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Fleet Management Reducing fleet operating costs in the current economic climate. 11 June 2014. Contents. Relevance of fleet management. Relevance of fleet management. Definition and purpose of fleet management Definition :
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Fleet Management Reducing fleet operating costs in the current economic climate 11 June 2014
Relevance of fleet management Definition and purpose of fleet management • Definition: • Fleet management can be defined as the process whereby the operation of and costs relating to a fleet of vehicles are controlled. It is a specific management discipline with recognised theory and techniques. • Purpose: • Organisations face many challenges in managing their fleet expenses and risks effectively. Such challenges can be serious and require immediate action or they may distract from business related tasks and activities. Fleet management techniques applied correctly will take care of challenges and mitigate risks. • Applying fleet management: • Companies are focussed on cost management to prevent revenue leakage. The fleet owner needs convenience, sophistication and quick access to information. Fleet management must provide a full range of custom-made fleet management services that will assist companies in managing and controlling costs. • Various categories of fleet expenses must be managed and invoiced through a single Fleet Management account. Fleet expense records need to be up-to-date, accurate and easy to access. For reporting needs, fleet management service providers must provide the convenience of a range of sophisticated, but easy-to-use tools to manage fleet expenses.
Relevance of fleet management Positioning of fleet management by fleet card issuers • The four main fleet card issuers Absa, Firstrand (Wesbank), Nedbank and Standard Bank together have approximately 700 000 fleet cards on issue. A fleet card can be issued for a variety of services ranging from fuel purchases, oil, tolls, maintenance and tyres • The fleet card issuers also offer managed maintenance (MM), Full Maintenance Leasing (FML) and an e-Toll solution
Challenges • Lack of awareness of a fleet’s Total Cost of Ownership • The increased cost of running and maintaining a fleet of vehicles in the current economic climate • Issues in reducing running and operating costs for a fleet of vehicles, vehicle maintenance and productivity strategies • Availability of information that facilitates managing fleet costs
Total fleet cost Total Cost of Ownership (TCO) • Lack of appreciation of magnitude of cost • Lack of information on and visibility of cost Acquisition • Purchase/Lease Operating Cost • Fuel Cost Management • Maintenance Cost Management • Tyre Cost Management • Fines and Licensing • Accident Management • Training • Tracking Average cost per vehicle (SBFM Base)
Maintenance costs Maintenance costs • Vehicle maintenance costs are challenging to control • Fleet owners have to ensure that vehicles are routinely serviced, tyres replaced on time and deal with issues impacting on maintenance, e.g. driver behaviour and correct vehicle use • Well maintained vehicles positively impacts vehicle productivity, fuel consumption and vehicle resale values • Maintenance costs on average increased by approximately 26% from 2010 to 2014 • Average value per invoice increased from approximately R2 600 in 2010 to R3 600 in 2014
Fuel cost and transaction authorisation Fuel costs • Fuel is a critical fleet expense and critical to manage and control • Fuel price increases have a major impact on fleet cost – indicated in fuel price versus fleet card fuel transaction values since 2010 • Fuel price increases resulted in average fuel cost per transaction of Standard Bank Fleet customers to increase from R515 in January 2010 to R890 in April 2014 (73%) • Vehicle condition and driver behavior are contributing factors that impact on fuel costs and must be managed (ultimately also impacts the value of the vehicle at replacement) • Costs can be controlled and managed by exception with fleet reporting that indicate fuel efficiency against national averages
Fuel cost and transaction authorisation Transaction authorisations • Fleet Management System performs close to 30 validations before a transaction is approved • Protection against fraud and abuse
Fuel cost and transaction authorisation (continued) Transaction authorisations • Standard Bank’s authorisation methodology is highly effective • With the second largest fleet card base, losses are well contained Source – Fleet card losses: SABRIC
Toll costs Toll costs • Toll spend equates to approximately 9% of total fleet card spend • E-tolling will see total toll spend increase even further • Table indicates e-toll cost for an approximate 3 000 vehicle fleet based mainly in Gauteng • Detailed reporting required to manage cost • Monitor spend • Private vs Business mileage • Route planning • Toll cost vs fuel spend
Fleet solutions Transaction authorisations – Real-time reporting • Website • Access approved and declined transactions in real time via the web • Transaction Authorisations App • Currently in development • Will allow fleet managers to approve/override declined transactions • SMS facility • Receive SMS’s for all approved and/or declined transactions • Breakfast reports • Daily reporting of declined transactions • Utilisation • 2 958 customers (56% year-on-year) • 90 000 vehicles
Fleet solutions Carbon footprint reporting • With the looming introduction of carbon tax in 2016 on Scope 1 emissions resulting mainly from fuel combustion, businesses should prepare themselves. • Developed ECO2Fleet, a web-based fleet management data collection and reporting service that measures the carbon emissions of vehicles and is aligned to the principles of the Greenhouse Gas (GHG) Protocol, a globally recognised accounting tool used to measure carbon emissions. • Companies need tools to manage, track and report their carbon footprint that can also facilitate the implementation and management of a strategy to reduce their carbon footprint. • Utilisation: • 529 customers (8.8% year-on-year) • 54 000 vehicles
Fleet solutions Predictive modelling • Using their own fleet transactional and operational data, companies can view the impact of variables on fleet expenses, including fuel price changes, interest rate changes, tyre price increases, more fleet vehicles • Variables that can be adjusted: • Example of fuel price change (Petrol R13.79 and Diesel R13.55):
Conclusion • Understanding the make-up and magnitude of fleet costs and the various factors that impact these costs will ensure that fleet owners understand the importance of managing all elements of fleet costs • Availability of information is critical for fleet managers to identify and interpret exceptions and trends in an environment of ever increasing costs • New and sophisticated tools are available that were developed to assist fleet owners in managing and controlling fleet expenses and risks • Fleet costs have a major impact on overall business profitability, hence the use of management tools and reporting becomes important to control the impact of these costs.
