The Car and Truck Fleet and Leasing Management Magazine

State of the Commercial Fleet Market in 2013

The most recent run-up in fuel prices and its ongoing price volatility is the top challenge facing fleet managers. Other ongoing issues are cost-control, sustainability, and minimizing liability exposure, such as distracted driving.

April 2013, by Mike Antich - Also by this author

Fuel prices, cost reduction pressure, flat maintenance costs, and continued emphasis on sustainability are all major parts of the "puzzle" that makes up today's commercial fleet industry.
Fuel prices, cost reduction pressure, flat maintenance costs, and continued emphasis on sustainability are all major parts of the "puzzle" that makes up today's commercial fleet industry.

At a Glance

  • The No. 1 challenge facing commercial fleets is increasing fuel prices, which have reached record highs.
  • Pressure for spend reductions at companies are occurring at all levels, and fleet is simply another department requested to cut costs.
  • Maintenance costs, overall, have been flat due to the higher quality of vehicles from all OEMs and extended powertrain warranties have covered some expensive repairs at high mileage.
  • Despite a slow economy, sustainability initiatives continue to receive strong support from senior management at many companies.

Without a doubt, the No. 1 challenge facing today’s fleets continues to be the increased cost of fuel. As the largest cost component of operating expenses, fleet managers are focusing on a multitude of fuel-reduction strategies, which often morph into corporate sustainability initiatives. In many ways, fuel-efficiency initiatives and sustainability initiatives are very much intertwined.

Sustainability continues to gain importance as a top job focus for many fleet managers. The degree of sustainability pressures from management is often commensurate with fleet size. Corporations, especially multinationals, have publicized their corporate mission statements to shareholders and customers, committing to reducing their corporate greenhouse gas (GHG) footprint. Since vehicle fleets are key contributors to corporate GHG emissions, a quick way to meet emissions-reduction goals is to modify the fleet program.

Another significant and ongoing challenge facing fleet managers is pressure from senior management to reduce fleet costs. Looking at the big picture, pressure for spend reductions at companies are occurring at all levels within these organizations, and fleet is simply another department requested to cut costs. As any fleet manager will tell you, reducing fleet costs is a constant, never-ending struggle for all fleets.

Although already prominent on the fleet manager’s radar screen, driver distraction promises to take center stage as senior management becomes increasingly concerned about potential liability consequences.

Universally, senior management is viewing driver distraction as a significant liability exposure, especially as drivers bypass corporate restrictions and serendipitously use their own mobile devices in company-provided vehicles.

Fleet managers feel very secure in their company’s business conditions and their job positions over the next 12 months, but the outsourcing of in-house fleet services will likely continue.
Fleet managers feel very secure in their company’s business conditions and their job positions over the next 12 months, but the outsourcing of in-house fleet services will likely continue.

Ongoing Fuel Price Volatility

As stated earlier, the No. 1 challenge facing commercial fleets is increasing fuel prices, which have reached record highs. A corollary concern is the ongoing fuel-price volatility, which has kept managing fuel spend a top concern for fleet managers, who, in turn, are being pressured by management to search for ways to improve overall fleet fuel efficiency.

For businesses that rely on their fleets to move products to market, higher fuel prices not only impact fleet operations, but also business in general. Margins are further squeezed by the additional cost of mandated diesel emissions technology, which has increased truck acquisition prices.

At companies relying on truck fleets to move products, higher fuel prices are a concern because the price margins are already tight, forcing companies to explore less costly ways to distribute products.

However, the biggest issue surrounding fuel cost is the uncertainty of future prices. Most fleet managers are resigned to the fact that fuel prices will remain elevated. Forecasting fuel prices is difficult due to pricing volatility and sensitivity to external variables. The challenge for fleet managers is planning, budgeting, and containing the variable cost of fuel.

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 other fleet expenditures. The price of crude impacts many areas, such as tires, plastics, lubricants, oil, solvents, etc., in addition to fuel. The impact of higher fuel prices to fleets is far bigger than just the price at the pump.

One silver lining to higher fuel prices is that it has prompted many companies to reinvigorate fuel-efficiency initiatives. All aspects of fuel management are being examined, including route efficiency, vehicle payload, territory coverage to reduce miles driven, and fraud management processes.

Companies are implementing programs to train employees to drive their vehicles in a more fuel-efficient manner. This means eliminating fast starts and hard stops and avoiding excessive idling. Some studies have shown that fuel efficiency can be improved by as much as 19 percent simply by reducing a vehicle’s idling time. Encouraging drivers to drive within the posted speed limit, especially on highways, can also help with fuel efficiency.

“We just raised our combined threshold to 26 mpg for company vehicles,” said David McCauley, fleet manager for Red Bull North America, Inc.
Estimates show that every 10 mph a driver does over 60 mph reduces fuel economy by about 4 mpg.

“We are limiting the top speed of fleet vehicles to 60 mph and installing idle-reduction timers,” said Mike Payette, director, fleet equipment for U.S. and Canada for Staples.

Most fleet managers do not expect to see an increase to their fleet budgets in the next 12 months (46 percent) and some are even anticipating a decrease (11 percent). 
Most fleet managers do not expect to see an increase to their fleet budgets in the next 12 months (46 percent) and some are even anticipating a decrease (11 percent).

Fleets are also looking at telematics as a way to control fuel spend, along with other expenditures, in certain applications. Fleets are looking at telematics as a way to change driver behavior and improve fuel efficiency. With fuel prices varying by as much as 10-15 cents per gallon in a five-mile radius, fleets are also starting to use tools to better control where drivers purchase fuel.

The most common approach is to maximize mpg for models selected. There has also been an ongoing trend to downsize to smaller vehicles and engines. Some fleets have moved out of SUVs to crossovers. For many fleets, rightsizing initiatives have been in the works for a number of years. However, the option to rightsize is not viable for all fleets.

“Being in the agriculture business, I cannot downsize vehicle type. We just have to try and make more profit to offset costs,” said one fleet manager who wished to remain anonymous.

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  1. 1. Jim Frank [ April 27, 2013 @ 03:24PM ]

    Mike,

    What is the cost for fuel per mile today vs 20-25 years ago when adjusted for 1) Inflation and 2) Increase in MPG from probably 14 mpg to 24 or more today ?

  2. 2. Paul Chapman [ October 01, 2014 @ 08:47AM ]

    Fleet managers can do a number of things to reduce the cost of running large fleets. For example, introducing fuel additives can reduce fuel spend by up to 10%; introducing telematics and cameras to vehicles can reduce insurance premiums; introducing driver awareness technologies can aid the driver by suggesting driving techniques which improve fuel economy. Overall, a combination of technologies, such as those provided by www.vidiwave.com, can reduce fleet costs by over 10% per year.

 

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