In the fleet industry, it often seems that so many of the professionals have “fallen” into the job, or “volunteered” by standing still while everyone else stepped back.
For Dick Malcom, fleet administrator at State Farm Mutual Automobile Insurance Company, it’s a very different story. “I have always felt that my entire working career happened in order to help me prepare for my job at State Farm,” he said.
Preparing for Fleet
Malcom’s “preparation” began at the University of Illinois, where he earned a B.S. degree in recreation park administration. He immediately segued into the automotive business after graduation.
“I spent seven years working at a family-owned Ford dealership,” he related. “It was a job that helped prepare me for my next position at Country Financial.” Malcom spent the next 17 years with the financial firm in its fleet and public lease department. It was his formal entry into the fleet world.
His next career move was to State Farm, taking over the fleet in 2000.
Making a Mark
Not many fleet managers can boast a background that includes fleet leasing, automotive, and dealership experience. For the past 11 years, Malcom has leveraged his resume to the fullest. That resume is important when one looks at the State Farm fleet.
“Dick does an excellent job of ensuring we have the most efficient cost-effective fleet of vehicles available for our associates to accomplish their jobs,” said Malcom’s supervisor David Matzinger, manager – administrative services. “He is well respected in the field and worked hard to establish relationships with the manufacturers and key contacts in the industry.”
In December 2000, the company operated more than 20,000 vehicles, with many of them used as pool vehicles, assigned daily to adjusters to visit customers, write estimates, and negotiate repair prices with shops.
By late June 2012, Malcom had overseen the reduction of the fleet to slightly more than 12,000 units, consisting of sedans, vans, and light trucks, resulting in substantial savings. The reduction was accomplished in a number of ways.
“Since 2001, we have increased the mileage we drive our sedans from 60,000 to 85,000 miles,” Malcom explained.
He also took a close look at how the fleet used its pool vehicles. “We have reduced our pool car portion of the fleet by augmenting with rental vehicles,” he said. “This allows us to increase the utilization on the remaining pool cars and hold a smaller number in this category.”
While many large fleets are leased, State Farm has opted for ownership. “Based on the current cost of money, and the depreciation options made available by the federal government, we find owning our vehicles to be the best option for State Farm Insurance Companies,” Malcom said. The fleet is currently 98-percent owned, on its way to 100 percent.
Implementing Best Practices
Malcom sees his mission clearly. “It’s to provide the safest, most economical vehicles available that will handle the necessary job requirements of each position,” he explained. “And, equip those vehicles with a group of standard comfort features.”
Some fleets prefer to bundle key fleet management tools with one or two suppliers. Programs such as leasing, maintenance management, accident management, and fuel are sourced via a single fleet management company (FMC).
Malcom exhibits a preference for the “best practices” method, where each process is sourced separately, and the result is that the State Farm fleet uses a number of internal, as well as outsourced, programs. “Although we’re company owned, we source our vehicles via a purchase program,” he said. “We can leverage our buying power with it, and the program, in turn, leverages its buying power with the manufacturers.” This enables State Farm to purchase vehicles at the lowest cost possible, according to Malcom.
Fleets that prefer to outsource key functions use a lessor or fleet service company’s online tool to manage costs and inventories. Malcom has chosen a different route for State Farm: a fleet software package that is in-house, which enables it to manage as well as own its data.
“Earlier this year, we implemented new fleet management software,” Malcom said. “This tool assists us in tracking our expenses, including mileage, usage, drivers, and vehicles.”
The software replaces a “home-grown” solution the company had used since 1996. “The old system was good,” he said. “But, we believe we will be able to obtain a good deal of additional information from this system to help us manage our fleet more efficiently.”
Another tool Malcom said has helped him manage the fleet more efficiently is a newly issued State Farm Bank Visa fleet card. Rather than use purchasing instruments that are readily available in the fleet market, he has implemented a program that, he said, not only makes drivers more efficient, but saves money, and actually produces income for the bank.
“This option eliminates any late fees and out-of-network fees we had previously been subject to,” Malcom explained. “Our drivers are comfortable because any issues are handled by State Farm employees, and, due to our fuel and maintenance spend, we are able to provide our sister entity, State Farm Bank, with a substantial amount of income.”
The Visa card enables drivers to purchase fuel and maintenance within a much larger network of providers than a typical maintenance program allows.
“When this card was implemented around 2007-2008, our internal planning and analysis area projected the elimination of late fees and out-of-network fees plus the income to State Farm Bank combined would amount to approximately $475,000 per year,” he said.
His rich background and extensive experience enables Malcom to manage the State Farm fleet as a “department of one.”
