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Market Trends

Is Fleet Management Devolving to Crisis Management?

January 23, 2007, by Mike Antich

Since the start of the 21st century, seven short years ago, fleet managers have been buffeted by one major crisis after another. Following 9-11, there was an overnight meltdown in residual values. Then, Hurricane Katrina triggered fuel prices to skyrocket to $3 a gallon, literally overnight. If someone told us in 1999 that resale values would plummet 30 percent in the space of months and that fuel prices would exceed $3 a gallon, we would have dismissed these predictions as Chicken Little hysterics. The past seven years reveal the precariousness of our control over fleet expenses. The new reality is that our control is limited. The best we can do is mitigate the impact of adverse and unexpected market conditions (that are out of our control) on the cost of operating a fleet.

“Like most fleet managers, I worry about a lot of things that, in reality, I have little control over. Fleet managers are often times called on the carpet for vehicle costs, residual costs, repair expenses, and fuel costs, but we are not some sort of demigods who have substantial influence over these costs,” said Tom Krause, fleet manager for West Bend Mutual Insurance Co.

In this unpredictable environment, senior management continues to exert extreme pressure on fleet managers to lower fleet costs. However, outside factors conspire to thwart fleet efforts. Even when a fleet budget is fine-tuned, wild swings in fuel prices, for instance, make it impossible to stay within budget or accurately project future budgets. Despite this, fleet managers are directed to reduce expenses year after year, and to accomplish this with fewer resources. As one fleet manager said, who wished to remain anonymous, “How do I continue to show incremental savings? I am already running a tight ship and doing all the right things. What else can I do?”

Are Paradigms Shifting?
Several Fortune 100 companies, renowned for running exemplary fleet operations, report a growing internal challenge to quantify and qualify the value of in-house fleet management expertise to senior management. Management questions the importance of in-house fleet management expertise and asks whether it can be outsourced as have so many other corporate services. This reinforces the challenge for fleet managers to continue to find ways to add value to their company and the bottom line.

Fleet managers need to come up with creative ways to save money without negatively impacting company drivers. However, the dilemma is balancing the HR/driver requirements versus the finance/accounting requirements, which are often at odds with one another. Fleet managers need to balance these internal relationships (not easy) while meeting the demands of the corporation and keeping drivers happy.

This juggling act has become more difficult as fleet managers have taken on greater responsibilities, typically with less staff. The day of the fleet manager handling only fleet is becoming more of a rarity. Fleet managers who excel at their corporations have taken on diverse management responsibilities, but the down-side is that the total amount of time they can devote to fleet has been reduced, sometime dramatically. Although technology is enhancing fleet manager productivity, it also adds to the work level. Something as innocuous as e-mail communication is taking up more and more time out of the working day with each passing year. E-mail is both a boon and a curse to fleet managers.

These time constraints have caused a fleet manager's daily activity to devolve into “crisis management,” putting out an endless stream of “fires.” One example is the daily administrative challenges of enforcing driver compliance with corporate fleet policies, an area of great frustration for many fleet managers. It may surprise some readers that in 2007, not all drivers have access to e-mail, even at some of the nation's largest corporations. These fleet managers must communicate to drivers via voicemail or mail when drivers fall within their exception reporting. On the opposite extreme are tech-savvy drivers who only want information provided electronically or on an Intranet Web site and do not want information in a paper format. However, these are the same drivers who don't bother to read e-mails sent to them.

Waiting in the Wings
Fleet managers can no longer be satisfied by holding to traditional fleet management strategies, even if it means shaking up corporate culture in order to do so. “We’ve all thrown around the phrases ‘thinking outside the box,’ ‘shifting paradigms,’ etc., but I truly get the feeling that our industry is somewhat changing. Our core competencies are still there, but there seems to be external pressures affecting how fleet managers and vendors do business,” said Frank Memolo, fleet manager for Panasonic.

While this maelstrom is occurring, at some companies, the sourcing group is waiting in the wings to take charge, if given the opportunity.

Let me know what you think.

[email protected]

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Author Bio

Mike Antich

Editor and Associate Publisher

Mike has covered fleet management and remarketing for more than 20 years and entered the Fleet Hall of Fame in 2010.

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