The scenario is playing out more and more: pressured by markets, shareholders, boards of directors, and investors, companies are seeking ways to cut costs. Department heads are asked to provide detailed cost numbers, and in some cases, to justify their existence. Fleet management is a popular target.
If fleet managers aren't prepared to provide the downside perspective about fleet services outsourcing, driver reimbursement, and value of a company-owned fleet, they may find themselves a victim of cost-cutters. Fleet managers can take several proactive steps to avoid or counter such scenarios, and the time to begin is now.
While even a CEO can be replaced, the issues with fleet management are first, how a fleet manager can clearly demonstrate the value of a company vehicle, and second, why an in-house fleet management function is critical in managing costs, safety, and dependability.
First Step: Relationship-Building
One initial step a fleet manager can take in securing his or her position in the company is relationship-building at all levels of the organization, from drivers up to senior executive management.
Relationship-building begins with communication. No matter how brief or often, fleet managers must keep all stakeholders in the fleet operation informed. Drivers, field managers, department heads, executives with company vehicles or whose responsibilities are "touched" by the fleet function — all have an interest in fleet activities, and it serves the fleet manager well to stay in touch.
The relationships vary depending upon circumstances. Senior executives normally are unavailable for casual contacts; however, it's a good idea to make the effort. A phone call or e-mail of introduction usually is remembered and can be used with executives who have no business connection to the fleet.
For senior executives with some involvement in fleet operations, there often is some regular reporting. If the executive doesn't specify a form or schedule for communication, fleet managers can suggest one. Keep the following advice in mind:
■ Keep it short. Whatever the reporting form, get to the point. The more senior in the corporate hierarchy, the less time the target has to review the material.
■ Visual evidence is better than words or numbers. Graphs and charts demonstrating trends, or performance versus benchmarks are particularly effective.
■ When cost reduction initiatives are implemented, keep executives informed.
■ Be on time and accurate.
Communications with drivers are an entirely different matter. Drivers are the "customer," and much of fleet management is serving their needs. Concerning company vehicles, these needs focus on a vehicle that runs well, is safe, and can do the job.
In a fleet of hundreds or perhaps thousands of vehicles, the relationship is generally with the entire group of drivers. They must be aware that their concerns are important to the fleet manager.
One popular form of communication and relationship-building with drivers is a fleet newsletter, issued electronically or in hard copy. Effective newsletters contain information useful to drivers as they perform their jobs: tips on maintaining their vehicles and driving safely, highlighting aspects of fleet policy and other day-to-day activity. A newsletter also can publicize driver rewards and recognition for safety or cost containment.[PAGEBREAK]
Next Step: Preparation
In building a "mission-critical" fleet function, the next step is to be ready to justify the basic necessity of a fleet and/or of the need for in-house fleet management. Preparation is critical and, combined with relationship-building, is effective in helping a fleet manager make his or her presence in the company indispensable.
Before the question arises, fleet managers must make the case that providing a company vehicle is more cost-effective than forcing employees to drive personal vehicles for reimbursement.
A fleet manager must know the cost of providing vehicles — the total of fixed and floating costs, expressed in dollars per month. If, for example, a company vehicle costs $500 to provide to an employee, it is simple to establish a "break-even" point at which providing a vehicle is less expensive than reimbursing the employee.
The most common reimbursement rate used is the IRS "safe harbor" rate, currently 55 cents per mile. Doing the arithmetic (dividing $500 by $0.55): if an employee drives more than 909 miles per month, it is more cost-efficient to provide a vehicle than reimburse.
Providing vehicles rather than reimbursing is valuable for a number of other good reasons:
■ Under reimbursement, recruiting, hiring, and retaining talented staff is limited to drivers with a vehicle available for business use and adequate to fulfill the mission.
■ Reimbursed employees may treat the money as additional income, making certain their personal vehicle expenses are less than the amount reimbursed. This practice can lead to improperly maintained vehicles, vehicle repairs that go undone, dependability issues, unnecessary downtime, and vehicles that do not represent the company well.
■ Employees may tend to over-report mileage to maximize reimbursement amounts, resulting in additional uncontrollable costs.
These issues should be revisited annually at the fleet manager's insistence, with results sent to all stakeholders.