“I have someone that does the central ordering/payment process, but she does not answer to me. In each of our 12 zones, we have transportation clerks assisting the drivers at a more local level,” he explained.
Malcom’s list of cost-containment initiatives that he and the company have undertaken over the years is long and include:
■ Implementation of centralized purchasing. Previously all zones could purchase locally if they chose. Now all purchases are funneled through corporate, and 99.9 percent of all vehicles are ordered, with few out of stock.
■ Limiting vehicle purchases. Realizing the company had too many vehicles and too little utilization, purchases were restricted to 10 percent of the zone fleet size for one year, and 15 percent of the zone fleet size the next year. Vehicles were reallocated rather than purchased.
■ The introduction of “domestically assembled foreign vehicles” into the fleet for the first time, including Toyota, Nissan, Subaru, and Mazda.
■ The adoption (and achievement) of a goal to have 75 percent of State Farm vehicle purchases be SmartWay qualified.
■ Moving 95 percent of the company’s claims estimators to four-cylinder vans.
■ Enactment of a new-vehicle policy limiting personal use, with more clearly defined rules as to how vehicles are to be used.
■ Changing the primary classification types of State Farm’s fleet. In 2011,
State Farm had approximately 2,300 assigned vehicles, with all expenses flowing to the department using them, and 10,000 “pool” vehicles, which each had a mileage charge for usage. As of Jan. 1, 2012, the company has 2,300 assigned vehicles, 7,000 dedicated vehicles (both of these categories are now charged for all vehicle expenses), and 3,000 pool vehicles used by multiple individuals, which are charged either a daily or hourly rate for their use.
All of these initiatives and processes are geared toward maximizing usage and minimizing costs, according to Malcom, adding that, so far, the results are right on target.
It often seems as though fleet managers manage change more than they manage vehicles. But, Malcom doesn’t shrink from the challenge. “Too many fleet managers rely on FMCs to do everything for them,” he observed. “Fleet professionals need to stay in touch with what is happening in the industry in order to help their management/executives understand what they do, and why they do it. Maintaining a finger on the pulse of the fleet, and automotive business is a key to doing the job well.”
Malcom sees a number of other changes that have come about in his decades of professional experience. Manufacturers’ CAP programs aren’t the same today, and, sometimes, fleet managers focus too much on up-front costs, he said.
“Too many fleet managers are capital-cost driven,” Malcom said. “It is not about what the vehicle costs to purchase — it is all about what the vehicle costs to operate during its life with the fleet.”
On a more basic level, Malcom said that the changes in vehicles have been little short of dizzying. “Fuel economy, electronics, other driver-based technology, make, and model choices have been changed, and changed again,” he observed. And, he sees no end in sight.
State Farm has had a number of changes company-wide that parallel those happening in its fleet, including having fewer buildings, more mobile workers, and larger territories.
Some of the fleet changes have been designed to help drivers do their jobs better. In 2003, Malcom collected a group of colleagues from claims, safety and environmental health, catastrophe services, and strategic resources (vehicle research facility) in an effort to develop State Farm’s first ergonomically correct mobile office in the back of a Chevrolet G 1500 passenger van. This vehicle and the upfit have continued to become more sophisticated over time and the upfit now resides in a Ford Transit Connect.
The introduction of change into both the fleet and into State Farm is a never-ending process, Malcom said, as it should be for any successfully run fleet.
Malcom is looking ahead to his next priorities. First and foremost, he said, vehicle selection is at the top of the list. “We have to constantly look at vehicle model choices to see if there is something we can implement that is better than what we are using,” Malcom said.
Vehicle selection isn’t just a matter of adding a few percent for price increases, and ordering the same models each year. “If there is a more important, more basic responsibility a fleet manager has, I don’t know what it is,” he insisted. “Everything else a fleet manager does, and every penny the company spends on fleet begins with selecting the right vehicle for the job.”
Safety is always at the forefront, too. “We need to constantly review our safety practices,” Malcom said. “Whether it’s driver behavior, managing losses or preventing accidents, a culture of safety is a critical component of any fleet manager’s responsibilities.”
Add to the list vehicle and business technology. “We’re always looking at new technology,” he explained. “Anything we can implement that helps us save money, or helps driver productivity, is on the table.”
Considering that Malcom has scrapped a “home-grown” fleet system for one the company purchased and implemented, it’s easy to see that this is no idle comment.
Other changes that Malcom is looking at include vehicle monitoring (GPS, telematics) systems and mobile office options. “Our drivers work out of their vehicles,” he noted. “Anything we can do to help them do so more efficiently and safely will be considered.” FF