State of the U.S. Commercial Fleet Market: Cost Containment is No.1 Challenge Facing Fleet Managers

Commercial fleet managers are casting a wary eye toward higher fleet costs, which has also gained senior management's increased scrutiny following the rapid escalation of fuel prices, triggered by the upturn in global economic activity and unpredictable geopolitical events occurring in oil-producing nations.

This was the key takeaway of a recent survey of commercial fleet managers, which asked them to identify the top challenges facing their fleets in 2011.

One survey respondent, Sam Alfano, fleet manager for Cook's Pest Control, succinctly summarized his top three challenges by stating: "Fuel prices, fuel prices, and fuel prices."

This sentiment was echoed time and again by other fleet manager survey respondents. The response from Xerox summarized the concern of most fleet managers. "The major challenge facing our fleet is increasing fuel prices," said Paula Morisey, fleet manager for Xerox.

Compounding the impact of the fuel price volatility is that most fleet budgets were already approved, which anticipated a much lower price per gallon.

Here is an example of the dilemma of one fleet operating diesel-powered assets. "My major challenges for 2011 and 2012 will be controlling escalating fuel costs throughout the next two years. Since budgets are already set for 2011, we are struggling to control our fuel costs. We are also challenged with our larger diesel trucks on DEF fluids, storage of fluids, and educating our drivers on these new models," said Charlie Stevenson, fleet manager for Aqua America in Springfield, Pa.

Similar observations were made by other fleet managers, one of whom said, "The growing instability in the oil market will make cost planning even more difficult when trying to formulate future fleet budgets."

Dave Meisel, director - transportation services for Pacific Gas & Electric, summarized the impact on fleet budgets.

"The rapid rise in prices and the instability in some of the oil-producing parts of the world are going to continue to be a challenge for fleet budgets. Crude prices jumped more than 15 percent in one week, and when you manage a large fleet, it can equate to a serious impact to the budget. The price of crude impacts many areas, such as tires, plastics, lubricants, oils, solvents, etc., in addition to fuel. The impact is bigger than many people realize," said Meisel. "Looking ahead into 2012, the challenges will continue to be with crude oil. I think this issue will once again start to push fleets to look at other technologies, such as natural gas and electrification, to name just a few. Even though some fleets are more ready than others in this area, this is still going to be a major challenge for all fleets."

Most of the surveyed fleet managers foresee fuel price volatility continuing for the balance of this year and extending into calendar-year 2012.

Not only are fleet budgets feeling the impact of higher fuel prices, they are also being stretched by an across-the-board increase in almost all fleet expenditures.

"All pricing for everything we touch is now on the rise after a few years of being flat. Fleet managers are feeling the extra pressure. The prices for fuel, parts, tires, oil, and maintenance in general are all increasing," said one well-known fleet manager who wished to remain anonymous.

Escalating fleet costs are making fleet managers cautious in their fleet planning and forecasts. "2011 promises to be more difficult than 2010. Fuel prices are on the rise, which has a huge impact on every fleet. Predictions of even higher fuel prices for this year have us all bracing for the impact," said Alicia Hammond, fleet administrator for Ambius in Buffalo Grove, Ill.

Another concern voiced by fleet managers about the rapid run-up in fleet costs is the inevitable knee-jerk reaction by senior management.

"I, too, foresee fuel pricing volatility for the remainder of 2011. With the recent unrest in the Middle East, the ability to execute and to rationally plan are severely impacted. Upper management tends to react in a knee-jerk fashion, when more methodical planning is required," said one Top 300 fleet manager who wished to remain anonymous. "Balancing these pressures will be a challenge."

One longer-term impact of higher fuel prices is that fleet managers are beginning to reassess the models to be offered on selectors for the 2012 model-year.

"We will have an increasing focus on fuel economy during selector development by identifying vehicles with better fuel economy and possibly implementing technological devices to track/control driver behavior behind the wheel," said one fleet manager who requested anonymity.

