How Fleet Management Will Change in the Next 5 Years

What will make the next five years so different from the previous five will be the near-exponential growth in technology and electronic commerce applications in the fleet management workplace. Five years from now, the norm in fleet management will include web-based factory ordering, online vehicle registration with state DMVs, almost paperless fleet purchasing and maintenance management, to name but a few of the many changes that will be altering our business. To gain a better insight in how fleet management may change in the next five years, we have identified 21 trends in the areas of purchasing, maintenance management, truck management, license & title, and vehicle taxation.

5 Trends in Vehicle Selection and Purchasing

Expanded Vehicle Eligibility

As a result of the tight labor market, there will be a trend to expand employee eligibility for company-provided vehicles. "Fleet vehicles usually fall into two categories: perks or executive vehicles and work vehicles. If the tight job market continues, these categories will be expanded to include ‘incentive’ vehicles," said Jim Anselmi, fleet manager for Lorillard Tobacco in Greensboro, NC. "Recruiters will use the type and model of the company-provided vehicle as an extra incentive or deal maker to attract the better applicants. This will have a direct effect on company policy and the vehicle selector," he added. One company that has already adopted this approach is Prime Services Inc. in Houston, which is currently conducting a pilot program in California to entice salespeople to join the company by providing them with a Ford F-150 extended cab pickup as a company-provided vehicle.

Paperless Fleet Purchasing

The future of fleet purchasing is rapidly moving toward the paperless environment of the Internet, said Jim Tangney, vice president, purchasing for Emkay. "We are receiving less data from manufacturers on paper, with updates and product information being circulated instead via e-mail and websites," he said. This will accelerate in future years, said Tangney, who expects Ford and DaimlerChrysler to move to a web-based Internet environment when creating their next generation new-vehicle ordering systems. Rick Shick, vice president, purchasing for Donlen Corp., likewise, believes that the Internet will dramatically influence and alter fleet purchasing in the coming years. "I see the most significant impact being in the area of vehicle selection, quoting, status inquiries, and ordering, with this ability extending down to the individual driver level," said Shick. Gary Taylor, vice president, purchasing for Associates Fleet Services, also believes that the Internet will play a vital role in being an information link between the fleet manager and the leasing company in spec’ing new vehicles, processing new-vehicle requests, and monitoring new-vehicle order and delivery status. "By providing spec’ing capabilities through our Internet site to fleet managers, it will be used as a tool to set up their fleet selectors and will be used to relay data on new model-year updates," added Taylor. Rick Lee, former executive director of GM Fleet Operations, and now North America regional manager for e-GM Operations, agrees. "In the future, fleets will probably place orders direct to manufacturers, which are linked to fleet management companies. They will have the ability to track orders and communicate with manufacturers via the web. They will also get service bulletin and recall notices via the web." The new GM business group – e-GM – will market GM products and integrated services using electronic malls. According to GM, the new group will lay the groundwork to transform its automotive operations into a global e-business enterprise.

Web-Based Factory Ordering

Dave Hansen, general manager for GM Fleet & Commercial Operations, said, "GM, like others in the industry, is using the Internet to improve vehicle order-to-delivery time, the vehicle selection and purchase process, and also to aid our customers with their fleet management needs. We also see this technology facilitating an increasing trend of global purchasing agreements with large international companies." Just like the Big 3, Toyota will also implement a web-based new-vehicle ordering system. "Toyota Fleet has developed and will be implementing a web-based system for ordering Toyota fleet vehicles," said Marv Rivers, corporate manager – fleet for Toyota Motor Sales USA. This system will streamline the production ordering system by providing immediate validation of customer order input, update vehicle specifications as required, and utilize the latest technology to provide a stand-alone viewing and browser compatibility at fleet.toyota.com. In addition, Toyota Fleet has developed an electronic version of a Production Information Guide. "This CD-ROM will be a stand-alone software package that provides information on lifecycle cost information, and other information regarding fleet promotions, special program announcements, and reminders," said Rivers. Available for the 2000-model year, the CD-ROM will be used as a ‘building block’ for future model-years. The CD-ROM will allow all users to ‘load’ the Product Guide onto their hard drive and, when connected via a secured line, will enable updates of product information on a regular basis or as changes occur. "This CD-ROM will be updated with 2001-model-year specifications and Toyota fleet programs as the information becomes available," said Rivers.

