The Car and Truck Fleet and Leasing Management Magazine

Five Tips For Running a More Efficient Fleet

November 2015, by Bob Cavalli

Image courtesy of iStockPhoto.com.
Image courtesy of iStockPhoto.com.

In some ways, even contemplating doing something counterintuitive seems counterintuitive. If the fleet is running smoothly, benchmarking numbers look strong, drivers and managers are satisfied, and the fleet manager is well thought of, why would he or she want to do something that rocks the boat?

It’s easy for a fleet manager to slip into a comfortable routine. But, is that really a trait of management excellence? Fleet managers should constantly be looking for ways to shake things up, to discover better ways to do things (even if operations are running smoothly for the time being), to be creative and innovative, regardless of whether the result is something that runs counter to common practice or conventional wisdom.

We all become comfortable with routine — personally and professionally — and fleet managers are no exception.

Consider a large fleet, for instance. It has several hundred vehicles — which are leased — with a fleet management company (FMC) handling maintenance and accident management, along with a fuel card.

It’s a very smooth operation. Drivers know the policies and adhere to them; the fleet manager has a single source for programs and services, with a single point of contact. Why on earth would the fleet manager decide to upset a fleet operation practically on cruise control? Here’s why: single sourcing for convenience sake isn’t always the most cost-efficient way to go. There are a number of areas where best practices can be used, and costs reduced:

  • Fuel card: Fleet managers can often negotiate larger volume rebates by contracting directly with a fuel card provider. The fuel business is a very high volume, low margin business, and using an FMC’s fuel card adds a middle man between the provider and the end user. There is only so much margin to share, and dealing directly eliminates one of the “sharers” in the transaction flow.
  • Maintenance: With warranties extended to as much as five years/50,000 miles, is a maintenance management program really needed? A fleet that replaces vehicles on a three-year cycle may be paying per vehicle per month fees for access to expertise (technicians) they seldom need, as most components and systems are covered under the new vehicle warranty.
  • Subrogation: Rather than using an FMC accident management program’s subrogation services, it may at least save the contingency fee it gets by working either with your company’s insurance carrier or even the risk management department to develop a formal fleet subrogation program.
At a Glance

Conventional wisdom counsels not to "fix" what isn't broken; however, savvy fleet managers know that counterintuitive thinking can:

  • Help fleet run more efficiently by looking to outside customers for help.
  • Keep fleet operating at the right size with the right vehicles.
  • Open up career paths by delegating responsibilities to other members of the fleet team.

But, what about using multiple vendors when unbundling? Won’t that add significant administrative and clerical costs? Separate billings? What about getting data into the FMCs’ fleet system for reporting? Certainly these are issues to take into consideration; however it is usually the comfort and convenience of single sourcing that keeps fleet managers from going against their instincts and looking at alternatives.

Step 1:

Downsizing Fleet Size

Fleet vehicles should be downsized provided the action can be done effectively. But, the counterintuitive step here is downsizing the number of vehicles in the fleet. Why is this counterintuitive? Simple: What fleet manager wants fewer vehicles, and a smaller fleet? Won’t that diminish the volume incentives suppliers provide? Isn’t there the possibility the fleet manager will downsize him or herself out of a job?

In an extreme case, yes, but here we’re talking about inventory management and vehicle assignment. Fleets with hundreds or thousands of vehicles inevitably have more vehicles than they should. These include surplus vehicles, which branches and other field locations quietly keep in service for pool use. Vehicles that do not reach assignment criteria, which over the years have been grandfathered to the territory. These and other situations swell the vehicle inventory and inflate fleet costs.

Whether it is part of the fleet operation, nearly every company has a reimbursement option, for employees who may occasionally drive on business. Though the word “reimbursement” often causes fleet managers to cringe in fear or anger, using reimbursement to help ultimately reduce costs is good management. This is not an alternative for having legitimate company vehicles. It has been proven time and time again that providing company vehicles is less costly and far more reliable than reimbursing drivers for business use of personal vehicles. There is also the image problem that reimbursement carries. But, fleet managers who shy away from using reimbursement to help “cull the herd” bypass a great opportunity to strut their cost-reduction stuff.

Further, senior management will recognize efforts by the fleet manager that are clearly geared toward the best interests of the company; such talent and daring is rare, and can even lead to career advancement.

Step 2:

Don’t Become Indispensable

Any professional wants to exhibit the highest level of competence and expertise. Who doesn’t wish to be recognized as an expert in the field? Running a fleet of vehicles requires a unique set of skills and experience, and successful fleet managers are savvy in the way they make certain that management recognizes their performance.

It is tempting for a fleet manager to seek ways to make himself or herself indispensable; seen as the only one in the company who can do the job. After all, what employees in their right mind would want management to think that they can be replaced? Answer: a smart one.

The counterintuitive strategy would be to avoid becoming indispensable. Being indispensable in one’s current job is one of the best ways to erect a wall blocking career advancement. Many fleet managers loathe delegating responsibilities to staff, and/or training subordinates to be ready to step into the job. When that happens, and when a job or promotion opens up that the fleet manager seeks, being indispensable as fleet manager can limit his or her consideration for the position.

