Top 5 Challenges Facing Commercial Fleets
In a survey of commercial fleet managers, the top challenges in 2012 will be fleet cost-reduction mandates, fuel price volatility, difficulty greening fleets, fleet safety, and increasing driver productivity.
The top five challenges are:
- Cost-reduction initiatives.
- Fuel price volatility.
- Driver safety.
- Implementing green fleet initiatives.
- Increasing driver productivity.
Senior management mandates to reduce overall fleet costs continue to be the top challenge facing commercial fleet managers, followed closely by fuel price volatility. Other top challenges include increasing fleet safety and reducing preventable accident rates, finding cost-effective ways to green a fleet, and addressing ways to increase driver and fleet department productivity.
Challenge No. 1: Cost-Reduction Initiatives
Reducing fleet costs is a constant, never-ending struggle for all fleet managers.
Managing costs is always the No. 1 challenge for all commercial fleet managers. The pressure to save money year-over-year is persistent at all companies. However, resale values are offsetting some of the other rising costs, at least for now.
Driving much of the pressure to reduce fleet costs is the overall weak economy, in both the U.S. and internationally.
Many fleet managers report they are given a specific percentage reduction goal in fleet costs and it is up to them to figure out how they are going to achieve it.
“My mandate is to reduce fleet costs by 10 percent, at the same time when fuel and acquisition costs are increasing,” said one fleet manager who asked to remain anonymous.
Invariably, cost-reduction mandates from senior management also involve analyzing the viability of driver reimbursement. “I have gone through three reimbursement-versus-fleet reviews within two years. I’m required to keep my cents per mile below 30 cents. Despite this, I continually have to prove the company-provided fleet is the best deal for the company,” said another fleet manager who also wished to be anonymous.
Currently, the biggest factor contributing to management pressure to reduce fleet expenses is the general business climate. Although the challenges are daunting, a number of cost-reduction success stories are reported by fleet managers.
“Despite the wild swings in fuel prices and continued increases in parts prices coupled with increases in equipment costs, our operation has managed annual increases in overall budget of less than 1-1.5 percent.
This is in a three-year period where fleet has grown in size by approximately 12 percent. While containing costs, we have successfully improved fleet availability to less than 0.5 percent overall for the working equipment, such as bucket trucks, digger derricks, and cranes,” said George Survant, director - fleet services for Florida Power & Light in Juno Beach, Fla.
Cost-reduction initiatives, by their nature, involve tension between fleet and procurement.
“Pressure from procurement to produce savings is a challenge. We plan on looking at fuel in 2012 since it is one of the largest expenditures,” said Rachel Johnson, CAFM, fleet specialist, region Americas for Konecranes, Inc. in Springfield, Ohio.
Another factor driving fleet cost increases is higher vehicle acquisition costs.
“Manufacturers are making better cars and increasing fuel efficiency, but are marketing increased fuel efficiency as a way to increase the sticker price,” said one fleet manager. “We short cycled a number of cars in 2011 to take advantage of current incentives and the strong resale market.”
Lifecycle costing for fleet managers is complicated due to the influence of external market factors.
“How do you plan and manage in a changing aftermarket environment? How will higher used-vehicle prices affect amortization terms for those vehicles coming into service in CY-2012? What will the move to smaller vehicles do to midsize vehicles’ ROI?” asked Michael Bieger, senior director – global procurement for ADP in Roseland, N.J.
Repeatedly, fleet managers cite the economy as the wildcard influencing future fleet costs.
“As the uncertainty about our economic future continues to grow, there are always pressures to reduce spending without reducing resources. As such, fleet is a pretty big target, and usually the first business group to come under fire,” observed Jim McCarthy, director, vehicle management services for CSCM, a division of Siemens Corp. in Iselin, N.J.
Another fleet manager also cited the impact of the national economy on his fleet operation.
“Concerns include the economy in general, election year jitters, and the growing global unrest — I don’t see company revenues growing too much over the next few years or maybe longer. It is inevitable that today’s middle-class quality of life will decline due to unsustainable national and personal spending habits — to what extent is the question. U.S. quality of life is synonymous with domestic trade and we fleet managers will feel the pinch of reduced budgets. Coupled with growing political destabilization in the Middle East, we can expect petroleum supply issues. We’ll feel the pinch from both reduced budgets and substantially higher fuel costs as time passes,” said a fleet manager who wished to remain anonymous.
However, there is a limit on a fleet manager’s ability to impact fleet costs due to the restrictions imposed by fleet application requirements.
“Unfortunately, there is little that can be done to affect the total-cost-of-ownership, other than to continuously review the contractual relationship with our various suppliers, and periodically review our equipment specifications and maintenance programs to ensure we have the most appropriate vehicle to perform the work while avoiding unnecessary over-spec’ing,” said another fleet manager who wished to be anonymous.
The biggest issue in cost management is controlling unexpected expenses.
“For example, we don’t have a centralized maintenance department; we use mostly national chains. So that brings labor costs into the mix, as we now have to ‘jockey’ cars. Bringing in mobile oil change companies that can do minor repair work on cars on site saves time, manpower, and helps control unforeseen expenses by drivers going the long route to take cars in for service,” said Dean Saunders, senior director of purchasing for G4S in Jupiter, Fla. “My fleet is not a one-on-one driver scenario, but has multiple drivers for the same unit. I can’t afford the luxury of having spares, or having a driver sit and wait for their car to be repaired. If the car is not onsite, it is not making money for my company.”
A common strategy to reduce fleet cost is to downsize to smaller vehicles, but the line between downsizing and driver satisfaction is a fine one.
“Selecting vehicles that drivers want and either maintaining or reducing costs for the company is the challenge,” agreed Josie Sharp, CAFM, fleet manager from Shire US Inc. in Wayne, Pa. (Sharp retired Dec. 31, 2011.)