However, there are trade-offs to modifying selectors to include smaller, more fuel-efficient cars. "First, having more fuel-efficient vehicle choices priced competitively will be a challenge. Second, locating fuel-efficient vehicles with cargo-carrying capacity will continue to be challenging," said one fleet manager who wished to remain anonymous.

A similar concern was cited by David McCauley, fleet manager for Red Bull North America, Inc. "Fuel pricing will ultimately drive what directions we take with truck purchases and the types of vehicles we have on our selectors," he said.

There is also an employee morale consideration to transitioning to more fuel-efficient vehicles. "Going forward, I think we will have to find ways to keep employee morale up as we move to even smaller vehicles," said one fleet manager. "The manufacturers are going to have to understand small vehicles need to offer the options currently available in mid-sized cars. Many of us will be looking for small, economical, safe, and quiet vehicles that have options such as a power driver seat, heated seats, GPS availability (without all the other garbage), Bluetooth, and other things commonly thought of as only available in more expensive larger vehicles. I see vehicles meeting our business needs changing."

An Uncontrollable Expense

Many fleet managers acknowledge fuel as their No. 1 challenge, but most are resigned to the fact that it is an uncontrollable expense they will have to deal with as the best they can.

"Obviously, fuel costs are our top challenge, but my observation is it is almost uncontrollable in my type of fleet operations," said Steven Franz, fleet manager for Highmark.

This sentiment was echoed by other fleet managers. "I see the major challenges facing our fleet as all external," said Susan Miller, CAFS, manager, fleet program services for McDonald's Corp. "The ongoing and increased political unrest throughout the Middle East continues to present a major challenge for 2011. Overnight, the price per gallon in Chicagoland increased 20 cents on the saber rattle of Muammar el-Qaddafi. Trying to anticipate and manage things beyond our control, which have direct impact on operating expense, is the major challenge. Predictably, energy prices and petroleum-based and dependent products will continue to challenge through 2012 and beyond."

Here is another comment from a prominent fleet manager, who likewise wished to remain anonymous: "One major challenge for 2011 (and 2012) will be increasing fuel prices and the fact there is nothing we can do but watch them go up. Our company has moved to more four-cylinder vehicles over the past three years, so we will be in better shape than we previously would've been if/when fuel remains at $4-plus per gallon. Unfortunately, the savings previously predicted with the move to the four-cylinder sedans will be offset by the higher fuel prices. I assume alternative-fuel vehicles will be more of a topic of discussion for our company as fuel prices rise."

One silver lining to higher fuel prices is that it has prompted many companies to reinvigorate fuel-efficiency initiatives.

This was illustrated in a comment by one fleet manager. "Increased fuel expenses have really caused us to focus more on route efficiencies and territory coverage."

A similar observation was made by Mike Lahr, director of logistics for LKQ Corp., in Urbandale, Iowa. "We have become very conscious of fuel economy and fuel alternatives. In doing so, we have looked more closely at driver productivity, routing, and payload of product to reduce the miles driven," he said.

Other fleet managers are looking to increase car-sharing among employees.

"I believe our biggest challenge will be rising fuel prices. We are looking at the possibility of using pool cars at some of our larger offices," said Chuck Kukal, supervisor, fleet, mail and administrative services for Infinity Insurance Company in Birmingham, Ala.

Other fleets are looking to mitigate increased fuel costs by increasing personal use charges.

"Last year, we increased our personal use deduction from $75 to $115," said one fleet manager. However, the laws of diminishing returns eventually confront all fuel management initiatives.

"Of course, rising gas prices are showing up on the radar once again.  However, we can only right-size the fleet so much before the vehicle we provide our drivers doesn't work or makes their job more difficult," said Brett Switzky, fleet services administrator for American Family Mutual Insurance Co.

Already fleet managers are gearing up to deal with potential fraudulent use of corporate fuel cards, especially as employees set out for family summer vacations using the company vehicle. "Fuel pricing this summer is going to be very challenging. We are paying a close eye on personal fuel fraud, etc.," said Lisa Kneggs, fleet manager for Coinmach Corporation & Appliance Warehouse.

