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Establishing a business case for fleet management technology

Fleet management represents both an expense to the business and an investment. Chief financial officers therefore need to establish a business case that demonstrates a sound rationale for investing in fleet management technology

FLEET management represents both an expense to the business and an investment. Chief financial officers  therefore need to establish a business case that demonstrates a sound rationale for investing in fleet management technology and in car, truck and van fleets themselves. However, the very fact that such propositions are both an expense and an investment means that they need to find a balance between the two sides of the coin – particularly as the main barrier to investing in fleets falls heavily down to what it costs to procure the vehicles, to maintain and manage them throughout their lifespan.

Let’s not forget that fleet management solutions are initially an expense too. Yet they are also an enabling opportunity to demonstrate how the organisation can in many ways create a much better return on their investment in their fleets in terms of time, money and employee productivity with the aid of telematics, data analysis and reporting. In essence it is also argued by industry commentators that the right fleet management solution can help organisations in the public and private sector to increase their profitability, and they can engender better customer relationships.

Increasing capacity

David Bridge, finance director at commercial vehicle fleet management software company Quartix, cites a number of reasons that back up the case for investing in fleets and fleet management technology, and one of those is that it allows companies to increase their capacity:  “First of all it offers increased capacity because if someone is running a chain of plumbers, or a dishwasher repair company, and the customer wants something, then you can check the location of your nearest employee to ask to them attend the call and to resolve the customer’s issue.” Knowing where your engineers are in relation to your customers, means that more jobs can be completed in a day and the speed of the response can also lead to better customer satisfaction.

“If that extra job is charged at £300 and the marginal cost for materials would be just £50, then you have made profit and the cost of the tracking is £15 per unit per month or 75 pence per day”, he claims. He adds: “We supply tracking to Ginsters, and the improved utilisation reduced their lorry movements by up to 40% and with better routing and by monitoring your drivers’ styles you can cut down on fuel usage –  in the case of Ginsters this saving was about 18%.” He has found that telematics can also be used to cut down on overtime expenses by proving that a driver was either working as he claimed to have been or in the pub while claiming to be at work.

Reducing administration

“Tracking also reduces administration with the automation of timesheets which feeds into payroll, and the final but not least point is that it improves health and safety through accident reduction because we measure driver behaviour, and if someone is driving like an idiot the insurance company tells us about it”, he explains. This could lead to the drivers that are driving badly to be either lose their insurance, be required to improve their driving, or enable the company to work on creating better driver training programmes.

While the worst drivers could be in the firing line, telematics can also be used to reward the drivers who constantly improve their driving through gamification – competitions that encourage good driving practice by using telematics to compare driver scores. The overall driving and environmental score or record of the company can also enhance brand perceptions, and make a firm more attractive to do business with if this demonstrates a commitment to health and safety and green fleet management. Staff can also be rewarded for their driving performance to encourage participation in the use of fleet management technology in their vehicles, and this can help firms to retain their staff.

Staff retention

“From a company car perspective it’s about balancing the cost of ownership of the vehicle with an attractive vehicle that’s going to help your staff retention, as well as being about looking at the whole life cost, and if you can reduce your CO2 output you can keep your vehicle choice attractive while reducing costs”, says Richard Hipkiss – Operations Director at Fleet Operations. He adds that there are generally three groups of employees that require a company car:

“The first group is the one where staff are given a car as a perk; the second group consists of people who need a vehicle to do their job, such as account managers and engineers; and although it isn’t widely recognised the third group is essentially a combination of the perk and the job need user”. He says the latter is exclusive to competitive industries and smaller businesses where there is a need for drivers to be given a vehicle that is similar or better than the choice they’d have for cars that are traditionally offered as perks. This group that creates the biggest challenge for fleet managers.

Ask questions

To tackle the business case, and perhaps this even includes the challenge represented by the third group mentioned by Hipkiss, Jeremy Gould – Vice President of Sales in Europe for TomTom Business Solutions, says fleet managers and CFOs should “have a greater picture of what they are trying to achieve and what was delivered.” He emphasises that ROI is a key part of any fleet management decision, and so he suggests they ask questions such as:

  • “How is the telematics service provider going to support the customer over the lifetime of the vehicle? “
  • Are they as customers choosing a provider that can support them as the needs of the business evolves?

Experience the technology

“We very much encourage our potential customers to talk with our customers, and we advise them to undertake trials to enable them to experience our technology with a significant representative sample of their fleet such as a depot”, he adds before suggesting the CFOs and fleet managers should experience the fleet management technology themselves. “The ultimate success or failure of a fleet management system relies upon the drivers’ willingness to use the technology, and we are talking about management being able to see where the vehicles are, but we are trying to involve the drivers in the process with capabilities such as being able to communicate directly with the office”, he explains.

He adds that telematics was traditionally implemented in trucks, but “more and more customers are implementing it into their car fleets for compliance and for being able to register private and business mileage.” He also mentions health and safety and the need to prevent or reduce accidents.

Top business case tips

Ashley Sowerby – Managing Director of Chevin Fleet Solutions – also offered his top 5 fleet management business case development tips:

  1. Know your requirements – Assess what you need and focus your efforts on it. Keep sight of why you believe the technology can help you.
  2. Create a sound budget and define your costs – Assess how much you can spend and where your ROI could be realised.
  1. All fleets are different – What works for one fleet may not work for another. Request solution demonstrations to show you how technologies can be used to meet your particular requirements.
  2. Data interrogation is key – Have an effective way to record information, make sense of it, and create actionable KPIs.
  3. Look to the future – Choose a system that is flexible and powerful enough to deal with future changes. The best global fleet management software should be highly-configurable, user-definable and future-proof by allowing users to define their own screens, menus, reports and KPIs without the need for reprogramming.

He concludes that “the potential benefits of fleet management and improvement strategies are often not too difficult to spot.” He then offers an example to underline his point:  “For example, fuel usually accounts for around a third of a fleet’s running costs, and the average annual distance travelled by fleet vehicles is 19,000 miles.” With this scenario in mind he says the companies that can reduce their fuel usage have much to gain. “So if you had a fleet of 150 vehicles and increased average miles per gallon from 30 to 33, you could save around £30,000 per year”, he claims. So in essence the business case for fleet management technology is very clear, saving time and money as well as offering the ability to improve customer relationships and to even potentially save lives or reduce injuries at work.

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