Shift in Fleet Buying Preferences

In a possible reversal of the migration to trucks, some fleet management companies are reporting that they are noticing an embryonic trend among some fleets to shift back to four-door sedans. "In an effort to cut costs, some fleets are taking expensive sport/utility vehicles off their selectors and switching back to four-door sedans," said Sally Spangler, manager of information consulting services for PHH Vehicle Management Services. She said these fleets are looking at lifecycle cost and, more often than not, they are moving away from SUVs and minivans. Also observing this trend is Jim Creighton, manager, vehicle acquisition and distribution services for ARI. "Sport/utility volume is stabilizing but some fleet managers are using smaller and less-expensive all-wheel-drive vehicles to meet the ‘perceived’ driver requirements for all- or four-wheel-drive vehicles," said Creighton. "Also, we have heard reports that drivers when given the option to choose a sport/utility, frequently switch back to a four-door sedan for the replacement vehicle because they desired the comfort and ride features of the car versus the truck-like feel of a sport/utility."

Global Fleet Management

Multi-national corporations are exerting more pressure on vehicle manufacturers and fleet management companies to structure global fleet acquisition programs and pan-national fleet management services. According to Jim Rallo, vice president for PHH, this pressure will increase in coming years as multi-national companies strive to develop global programs that incorporate local operating units in different countries under unified global fleet processes and systems, while providing them the flexibility to conform to their local, social, political, economic, and cultural factors. There are four factors driving this, said Rallo: an increasingly globalized and competitive world economy, the fact that most large fleets are operated by multi-national companies, new technology that is changing the way we do business, and the need to reduce costs, while enhancing services. "It is important for everyone to think globally, but act locally," said Rallo. "Globalization and company mergers will continue to affect how fleets are managed," agrees Anselmi of Lorillard. "Fleets will become larger and more diverse. The fleet manager must learn the culture of the ‘new’ organization and act accordingly."

5 Trends in Truck Fleet Management

Ongoing Shortage of Drivers

According to Ron Dapkunas, director of special vehicle services for PHH, a key issue is the shortage of drivers and the retention of good drivers. Dapkunas believes the driver shortage will impact truck design and specifications. For instance, there will be increased spec’ing of automatic transmissions by fleet managers because fewer drivers will know how to use a manual transmission. There will also be an increased use of models providing greater visibility and easier steering.

More Part-Time Drivers

As a result of the driver shortage, "I suspect that many more drivers will work part-time, which may mean that more smaller shipments will be moved in straight trucks rather than Class 8 vehicles," said Dapkunas.

Heavies to be Managed the Same as Light-Duty Fleet

More companies are using fleet management companies to manage their heavy- and medium-duty trucks. "At the CFO and CEO level, they are saying, why aren’t we managing our heavy and medium trucks the same way as our car fleet?" said Tom Coffey, vice president, North American Truck Fleet Services for GE Capital Fleet Services. The senior management at these companies want to acquire heavy and medium trucks under a centralized purchasing platform using a fleet management company and to use a separate line of credit for financing other than bank lines, adds Coffey. In addition, they are looking to shift the burden of remarketing heavy- and medium-duty trucks to a fleet management company. The type of companies that are making this decision are typically those that service or deliver their own goods. "More and more companies with multiple-asset fleets have begun to bundle RFPs to include medium and heavy truck, along with trailer and lift truck capabilities, with car and light-truck requirements in order to leverage economies of scale and single-source clout," said Coffey.

Use of Display Advertising to Increase Truck Revenue

There will be increased pressure to enhance truck revenue. "Companies will be looking for new ways to generate revenue and will be more aggressive in selling ad space on their trucks to their suppliers and customers," said Dapkunas. One example is SuperShuttle, which sells advertising space on the back of some of its vans.

Bulk Fuel Purchases Increase

Another trend that will impact truck usage is the fluctuating cost of fuel. "Given the recent and projected increases in fuel costs, I believe there will be even more aggressive efforts by fleets to cut fuel cost, such as bulk purchase negotiations and commitments, more effective routing and scheduling, and a greater focus on powertrain efficiency," said Dapkunas.

5 Trends in Fleet Maintenance

Internet-Based Maintenance Management System

Electronic commerce will dramatically change fleet management and the way fleet managers work. One consequence will be the increased volume of paperless reporting, said Dave Chimenti, manager, fleet management services for Lease Plan. "We’re seeing fleet managers become more receptive to electronic reporting using spreadsheets via diskettes and e-mail attachments," said Chimenti. "Since not all clients have access to the Internet, the next best tool is for them to use this type of electronic reporting." However, as more fleet vendors and drivers gain Internet access, it will become an everyday tool for communicating with them. "Preventive maintenance (PM) data will be accessible on-line and e-mail will be used to issue reminders to drivers when their vehicles are due for PM," said John Frank, vice president of fleet management services for Wheels.