The high cost of diesel is a top concern for truck fleet managers. "Our challenge is the high cost of diesel fuel, its seemingly unexplained and uncontrolled rise, and its premium cost over gasoline," said Mike Payette, fleet equipment manager for Staples Inc. "Our other challenges are the high cost of diesel emissions technology, and its impact on new truck prices, and the use of DEF and its cost on a fleet's bottom line. Diesels in inner-city operations are not allowed to complete DPF regeneration due to shortened duty cycles resulting in dealer-forced regens or DEF premature replacement at high cost."

In reaction to the ongoing higher diesel prices, a few fleets have shifted from light-duty diesels to gasoline engines. These fleet managers say the switch was prompted by the consistently higher price of diesel, the high cost of diesel engine acquisition, and the increase in the cost of diesel maintenance. "These changes have easily overcome any benefits associated with the use of diesel technology, such as improved fuel economy and longer life span," said one fleet manager who made the switch.

For businesses that rely on fleet vehicles to move their product to market, higher fuel prices not only impact fleet operations, but their business in general.

"Higher fuel costs are a concern because the margins are already tight in our business. We must find less costly ways to distribute our products," said Gregg Hodgdon, CAFM, manager, fleet operations for Deli Express/E.A. Sween Co., in Eden Prairie, Minn. [PAGEBREAK]

Pressure to Contain Fleet Costs

In an era of rising fleet costs, fleet managers are facing a daunting challenge to mitigate these expenses.

"How to offset rising fleet costs is the most significant issue I will face in 2011 and beyond," said Charles Szymanski, manager, global property & casualty insurance and automotive fleet for PPG Industries, Inc. "I am constantly challenged to find new and creative solutions that produce savings of $1 million or more per year. Reports show fuel costs are expected to reach new highs in the coming years, if not months. Auto manufacturers will provide lower discounts for new models, which will tease fleets with improved fuel efficiency, and leasing companies will have increases related to rising interest rates. My job will be to minimize the impact for 1,600 sales and technical employees driving 50 million miles per year."  

In the case of these well-managed fleets, it is getting more difficult to find additional cost savings. According to one fleet manager, among her biggest challenges is to continue finding year-over-year savings.

A similar comment was made by Meegan Heritage, manager, sales & marketing operations for Biogen Idec in Weston, Mass. "Our challenge is cost containment, keeping the TCO for vehicles flat year-over-year."

As the survey revealed, every fleet is experiencing cost pressures. Forest Pharmaceuticals is no exception. "Our fleet is growing this year, so the challenge is going to be growing it carefully and appropriately while meeting the needs of the business. Additionally, we have not increased our fleet in some time, so we need to adjust our metrics and analytical tools so that we can continue to show improvements in cost management even though the overall cost of running the fleet will be increasing. This is going to be especially difficult with fuel because there will be an increased consumption due to increased vehicles, but also a significant increase in price per gallon," said
Theresa Belding, senior manager - fleet services
for Forest Pharmaceuticals.

Many companies continue to be in economic doldrums with the slow pace of the recovery from the economic downturn. This is especially impacting fleets that traditionally own their fleet assets.

"We have seen a significant reduction of funding for fleet replacement (we own our vehicles), and rapid changes in company staffing make it difficult to keep up with vehicle needs," said one fleet manager who wished to remain anonymous.

Another company impacted by the slow economy is similarly pressuring its fleet manager to make cost reductions in its fleet operations. "There is ever-increasing pressure to reduce company expenses as our margins have tightened and the economy continues to struggle with no real significant signs of recovery," said another fleet manager who wished to remain anonymous.

Other fleet managers likewise reported their companies have been adversely impacted by the economy and forced to reduce the size of their fleets.

"We reduced our fleet size by about 30 percent since 2007. Most of this was through reductions in business due to the economy. Some were due to changes in our vehicle program that eliminated the vehicle for certain positions," said Lance Keith, fleet manager for The Pape Group, Inc.

