Cost management is a constant, never-ending struggle for all fleet managers since every aspect of fleet management revolves around money. While there never seems to be enough money to go around, one of the less talked about aspects of fleet management is the amount of budget dollars that are wasted every year. I define waste as the consumption of corporate funds and resources by inefficient or non-essential activities. It’s estimated that an average fleet wastes between 5% and 10% of its annual budgeted dollars.
Beside advice on how mimimize fleet waste, Automotive Fleet readers offer additional commentary on the potential of a totap price reset for future fleet products, asset simplification versus standardization, and ways to thwart driver abuse of corporate assets.
Wasted Fleet Dollars
Thanks for the article entitled “Estimated 5-10% of Fleet Dollars are Wasted Annually.” Great stuff. I think if every level of an organization appreciated the bottom-line cost of fleet annually, they could do the math and see how big of a number 5 - 10% of the total fleet budget really is that is wasted. With a passenger vehicle costing around $5,000 in carrying costs, think of how much money sat idle in parking lots while travel stopped, vehicles parked at the office, and employees worked from home. A university motor pool of 100 vehicles, during pandemic for example, may have had a carrying cost of ~$500,000 annually but only ran at about 10% utilization rates! So, 90% of $500,000 sat idle. To this day, as we exit out of the pandemic, utilization rates still aren’t high yet many fleets have not adjusted. The lost costs are enormous. I am a strong proponent of vehicle sharing and can make a very strong financial argument about how shared fleets can help limit the loss as fleets slowly transition back to normal.
Ed Smith, President of Agile Fleet
Careful What You Ask For
I really enjoyed the May 18, 2021 State of the Fleet Industry video. These are indeed interesting times. It’ll be interesting to see how all this is managed. I’m reminded of the first presentation I ever gave at NAFA in Toronto too many years ago. I titled it “Be Careful What You Ask For,” and I was speaking of escalating fleet discounts. Imagine today what the budget meetings are like for the 2022 model-year. When it’s documented that fleets are actually selling vehicles for more than the purchase price, and when days supplies at retail are as low as they are, fleet managers might be shocked at pricing when they go out to bid. I’m sure it’ll cause a lot of brand shopping, but will it really be any better somewhere else? Unlikely. Loyalty will be tested with both the OEMs and fleets. It feels like a total price reset is warranted on both retail and fleet sides, and I hope the market is ready for that. All things come around though, and I hope the OEMs don’t dismiss the long-term benefits of the fleet business -- sales, brand exposure, balancing production, used vehicles to support retail, etc. There will undoubtably be a day again when they’re begging for that business, and I hope they focus their organizations on how to build for that future. Thanks for keeping us updated and informed.
Ray Fisher, Managing Partner for Motormindz, Inc.
Don’t Pay the Piper
I watched the April 26, 2021 State of the Fleet Industry video report about the uncertainty as to the duration of the automotive microchip shortage. It was an excellent summary of the micro-chip quandary. The U.S .has not bottomed out – fleet managers beware. Prepare to run your units for longer duration and if you relax your PM schedules be prepared to “pay the piper” on unscheduled repairs.
Charles Schott, Managing Director for Schott and Associates
Great article on “Asset Simplification vs. Asset Standardization.” So often operations have become spoiled to think they have to only have top-of-the-line package in the company vehicle they drive from home to work when in reality a more plain-Jane model would do the job just as well and save the company thousands in each area they operate. It’s time to quit spoiling the upper echelon of management and give the savings to those that actually do the work and make the money.
Art Meyer, Fleet Manager for VoidForm Products, Inc.
An Avoidable Fleet Cost
Super article by Mike Antich on “The Overt (and Hidden) Cost of Vehicle Abuse” in the April 2021 issue. The opening line to the article says it very well - vehicle abuse IS an avoidable fleet cost. Fleet culture can help with this with a present fleet management, which is empowered and supported at the highest levels, modern fleet policies, and engaging your fleet regularly through education and expectation setting.
Hamid Dean, National Fleet Manager / Ethics & Compliance Leader for3M Canada