Wireless Monitoring of Vehicles

Advanced on-board vehicle diagnostic devices will help to revolutionize fleet maintenance in the future. "There will be the ability to tie into the units on-board diagnostic (OBD) through a cell phone or lowband technology to diagnose vehicle condition and, if there is a problem, to send out an update repair for the problem," said Frank of Wheels. According to Bob White, manager, fleet services for ARI, global positioning systems (GPS) and on-board computers will allow fleet management companies and repair facilities to "talk" to vehicles while they are on the road. "This will allow accessing mileage, engine performance, and so on, on a real-time basis," added White. General Motors foresees its cars and trucks being able to automatically schedule their own routine maintenance with OnStar while they’re sitting in the drivers’ parking lot at work or their driveway at home. "Here’s an example of how this would work," said Hansen of GM Fleet & Commercial Operations. "The engine control module algorithm determines when an oil change is required based on a driving log of temperature, rpms, trip length, and other factors. When it’s time for an oil change, the engine control module notifies the on-board OnStar system to call an OnStar coordinator to schedule the maintenance with the driver’s service provider." Likewise, Anselmi of Lorillard Tobacco foresees future vehicles having the capability of being mobile offices and more. "Information on a driver’s location and personal use will be transmitted electronically," he said. "Breakdown and emergency services will be dispatched immediately."

Ongoing Technician Shortage

The introduction of new technology promises to further aggravate the existing service technician shortage. "There will be a need for more technicians whose specialty will be computers and electronics," said Bill Krick, manager, fleet maintenance for Emkay. "There will no longer be a need for part changers. Because of the complexity of these newer engines, we will see a shortage of technicians which will result in longer downtime and increased diagnostic costs," added Krick. Mike Southwick, vice president, fleet management for Associates Fleet Services, agrees. "The technical aspects of vehicle repairs will continue to become more and more complex, requiring more and more technically adept individuals to repair vehicles," said Southwick. One solution, perhaps, is strategic alliances with community colleges or trade schools to find the best and the brightest mechanics and nurture talent, said Ruth Alfson, CAFM, program manager for Seminole County in Sanford, FL. A more long-term trend is the consequence of greater acceptance of alternative-fuel sources such as fuel cells. "This will make it more difficult for the little ‘mom and pop’ repair shops to stay on top of the latest technologies," said White of ARI. There is also a trend toward extended service hours, said John Mack, director of service support for GM Fleet & Commercial Operations. "Customers are looking to us to provide programs and assistance beyond the 8-to-5 workday and to ease their fleet administration needs," said Mack. "We recently created GM Goodwrench Fleet Service and the Medium Duty Business Center in response to these trends."

More Dealers Servicing Fleets

Dealership service departments are becoming more interested in capturing service and repair business over and above warranty work, said Southwick. "New-vehicle dealers are being forced to actively pursue PM business, an area in which they had little interest in the past. This is a direct consequence to the improved vehicle quality," said Bruce Horan, maintenance product manager, card services for PHH. "I believe the additional competition from dealers has helped stabilize the cost of PM services." On the other end of the spectrum, Southwick says, non-traditional national account providers will continue to capture more and more fleet service business over and above the major national account providers. "Examples of non-traditional national account suppliers are National Tire Warehouse, Penske, Monroe, and Pep Boys," said Southwick.

Extended Service Intervals

A trend among vehicle manufacturers is to extend their recommended service intervals, said Frank. What is contributing to this is on-board engine analyzers, which promise to change the way fleets schedule their preventive maintenance, he added. Krick of Emkay agrees. "It’s already happening with spark plugs, transmission fluids, and extended life anti-freeze, which have, for the most part, been dropped from Emkay’s preventive maintenance plan," said Krick. "With the 2000-model year, we find vehicles which have oil sensors that will alert the drivers when it is time to change the oil and the filter, thus eliminating the normal 3,000-5,000 mile service." Eric Strom, manager, vehicle maintenance center for GE Capital Fleet Services, cautions that the 100,000-mile maintenance-free vehicle is not risk-free. "Some drivers believe that their company vehicle is ‘maintenance free’ because of the 100,000-mile maintenance advertisements. This belief may lead to higher operating costs and more downtime for some vehicles," he said. "Many factors, including driving habits, air temperature, geography, and idle time may classify a fleet vehicle as having ‘severe service’ conditions. This means that the coolant, spark plugs, and other 100K components may not be performing effectively. Services performed before the recommended 100K service interval are generally not covered by the manufacturer’s warranty."