Facing the Outsourcing Issue
In addition to reimbursement, the second major threat a fleet manager faces is outsourcing the in-house fleet function. Fleet management and administrative programs are available for nearly every task a fleet manager performs. The question is commonly asked: If a fleet management company can lease vehicles (or buy and sell them), maintain them, repair physical damage, buy fuel, and provide drivers with day-to-day communications (the so-called "fleet desk"), why does the company need an internal fleet staff?
Once again, if a fleet manager isn't prepared to answer the question in advance, he or she is asking for trouble. The answer involves a combination of numbers and narrative.
The narrative should detail a breakdown of the fleet management function. The operation of a vehicle fleet consists of a number of administrative, clerical, and managerial functions. Routine vehicle activities related to ownership and licensing are primarily clerical activities, such as maintaining valid registrations, vehicle inspections, tax payments, and related recordkeeping.
A fleet manager should not only accept, but embrace outsourcing these routine fleet tasks. Company resources should not be expended on paper shuffling or forms completion. Fleet management companies have the resources to handle such activities as registration renewal and parking ticket payment far more efficiently. A fleet manager's stubborn refusal to consider outsourcing some level of administration can foster a move to outsource the entire fleet function.
A critical difference remains, however, between paying a registration renewal fee and managing a significant company expense. Management activity comprises decision-making on the allocation and expenditure of company assets — time, people, and money. Outsourcing such decision-making should not be an option. From this principle, a fleet manager makes the case for maintaining an internal fleet function. Internal management is needed in a number of specific cases:
■ Establishing and executing fleet policy. Determining vehicle assignments, suppliers, make and model, and service life are decisions employees, not outsourcing vendors, should make.
■ Repairing versus replacing. This decision occurs regularly, not only with regard to physical damage, but mechanical failure as well. The option of replacing or repairing a vehicle involves thousands, sometimes tens of thousands, of dollars.
■ Tracking and managing vehicle cost. Fleet managers manage information, not vehicles. Cost data determines replacement cycling and reveals opportunities for savings. Certainly, employees are better suited and motivated to do so. Decisions involving fleet cost or company assets should never be outsourced, any more than treasury, human resources, or production functions should be handled by outside vendors.
Some fleet managers fear outsourcing any part of fleet operations and build an internal function that performs every task, which involves headcount and an often large and unwieldy budget. The larger the fleet department, the bigger the target for cost-cutters.
Fleet managers must take an honest look the tasks they perform. Clerical or administrative activity can and should be outsourced. Once this has been done, a fleet manager can make an excellent case that excess fleet management cost has been eliminated and what remains is critical decision-making activity only employees should undertake.
Simple numbers support this in-house fleet justification. First, the fleet manager must be fully aware of internal administrative cost figures to compare with outsourcing costs. Such a comparison is a relatively simple process; the time and cost involved, for example, to transfer a title or renew a registration compared to the fee a vendor charges for the same task.[PAGEBREAK]
In one scenario a fleet manager must avoid, a vendor representative gets the ear of a senior executive to present the case for how the rep's firm can save money by managing the company's fleet. The executive contacts the fleet manager, asking why the company should not do so, and the fleet manager is unprepared to give an informed answer.
This lack of preparation is particularly damaging if, for example, the fleet is company-owned and the vendor is selling a bundled fleet program that includes leasing — and the fleet manager is not fully informed on the leasing option. Or vice-versa. The fleet manager should know exactly the products and services the marketplace offers, their cost, and if those products are cost-efficient alternatives.
Too many fleet managers refuse to make time for sales representatives, an activity critical to remaining informed. Indeed, refusal to meet a sales rep, however briefly, essentially forces the representative to focus efforts higher up in the hierarchy, resulting in the scenario described previously.
A fleet manager with a leased fleet should know and understand why that option is best and be prepared each year to research and analyze the lease-versus-ownership comparison. The fleet manager should know what programs are available in the marketplace, their cost, and how they compare to current company tools.
Close to Indispensable
Realistically, no employee is indispensable. But a fleet manager can make a clear case that the fleet management position and fleet itself is indispensable, taking proactive steps to solidify his or her position in the company:
■ Develop relationships.
■ Be prepared to present the case against reimbursement and outsourcing the fleet management position. Or, better yet, initiate the question itself.
■ Keep informed of fleet and departmental costs and new products and services that can reduce cost.
■ Avoid "empire building." Objectively review fleet operations, with an eye to determining what can be outsourced.
Good executives don't get where they are by being stubborn. Following these steps, a fleet manager can help ensure fleet operations and the fleet manager position remain as close to indispensable as possible. ■