleets hit with large excess-mileage penalties when vehicles are turned in, for example, may find the lease terms are inadequate. A closed-end lessor should be expected to advise the lessee of the most effective lease term and mileage allowance.
Follow Up on Vendor Promises
Maintenance management is unquestionably the most widely used fleet management program. These programs provide drivers the means to adhere to a preventive maintenance schedule, vehicle technicians who negotiate with shops on non-maintenance repairs, and a nationwide network of shops to carry out this critical function quickly and easily. Most vendors provide performance information to use as a benchmark.
Performance Indicator: Are maintenance, repair, and tire costs up to the standards the vendor provided when the program was implemented?
For example, during the sales process, maintenance management vendors usually tell customers their program can help reduce expenses. Use that information to judge whether vendors live up to their promises. Track cost-per-mile expense and match it against vendor claims.
Responsiveness is another measurable area in any maintenance program. How quickly are phones answered? Are drivers provided timely assistance when needed?
Maintenance management programs usually provide a toll-free number that the driver calls for help when a vehicle breaks down or experiences mechanical problems. A maintenance management provider should have a telephone management system to track statistics such as average answer times, average time on hold, dropped calls, and other responsiveness indicators.
Performance Indicator: Is the maintenance management vendor responsive when contacted? Is downtime minimized when drivers require help?
Prompt Service Critical
Accident management programs generally provide the following services:
- Accident reporting.
- Repair management.
- Replacement vehicles (rental).
- Subrogation recovery.
When a driver reports an accident on the program's toll-free line, the vendor records all pertinent data and completes an accident report. Copies of the report are sent to recipients designated by the customer.
The deliverables in this process are the promptness of driver service and the accuracy of the report information. Remember, when reporting an accident, a driver, at the very least, will be upset and in the worst cases, injured. It is critical this first contact is handled quickly, carefully, and thoroughly.
Performance Indicator: Is the accident report taken promptly with minimal answering and hold times? Is the information in the report complete?
Again, telephone management reports measure this responsiveness. Report accuracy can be judged by sampling every fifth report, for example.
The next steps include determining if the vehicle is drivable (and arranging a tow if it is not), finding a repair facility, and managing the repair from estimate through completion. The key, once again, is time. Drivers should be taken out of the process quickly. The estimate should be obtained, reviewed, and an agreed-repair cost reached with dispatch.
Performance Indicator: What is the average repair time, from day of report until the repair is completed and the vehicle picked up?
A corollary to this indicator matches the average rental days to repair times.
Performance Indicator: Are replacement rentals out for the same number of days as it took for the repair to be completed?
If the vendor does not follow up on rentals to make certain that they are returned, tens of thousands of dollars in unnecessary rental costs can be incurred.
Subrogation recovery can be difficult to assess. Some level of performance should be agreed upon before the contract is signed. For adverse parties who are insured, the average time to reach a settlement should be reasonable and applicable to the majority of situations.
Performance Indicator: How long does the average subrogation recovery file take, from initial notification to the receipt of a check?
Subrogation is similar to accounts receivable — the longer it takes to collect, the less is collected. Make certain state laws governing collections are taken into account before establishing accident management vendor performance standards. The vendor should also agree to basic performance levels.
Performance Indicator: What percentage of overall costs related to an accident are recovered?
Mine Fuel Card Data for Savings
Fuel card programs are less subject to performance assessment than other fleet programs. Most primary criteria are analyzed when the program is implemented, i.e., adequacy of coverage, ease of use, data timeliness and accuracy, and management tools (reports and systems).
Bidders often make claims of program cost savings, primarily via management and reduction of "slippage" (unauthorized or fraudulent use and purchase of nonfuel items, premium grade fuel, items outside of company policy, etc.).
Performance Indicator: Have the data and tools to mine it resulted in the savings originally claimed?
Expect Prompt Service
Fleet administration programs run the gamut from simple tasks, such as paying parking tickets and registration renewals, to a full-blown "fleet desk" program, in which a vendor takes over day-to-day fleet communication and administration. Registration renewal programs are among the most popular.
Performance Indicator: How many registrations were permitted to expire while the program was in place? What penalties did the company incur for late renewals?
The success of a registration renewal program lies in the fleet providing complete and accurate expiration information upon program implementation. If this is not done, the vendor cannot be held responsible if registrations expire.
Another popular program involves motor vehicle reports (MVRs) — state-provided records on each driver. Although this program is a relatively mundane administrative task, the consequences of a slip-up can be enormous. If a requested report is not provided and the driver is involved in an accident that results in third-party damage or injury, the company could be open to substantial, if not catastrophic, liability.
Performance Indicator: Are MVRs provided in a timely and accurate manner? Is the vendor willing to separate "clean" records from those that indicate violations? Most importantly, does the vendor notify you promptly when a record search shows no valid drivers license?
It is critically important drivers receive the same kind of service from a vendor they expect from you.
Performance Indicator: Does the vendor provide accurate and timely answers to driver inquiries regarding policy? Are vehicle replacement orders sent out on a timely basis?
Total fleet management programs essentially provide full administration of the company fleet, from new-vehicle ordering and communications with drivers to enforcement of company fleet policy. The company provides the fleet policy document, and the vendor establishes toll-free access for driver inquiries, notifies drivers of new-vehicle order times. The vendor also handles all daily administrative tasks, most involving communications.
Performance Indicator: What are the fleet desk telephone statistics? Are phones answered promptly? What are hold times and how many dropped calls are there?
Service Level Agreements
A vendor service level agreement is the best way to ensure performance levels can be established and that they accurately reflect expectations. Much like a new-hire job description, this agreement clearly outlines what is expected of the vendor. Reviewing performance, therefore, is easier. Most vendors are happy to establish these expectations and will conduct reviews regularly.
Assessing performance is important. Proper planning and establishing performance goals result in a fleet operating at peak efficiency.