What has compounded the current cost environment for some fleets is the fact they extended vehicle service lives as a cost containment strategy.

"Our biggest issue is spending cuts. As a result, we are challenged by increased maintenance spend due to operating a number of aging vehicles, which need replacement," said one fleet manager.

Pressure for spend reductions at companies are occurring at all levels within these organizations, and fleet is simply another department requested to cut costs. In terms of fleets, these pressures have prompted them to increase their reliance on their fleet management company partners. One example is the pharmaceutical company Pfizer.

"There is pressure on spend reduction with increasing pressure on headcount reduction. It will be increasingly more difficult to deliver performance improvement, including spend reduction, while maintaining the basics - good customer service, market-competitive vehicles, etc. We will rely more and more on our fleet management companies in the future," said Fred Turco, global fleet services senior director for Pfizer.

There are ongoing discussions exploring the pros and cons of leasing-company-provided assets versus going to a reimbursement or driver allowance program at a growing number of fleets. "We are looking at lease versus reimbursement/allowance, as we attempt to reconcile vehicle assignments between our two divisions," said Lynn Fee, supervisor, fleet and facilities services for Energizer.

Other fleet managers also cited renewed interest by their senior management in driver reimbursement programs as a consequence to higher fleet costs.

"I believe the higher operating costs of our fleet will be the major challenge, especially in relation to reimbursement," said one fleet manager who wished to remain anonymous. "With the uncertainty of fuel costs and oil price increases comes the increase in costs of tires and other products derived from oil. This will resurrect the company vehicle versus reimbursement issue. If the company's costs are increasing, what would be the cost to the employee who does not have access to purchase discounts on autos, fuel, and maintenance? What impact will this have on the company's employee retention and hiring advantage?"  

Fleet managers also reported concern about the possibility of higher vehicle acquisition costs.

"I think we are looking at higher cost for vehicles, upfitting, and transportation due to the increased CAFE standards and government/environmental regulations," said Kukal of Infinity Insurance Co.

Another reported concern is about the possibility of higher interest rates in the future, fueled by record (and ongoing) government deficit spending.

"Besides the rising cost of fuel, one of our biggest concerns in 2011 and 2012 is the potential of higher interest rates. The continued pressure to save dollars wherever possible is becoming very difficult in that we've already cut in nearly every area," said one fleet manager.

A variety of cost-reduction initiatives are being implemented, such as those at Staples. "We've reduced our top speed to 60 mph to conserve fuel," said Payette. "We also acquired hybrids and introduced all-electric trucks. We are also buying larger trucks to replace smaller trucks in order to place fewer overall trucks on the road. In some
cases, we've extended leases where it makes sense to avoid the high cost of
replacement trucks."

Another area being scrutinized to reduce costs is the vehicle selector.

"We are making sure the correct vehicles are being used to do the job. We are focusing on what we need versus what we want. We need to keep fuel and acquisition costs down. Our industry is facing a huge increase in the cost of raw materials. Our salespeople need to keep in mind that they are a very important part of our organization, but that we need to keep our costs in line with our need to keep the 'P' in P&L," said Rosalie Falato, SG&A procurement agent for Benjamin Moore & Co. in Montvale, N.J. 

Many fleets are adopting minimum mpg requirements for vehicles to be added to the fleet selector.

"We have gone to smaller, more fuel-efficient vehicles on our vehicle selectors. We set up mpg parameters that vehicles must fit into," said McCauley of Red Bull North America, Inc.

Another cost control measure has been the installation of GPS to maximize route efficiency.

"We have continued our focus on right-sizing units, along with providing increased scrutiny on vehicle adds and increased deployment GPS technology to reduce cost," said Michael Butsch, director of global fleet operations for Joy Global in Milwaukee.

Many cost-control efforts were implemented earlier and are coming to bear in today's business environment.

