The Car and Truck Fleet and Leasing Management Magazine

State of the Commercial & Public Sector Fleet Markets

May 2007, by Charles Gibbens

The high cost of fuel and reducing preventable accidents are two of the most pressing challenges facing fleet managers in 2007. Other challenges include the struggle to continually deliver incremental cost reductions year-over-year and managing a larger workload with fewer resources. However, fuel and safety are, by far, the most universal challenges facing commercial fleet managers.

As the cost of diesel fuel has risen at a rate greater than unleaded gasoline, government fleets have been especially hard hit because of their heavy concentration of diesel-powered trucks and equipment.

However, it is the unpredictable volatility of fuel prices that most affects fleet managers. When gasoline and diesel prices rise dramatically and unexpectedly, it severely impacts fleet budgets. Fleet generally must cut in other budgeted areas to cover the overspending in the fuel account. Unpredictable fuel prices make it extremely difficult to stay within budget and forecast future budgets. One way fleets are dealing with higher fuel costs is rotating out fuel-inefficient vehicles.

The cost of fuel is cited as the number-one issue, but the issue of fleet safety is a very close second, and, with some fleets, it’s the primary challenge.

One reason safety is such a looming issue is the increased influence of corporate risk departments in the area of fleet management. For some fleets, this influence has extended into vehicle selector development. For instance, these fleets are basing selector inclusion on National Highway Traffic Safety Administration (NHTSA) crash-test ratings. In fact, some fleet managers are hesitant to acquire vehicles not advised by the risk department. They are concerned that should a safety-related issue result in an injury or fatality, they might be accused of ignoring the safety recommendation.

The Commercial Fleet Market
Managing Fuel Costs: The most pressing task commercial fleet managers face is managing fuel costs and identifying ways to decrease this expense. A corollary concern is pricing volatility, which makes budget forecasting difficult.

One strategy to reduce fuel expense has been to acquire more fuel-efficient vehicles. Another strategy is optimizing idle vehicles and lowering CPM (cents per mile) for maintenance expenses. Fleets are also exploring telematics.

Fuel efficiency goes beyond selector development; it also involves driver compliance and education. While fleets cannot control the cost element at the pump, they can utilize effective measures to reduce consumption, the majority of which relies on the drivers for sound vehicle operation and efficiency. This includes proper tire pressure and avoiding jackrabbit starts, excessive idling, etc.

The cost of fuel is an even bigger issue with truck fleets, as the cost of diesel exceeds the cost of gasoline. The uncertainty of future fuel prices is causing some fleet managers to reassess their 2008 selectors.

Another way to control fuel costs is to set up tighter and more frequent exception reporting to ensure best buying practices and eliminate fraud.

A significant impact on fuel costs has been the mandated introduction of more expensive ultra-low sulfur diesel fuel. Not only have fuel costs for diesel trucks increased, but so have other operating costs.

Decreasing Preventable Accidents: Commercial fleets are seeing an uptick in preventable accident frequency. The top challenges for many fleets are reducing the number of accidents and increasing driver safety.

One reason for the increase is that drivers are being asked to do more in the same allotted time. Therefore, they are multitasking behind the wheel, compromising their safety and leading to greater risks.

One risk management strategy has been to select only vehicles with high safety ratings. Safety is not a new challenge; it is a perennial concern for commercial fleet managers. The key issue nowadays is how to keep it foremost in the minds of company drivers.

Greening the Corporate Fleet: Many multi-national corporations have adopted a strategy to reduce greenhouse gas (GHG) emissions. One area of focus is fleet. However, this overall corporate goal often conflicts with mandates to lower fleet operating costs.

Also, fleet managers recognize that without the refueling infrastructure, no matter how many alt-fuel vehicles acquired, they will have a negligible impact on the environment if clean fuels are not readily available.

The Public Sector Fleet Market
New Diesel Engine Reliability: There is uncertainty about the reliability of new diesel engines required by the 2007 diesel emission standards. The increased cost of the new engines versus those they replaced has caused consternation.

Lowering Operating Costs: Across the board, public sector fleet operating costs have increased.

In addition, personnel costs have increased. One approach seeks to control operating costs at the user level. The struggle is managing expenses to keep internal rates as low as possible. One way to do so is to maintain the highest possible productivity levels and billable hours. However, in the final analysis, these costs must be passed on to users. Funding for vehicle replacement is also an ongoing struggle.

Lack of Technicians: The lack of qualified technicians is a serious problem confronting public sector fleet managers. The rate of retirements at many fleet operations makes this shortage a pressing issue. Fleets are finding it difficult to locate replacements for vacant or soon-to-be-vacated positions.

Specific specialties are suffering even more severe shortages. Good mechanics, especially diesel mechanics, are proving hard to find. The demographics of public sector technicians are skewed toward middle age and older. There have been a variety of initiatives to attract younger technicians to work for public sector fleet operations. Some fleets have sought to set up an apprenticeship program, but have found it difficult to do so.

One stumbling block is that public sector compensation often is not competitive with the private sector. There is strong competition for technicians in the job market. The technician shortage also impacts the amount of time fleets can devote to technician training. Training is becoming more critical as new vehicle technologies are introduced. Training on newer vehicle technologies, such as hybrid vehicles, 2007 diesel emission controls, and particulate traps, is a challenge. The technician shortage promises to remain an ongoing issue for public sector fleets.

The Alt-Fuel Struggle: Many public sector fleets, due to EPACT and the Clean Air Act Amendments of 1990, have been in the forefront of mandated alt-fuel vehicle acquisitions.

Many fleets are likewise attempting to balance political concerns to create a greener fleet against the realities of costeffective fleet management. Fleets are also finding it difficult to acquire OEM-produced alt-fuel vehicles to meet EPACT mandates.

About the Author:
Charles Gibbens is president of the National Association of Fleet Administrators (NAFA). Gibbens is also fleet manager of the County of Henrico, Va.

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