So, how should a fleet manager avoid this trap? Delegate responsibilities and train staff in all aspects of fleet management. Teach staff how to develop a selector, involve them in employee sales, and train them on leasing vs. ownership. Delegation is nearly always considered an earmark of a good manager, and when the company is comfortable that when the fleet manager is promoted there will be a smooth succession from within, a career path opens up dramatically. Fight the urge to make oneself indispensable, and career advancement is always enhanced; when you see a job posted, or learn of another opportunity, management will be comfortable that there will be someone who can step into your shoes.

Step 3:

Remember the (External) Customer

Internally, in many companies, managers are told to serve “internal customers.” In the case of the fleet manager, this means drivers and those in the driver function. After all, it is the driver who uses the end product of fleet management. And, much of what a fleet manager does (or any department head, for that matter) is geared toward achieving what senior management wants to achieve.

But, a very smart former CEO, the legendary Jack Welch of GE, once said, “hierarchies are places where everyone has their face toward the CEO, and their a** toward the customer.”

There is much truth in that somewhat vulgar observation. Fleet managers spend much time trying to please senior management; not entirely a bad thing as it is at those higher levels of the corporate ladder where decisions are ultimately made. Innovation and value do not flow from the top down, and, counterintuitively, not from the bottom up, either. It flows from the outside in.

The point? How about including external customers in the vehicle selection and spec’ing process? Completely counterintuitive, sure, but who would know better how your company can serve customers than the customers themselves?

This holds particularly true for truck fleets where external customers know what product and parts your company’s drivers must have available when they come to install or service a product. Rather than facing up the hierarchy, face the customer — as Welch recommends — and you may be surprised at how much their input can help.

Taking the idea another step forward, truck fleet managers are smart to involve upfitters in the selection process, not just using them for their engineering resources. A series of roundtable discussions with drivers, upfitters, and select external customers may result in better productivity and a more satisfied customer base.

Step 4:

Embrace Risk

Within most large organizations, there is a great deal of pointing and ducking when things go wrong. “Not my fault” becomes the mantra, as those connected to a “bad” decision quickly look to place blame. The end result being timid management; managers who fear putting their fingerprints on decisions, or making decisions altogether.

Fleet managers who do this seldom get very far on the career path. They become complacent and comfortable within the cocoon they’ve created for themselves. They outsource as much as possible, even if there are more cost-effective alternatives; that way, when things go wrong a finger can be pointed at a supplier. The “not my fault” mantra can be comfortably repeated.

There are a legion of quotes and adages about this flaw, for example, “if you never fail, it’s because you never tried.” The point is that managers who keep their heads down and their fingerprints off of critical decisions are seldom successful. Change nearly always entails risk; when something is done differently there is always the possibility that it won’t work.

Fleet managers are frequently faced with such decisions. Each year, new models and new technology become available, with the promise of better quality, lower cost, and greater safety. Fleet managers, again each year, must decide what vehicles to use in the coming model year, and part of that decision should include an examination of that new technology. Veteran fleet managers know this very well: during the oil shocks of the early and late 1970s, new models included front wheel drive and transverse engines, technology — though not entirely new — was offered in mass production for the first time. Because of the oil embargoes, fleet managers were scrambling for anything that would help to reduce fuel costs, and some of them leaped at these new models.

Unfortunately, some of these models were rushed to market too quickly, and developed a number of serious problems, resulting in recalls and major hits in resale value. Equally bad, some fleet managers turned most or all of their new model-year purchases to these vehicles, and paid the price.

Taking risks isn’t an all or nothing thing. In the above situation, the middle ground would have been to embrace the new models, but to do so selectively. Ordering a group of test units, and tracking their performance benchmarked against existing selections would have limited the damage done when the first production models encountered problems.

Risk can be managed, but not taking risks at all will eventually be noticed by senior management. Cost-reduction and management efforts will eventually hit the law of diminishing returns. Taking risks and properly managing them can open up new sources of savings and new paths for career advancement.

Step 5:

Be Bold

It is intuitive for fleet managers to want larger fleets, to prefer a comfortable situation with suppliers carrying much of the day-to-day load, and to avoid risk taking. There are intuitive steps that relate directly to fleet, and others related to effective management, such as making oneself indispensable to the job in order to remain “safe.”

But, the business world is chock full of intuitive managers, and a distinct lack of those who go against the grain in their efforts to be successful. There is, however, a difference between being counterintuitive and being reckless. In the previous example, it is good to consider and embrace new model technology, but it can be reckless to replace the entire fleet with it too quickly.

It is always a good idea to consider alternatives to FMC programs and services. Smart, successful fleet managers manage boldly, but not recklessly:

  • Embrace new models and new technology, but do your homework, make certain that it fits the mission and start with a “test” run of a modest portion of the fleet.
  • Outsource only what is necessary. Learn areas that FMCs normally handle, such as used-vehicle markets, purchasing/leasing options, funding, and maintenance. Keep in mind that administrative and clerical processes are ripe for outsourcing, but management decision making should always remain in-house.
  • Do your job well, and make certain that management knows you do, but never make yourself indispensable. Your company should know that, if you are promoted or take a new position, the transition to your replacement will be seamless.
  • Consider the external customer when making important decisions, and don’t be hesitant to seek their input. Vehicle selection, spec’ing, and upfitting are areas ripe for customer input.

Managing a fleet can end up being repetitive and less than stimulating unless the fleet manager is bold in decision making and willing to act counterintuitively when it can lead to greater success.

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  1. 1. Fred Turco [ November 30, 2015 @ 10:53AM ]

    Great article Bob and I couldn't agree more!

 

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