"We are working more with our various operational groups to determine the correct amount and type of equipment to deploy, which has become more important than ever before. Through centralizing the management of our fleet, we have been able to better control costs by establishing national standards, which enable us to better leverage our purchasing power as a company across all aspects of fleet management and maintenance," said Mark Leuenberger, assistant VP, supply chain management for Cox Enterprises. "It has also resulted in more efficient and practical vehicles for our operational groups. We are also in the process of moving our repair and maintenance more in-house to relieve our dependence on dealers. Since the downturn in the automotive market, the shrinking dealer base has also impacted our fleet downtime."[PAGEBREAK]

Ongoing Downsizing Trends

There has been an ongoing trend to downsize to smaller vehicles and engines. "We have adopted smaller vehicles (four-cylinder) across a large sales fleet. We are also working on the harmonization of fleet policies associated with a large-scale corporate merger. There were significant downsizings associated with the corporate merger," said Scott Lauer, manager, U.S. fleet administration for Merck.

Other major fleets downsizing to smaller engines and more fuel-efficient vehicles include the Church of Latter-day Saints and Highmark. Similarly, Xerox has transitioned to four-cylinder engines from V-6 engines. Sun Chemical reported it has transformed its entire fleet to four-cylinder vehicles. The same was true with Infinity Insurance. "We went from a six-cylinder vehicle getting 16 mpg to a four-cylinder getting 23 mpg," said Kukal.

 Other fleets have moved out of SUVs to crossovers and smaller engines or eliminated their executive fleet vehicles.

Many fleet right-sizing trends have been in the works for several years.

"Beginning in 2008, I set a goal to reduce the number of minivans and larger exception vehicles in our fleet from 64 percent to 10 percent of the fleet to reduce $3.7 million in lease and fuel costs. The remaining 10 percent accommodates technical drivers who require additional storage capacity that larger vehicles provide. Overlaying that process, we set a goal to reduce our fuel consumption to offset some of the rising fuel costs," said Szymanski of PPG Industries, Inc. "The change was a significant cultural event for drivers replacing extended minivans with four-cylinder sedans. We accomplished the goal by revamping our driver approval process to include 'gatekeepers' to monitor eligibility for exception vehicles. Senior level business management also became involved and now receives periodic reports detailing costs and inventory breakdowns."

In addition to cost reduction, fleets have also embarked on right-sizing strategies to reduce their corporate carbon footprint.

"We are right-sizing the variety of trucks and vans in our fleet to optimize sustainability and cost," said Fee of Energizer.

Other fleets are adopting a multipronged approach to cost containment.

"We have seen a reduction in vehicles and a more focused look at the utilization of the vehicles that remain," said one Midwest fleet manager. "We had an intentional move to four-cylinder engines, hybrids, and SmartWay vehicles (including establishing an objective of 75 percent of new-vehicle orders), a move toward looking to increase our spend with qualified diverse vendors, a strengthening of our internal fleet safety program, the creation of a national employee sale program that shows us an increased return on our used vehicles, and taking a hard look at technology currently available, such as car-sharing and different options connected to the vehicle OBD II (onboard diagnostics system)."

Other cost control strategies have been to shift to different classes of vehicles. "We eliminated minivans from our fleet and are ordering almost all vehicles with four-cylinder engines. Four-wheel drive or AWD are only permitted in heavy Snowbelt territory," said Falato of Benjamin Moore & Co. 

During the past two years, Cox Enterprises has significantly reduced its new-vehicle acquisitions.

"We were able to do this by 'right-sizing' our existing fleet and taking better control of the maintenance of our vehicles, which has resulted in a prolonged lifespan," said Leuenberger of Cox Enterprises. "This resulted in significant capital savings to the company with only a minimal increase in operating costs. In 2011, we are beginning to purchase vehicles again, with a focus on weight and fuel economy. Though the purchase volumes are less than 2006-2008 levels, they are greatly increased over the past two years. We will most likely sustain these purchase levels through 2012."

Extended Service Life

Many fleets in the past several years have decided to extend their replacement cycles.

