Paul Lauria

1. Developing a Strategic Road Map for Your Fleet Operation Paul Lauria Automotive Fleet & Leasing Association 2008 Annual Meeting and Conference Scottsdale, AZ

2. Chinese Proverb If you don’t know where you’re going... any path will take you there.

3. Key Definitions Strategy:The science of planning and maneuvering into the most advantageous position prior to actual engagement. Tactics:The science of arranging and maneuvering to attain short-range objectives.

4. Why develop a strategic plan? • To identify opportunities to improve performance • Vehicle • Fleet management • Fleet operation • To prioritize improvements • To guide activities aimed at improving performance • To achieve improvements in performance

5. Why do opportunities to improve performance exist? • The fleet operation usually is a cost, not a revenue or profit, producer • Fleet management usually is an internal support function whose immediate beneficiaries are employees, not external customers • The contribution of the fleet to the fulfillment of enterprise-wide mission(s) is not always clear or well understood • Fleet costs are often small in relative, enterprise-wide terms, even if large in absolute terms • Information on, the visibility of, and hence an appreciation of the magnitude of fleet costs often is lacking

6. Why do opportunities to improve performance exist? • Fleet operation and fleet management responsibilities and authority often are decentralized • Outsourcing fleet asset management functions is sometimes confused with managing the fleet • Fleet management and operation are inherently complex activities, requiring proficiency in many different areas/disciplines • Many fleet management activities are affected by policies, procedures, and decisions promulgated by non fleet professionals • Fleet user needs and fleet operating conditions change • Fleet-related technology (vehicle, information, telecommunications, etc.) changes • Most organizations are fundamentally myopic

7. 7. Measure Results 6. Reengineer and Implement 2. Identify Improvement Opportunities 5. Develop Action Plans 3. Set Priorities 4. Define Improvement Strategies 8. Refine/Define New Strategies Overview of a Strategic Business Plan Development Process 1. Define the Business

8. Step 1. Defining the Business of Fleet Management • Management activities • Management roles • Management responsibilities • Management authority

9. Fleet Management Activities • Fleet asset management activities • Vehicle specification, selection, acquisition • Vehicle utilization and operation management • Vehicle maintenance and repair • Vehicle fueling • Vehicle replacement and remarketing

10. Fleet Management Activities • Enterprise management activities that affect the management of fleet assets • Financial management • Sourcing and supplier management • Risk management • Human resources management • Information management • Facility management

11. Sample Definitions of Objectives and Scope of Management Activities • Vehicle Specifications Development • Ensure that vehicles meet user needs (functionality and timing) cost effectively, take advantage of technological advances, promote corporate sustainability initiatives, comply with applicable (e.g., environmental, safety) rules and regulations, and facilitate standardization of fleet composition • Employee Performance Development • Promote continuous improvement in employee performance by providing regular, structured feedback on the quality of fulfillment of job responsibilities and rate of progress toward attainment of specific performance improvement goals and objectives

12. Human Resources Management Activities • Organization structure definition • Definition of job responsibilities • Staff assignment and utilization management • Employee classification and compensation • Employee recruiting • Employee training and professional development • Employee performance management

13. Fleet Management Roles • Ongoing execution/oversight of management activities • Policy and procedure development • Best practices and technology monitoring and educating • Goal setting and performance reporting • Fleet user advocacy • Executive management support

14. Fleet Management Responsibilities and Authority • Fleet management organization • Suppliers • Fleet user organizations • Finance/Accounting • Human Resources • Risk Management • Information Technology • Purchasing/Sourcing

15. Step 2. Identifying Improvement Opportunities • Review and assess the current quality of all direct and indirect fleet management activities • There are as many as 100 distinct management activities involved in managing a fleet • Use a simple scale for rating the current quality of performance of each activity (e.g., “Excellent, Good, Fair, Poor” quality)

16. Step 3. Setting Priorities • Establish criteria for prioritizing improvements to specific management activities • Impact on vehicle performance • Impact on fleet management organization performance • Impact on supplier performance • Reengineerability • Compatibility with enterprise-wide priorities (e.g., sustainability) • Opportunity for innovation • Establish weights and rating scales for each criterion

17. Sample Management Activities Improvement Prioritization Matrix

18. Step 4. Defining Improvement Strategies • State what about the management activity needs to be improved • Explain why the improvement is needed • Recognize that some improvement strategies may consist of fact finding and business case analysis as opposed to outright business process change

19. Sample Improvement Strategy Issues and Opportunities • The motor pool’s short-term rental vehicle inventory may be larger than necessary to meet customer needs. • Using commercial rental vehicles can be a cost-effective means of supplementing an inventory of company-owned vehicles to meet peaks in customer demand. • Utilizing rental vehicles as a back-up supply source might enable the motor pool to downsize the company-owned rental fleet without compromising vehicle availability or customer service. • The company currently has a contract in place for short-term vehicle rental. However, the motor pool does not use this contract as a secondary source of vehicle supply for its customers. Improvement Strategy Confirm the economic benefits of using commercial rental vehicles to supplement an optimally-sized inventory of company-owned short-term rental vehicles and, subject to such confirmation, develop an integration strategy and plan under which the motor pool would procure such vehicles on an as-needed basis on behalf of its customers.

20. Step 5. Developing Action Plans • Define how you will improve the management activity • Specific tasks and subtasks to be performed • Responsibility assignments • Timeline and milestones • Work products, deliverables, outcomes • Resource requirements • Internal (personnel hours) • External (dollars for products/services)

21. Sample Action Plan • Identify and evaluate potential cost savings. • Analyze historical trip pool rental transaction data to determine average daily and peak demands for rental vehicles. • Determine core rental vehicle inventory requirement based on analysis of historical usage trends. • Quantify marginal avoidable costs of furnishing pool vehicles in excess of core demand. • Compare avoidable cost per vehicle rental day with current contract rental rates. • Determine if potential cost savings are large enough to warrant additional investigation. If so, document analysis results and proceed to Task 2. • Implement commercial vehicle rental contract. • Develop service specifications. • Evaluate existing rental contract terms and conditions in consultation with Procurement for consistency with new requirements. Identify needed changes, if any. • Renegotiate and/or rebid contract as necessary to secure required services. • Evaluate bid results (if necessary) and award new or modified contract.

22. Sample Action Plan (cont.) • Implement new policies and procedures for using commercial rental vehicles to supplement trip pool. • Draft policy and procedure statement (PPS). • Solicit feedback from selected stakeholders and finalize. • Secure management approval for implementation. • Establish performance measurement process. • Define key performance indicator(s) (KPI's) for measuring motor pool and commercial rental company performance in meeting contract objectives. • Identify associated data requirements, data sources, analytical procedures, and reporting methods. • Design and implement performance measurement and reporting process.

23. Key Considerations in Developing a Strategic Business Plan • Technical rigor • Stakeholder involvement • Publicity • Recognition of political realities • Achievable goals • Implementable strategies • Concrete action plans • Measurement of results • Plan maintenance

24. Ancillary Benefits of Developing a Strategic Plan • Developing an understanding of the complexity of the business of fleet management • Clarifying the mission of the fleet management organization • Developing an understanding of the limits of the fleet manager’s authority and responsibility • Identifying interdependencies between fleet and other enterprise management activities • Strengthening relationships with fleet users • Promoting autonomy, self sufficiency, and stature of the fleet management organization

25. Questions

26. For More Information Paul Lauria Mercury Associates, Inc. 16051 Comprint Circle Gaithersburg, MD 20877 301 519 0535 plauria@mercury-assoc.com www.mercury-assoc.com