"In the past six months, we changed our replacement cycle from three years/65,000 miles to four years/80,000, switched manufacturers, and are working toward a four-cylinder-only fleet," said one fleet manager.

Another fleet that increased its replacement cycle was American Family Mutual Insurance Co. "We extended our replacement cycle from 36 months/60,000 miles to 42 months/75,000 miles. We have also introduced four-cylinder vehicles on our selector list," said Brett Switzky, fleet services administrator for American Family Mutual Insurance Co.

Some fleets are maximizing service life by reducing the miles driven. One example is Deli Express/E.A. Sween Co. "We are keeping trucks longer and routing our drivers using routing software to reduce miles driven," said Hodgdon.

Other fleets, such as PPG Industries, extended mileage to 95,000 miles and have only experienced minimal maintenance cost increases.

"Extending replacement mileage was another change that affected our fleet operation. Our sales and technical fleet utilized the very common 65,000-mile parameter for a very long time, and we supported this number each year with very traditional charts showing the lowest cost per mile on a lifecycle basis.  Challenged to save money, we added 10,000-mile increments to our replacement parameters for the last several years and have now reached 95,000 miles as our standard replacement mileage. We have monitored our costs in the upper mileage bands and found only minimal cost increases in maintenance but significant cost savings post amortization period on the leases," said Szymanski of PPG Industries, Inc. "Obviously, the selling prices dropped to some degree, but in total, our costs continue to fall. Many factors go into lifecycle models, but they are not always predictable or accurate. Recently we benefited from spikes in the residual prices, possibly masking issues with selling higher-mileage vehicles. Ahead, we are concerned how the credit risks of the buyers impact our selling prices."  

Yet another fleet that extended the months-in-service for its vehicles was Advance Auto Parts. "We have increased our lifecycle by a year," said Carol Davies, CAFM, fleet manager for Advance Auto Parts "We pay more attention to underutilized vehicles and have had several waves of moving several hundred vehicles across the U.S. to avoid growing the fleet unnecessarily."

However, not everyone experienced nominal increases in repair costs. Some fleets witnessed substantial cost increases.

 "We are dealing with an older fleet. We have brought in no new vehicles or equipment since 2007. We are also seeing an increase in business for the first time since the downturn," said one fleet manager who wished to be anonymous. "We are starting to see high-dollar repairs and more downtime now that most units are out of warranty. Monies for capital purchases will continue to be minimal for the next two years. Though actual dollars spent on fleet maintenance are down from 2009, the cost per mile, cost per yard of concrete, and cost per square foot of plaster could rise well above 2009 levels in 2011 and 2012 as we see a modest increase in production requirements. My staff and I will need to be ready with a solid explanation of these numbers we are sure to see."[PAGEBREAK]

Fleet Truck Trends

Diesel truck prices have increased dramatically over the past several years with the enhanced emissions equipment installed on trucks today.

In addition, order-to-delivery (OTD) has lengthened for medium-duties requiring upfits. "Build times on medium and heavy truck upfits have increased to 16-18 weeks, and there is a shortage of out-of-stock units," said Butsch of Joy Global.

Fleet managers also report that maintenance costs have increased for medium-duties. "My medium-duty truck line, which includes 115 units, has witnessed maintenance costs increase exponentially. I'm having a hard time explaining the downtime and repairs on trucks less than three years old. The repairs are large-ticket items and many on brand-new trucks," said Kneggs of Coinmach Corp.

Another factor contributing to higher maintenance fees are increased labor rates. "Shop rates will continue to increase. $120 per hour-plus is not uncommon in certain market areas," said J.J. Keig, CAFM, fleet manager for NCH EcoServices. "Qualified repair facilities and mechanics continue to be a weak link. If a shop is even 'okay,' then there is probably a several-day wait for even simple, routine PM work. If a shop is 'very good,' then there will probably be a week or two backlog, even for simple items. Most continue to struggle with a chronic shortage of qualified mechanics."

Tony Orta, asset management manager, Fleet Services for Sempra Energy utilities likewise reports an increase in truck maintenance costs. "We are seeing rising maintenance costs associated with heavy-duty vehicles utilizing SCR technology, such as filter cleaning, regeneration by both operator and maintenance personnel, etc.," said Orta.

Yet another reason for higher maintenance costs is the "proprietary" nature of OEM chassis. "All truck OEMs have their own proprietary engine diagnostics. While most functionality can be achieved with aftermarket scan tools, the cost for each OEM 'version' is staggering to the independent shop. Then the shop must employ a very computer-savvy technician. This underscores the vortex that most independent shops get sucked into," said Keig of NCH EcoServices.

All diesel trucks have become extremely complex. "This complexity makes it hard to work on these trucks, both from a technology and also from a 'real-estate' perspective. Look under the hood of a light-duty diesel and try to 'see' the actual engine block. Even the simplest repairs require surgical precision and increased man-hours due to the compact area they are tucked into. In many instances, it is easier to remove the entire cab to get at the engine," said Keig. "Show me one independent truck shop with an owner under 50 years old and I will show you 10 with shop owners over 60 that will be closed within two to three years."

On the light-duty side, there are concerns about certain models ceasing production. "The future of the Ford Ranger and Chevrolet Colorado are really going to damper our abilities to supply our fleet vehicle needs," said Davies of Advance Auto Parts. "We are losing all ability to be proactive in pooling vehicles with the manufacturer on a truck line for light-duty trucks. As a company, our fleet group is really trying to get the word out internally that our scheduling needs will need to be at least 16 weeks out to obtain our vehicle needs. I personally am not looking forward to 2012."

Also, new-model introductions have posed issues by not conforming to current upfit equipment.

"The new chassis from all manufacturers are also creating issues for us in performing box swaps due to the added components required to meet the new emission regulations," said Hodgdon of Deli Express/E.A. Sween Co.

Another concern has revolved around medium- and heavy-duty truck tires. "For operators of HD and OTR trucks, fleet managers are often faced with tread designs and sizes that are back-ordered and/or discontinued. Trying to match up a tire in the field due to a road hazard can be a frustrating and expensive proposition," said Keig of NCH EcoServices.

Another concern is the price of tires.

"The most pressing challenge is the sizable increase we are seeing with tire markups. In addition, we are looking at a rubber shortage that is a big concern. We have changed our primary vendor as a result to help us mitigate the effects on the 2011 budget," said Steve Saltzgiver, director, fleet operations - North America for Coca-Cola Enterprises Inc.

Another fleet concerned with tire cost and availability is DIRECTV. "With the cost of crude rubber dramatically increasing and shortages of certain tire models, we are evaluating different tire brands and models to identify the most cost-effective tire for our fleet," said Brandon Morris, director, fleet services for DIRECTV in Englewood, Colo.

Safety/Accident Management

Safety continues to be a priority for many commercial fleet managers battling distracted driving.

"My major challenges haven't changed all that much. No. 1 is safety and reducing the number of accidents we have. While the majority of them are not serious accidents, a large number of them are preventable and caused by driver inattention. We will be looking at that carefully and trying to figure out how best to address this, given the drivers' needs to be productive also," said Donna Bibbo, CAFM, manager, fleet and travel for Novo Nordisk.

Others similarly view driver distraction as a major challenge affecting their fleet operation. A significant safety-related issue is ensuring drivers are compliant with company distracted driver policies.

"My top challenges are driver safety and costs of accidents in the environment of ever-increasing driver distractions," said Lauer of Merck.

Another reason why accidents are a hot-burner issue is due to the recent severe winter, which resulted in an increased accident rate due to severe winter driving conditions.

 Other ongoing safety issues include safety program compliance, MVR results action plan, and updated safety policy rules.

In an era of higher costs, accident repair is not an exception. "The cost to repair accident damages is another 'eye opener.' Often what appears to be minor to moderate damages can often total out a vehicle," said Keig of NCH EcoServices.

One fleet, Highmark, now requires all of its fleet vehicles to have a NHTSA 5-star safety rating.