3 Trends in License and Title

State DMVs Go Online

The primary trend in license and title is the increased electronic capabilities of states in e-commerce and all types of electronic transmissions, said Diane Scharafin, director, title, registration & vehicle remarketing operations for Wheels. However, these technology advancements were delayed last year as states focused their efforts on being Y2K compliant. "With this behind us, we expect DMVs to more aggressively pursue the adoption of new technology to perform bulk renewal processing, electronic title maintenance, lien filing, and imaging. This is already being done by a handful of states," said Scharafin. Rob Scaffidi, manager of license and title for Donlen, says another area that is currently being researched is the utilization of state websites to process registrations. "Many states offer via their websites the ability to renew registration; however, this option is geared toward the retail market and not the fleet industry," said Scaffidi. John Maher, vice president, license and title for Associates Fleet Services, likewise foresees the increase in dedicated state online registration systems and the increased availability of Internet access in processing registration renewals. "This will lead to a gradual movement toward paperless titling of vehicles," said Maher. "Some of these changes will come in conflict with the increased regulatory requirements such as VIN inspections, proof of insurance, emissions checks, and safety checks. Methods will need to be developed to have electronic evidence of such prerequisites so that the efficiency of electronic transactions can be utilized." Joe Raasch, director of licensing services for GE Capital Fleet Services, also sees online renewals as a key trend in license and renewal. "We are participating in a pilot project with 20 states to review their online systems," said Raasch. "Online licensing will allow fleet management companies to become ‘mini-DMVs’ – having tags, plates, and title stock in-house," said Raasch. Lynne Currie, manager, title administration for PHH, agrees. "Online transactions will mean streamlined administration, minimizing the volume and expense of faxes, mail, and overnight packages," she said. Currently, truck registration and licensing is a difficult task, especially if the counterperson at the DMV office is not well-versed in the procedures involved or the documents being presented to them. "With the current capability of imaging documents and sending them via the Internet, a strong case can be made for enabling registration by electronic means," said Ken Gillies, director, transportation services for Donlen. Documentation of a truck’s empty weight, the MSO, and a chassis upfitter certification of vehicle completion is adaptable to being sent via the Internet, he said.

Electronic Titles Debut

According to Gerri Patton, manager of license and title for Lease Plan, some states are allowing fleet lessors to act as remote agents and issue their own decals. "State Departments of Motor Vehicles have begun to simplify their paper forms as well by eliminating most multiple-part documents," said Patton. "I predict that the majority of states will replace printed titles with electronic ones within the next five years."

More Prerequisite Inspections

One trend is the increased demand by states to have vehicles meet safety and emission inspections as a prerequisite to license renewal. "These types of laws are appearing more and more each year and are adding to the costs and administrative overhead of fleet owners," said Tim Delaney, manager of license and title for ARI. In addition, DOT regulations are becoming more strict. "Trying to interpret each state’s regulations and enhancements to the federal guidelines has become an administrative nightmare," added Delaney. "Federal DOT regulations have increased multiple registration types in many states, which now makes the process of determining the required plate type for each truck type even more difficult."

3 Trends in Fleet Vehicle Taxation

States Automate Tax Collection

State governments continue to lag behind the private sector in the adoption of new technology, said Larry Makowski, tax manager for Wheels. "However, there are improvements in how they conduct business; nearly all states are requiring electronic fund transfers (EFT) of money for large accounts," he said. Makowski predicts that the next big push will be electronic data interchange (EDI) filing of returns. Ultimately, this move to electronic transactions will pose a challenge to states. "Sooner or later, states will have to formally address how they will audit taxpayers who have moved to a paperless process," he said. Makowski also foresees more local jurisdictions, such as smaller cities, trying to impose taxes on leasing companies, such as local gross receipts taxes, business occupation taxes, and license fees. Another source of revenue for states is the use of audits, said John Shevlin, tax manager for Lease Plan. "More states are increasing their audits to discover more revenue sources due to the repeal of tax laws."

Personal Property Tax Repeal

There is a movement to eliminate the personal property tax (PPT) on motor vehicles, as was recently done by Virginia, which partially repealed its personal property tax in 1998. "Unfortunately, Virginia only repealed the tax for vehicles used by individuals. But other states could broaden their reach," said Mary Tavenner, executive director for the American Automotive Leasing Association. One example is Texas, which is deliberating whether to eliminate personal property taxation on consumer leasing. Agreeing with Tavenner is Shevlin of Lease Plan. "More gubernatorial candidates are running on platforms to abolish the personal property tax on automobiles," he said. Tavenner added that many personal property tax states are ill-equipped to handle the appropriate processing of a large number of vehicles titled in one company name. "This is complicated by the fact that the administration of the PPTs are delegated to individual counties and there is no state-wide uniformity in assessments and collections," said Tavenner. In terms of federal taxation, one piece of good news is that the luxury excise tax will be eliminated for purchases after 2002, said Shevlin. The current phase out of the tax is 1 percent per year. In 2000, the tax rate was reduced to 5 percent on the dollar amount over $36,000.

IRS Scrutinizes Personal Use

Personal use is becoming a hot subject with the IRS, said Makowski. "We may see the IRS cracking down on what they perceive as abusive practices," he said. Another trend involving personal use is the movement "toward annual driver statements, rather than monthly mileage reporting," said Susan Stiles, information products business manager for PHH. "These annual statements would be used to collect annual personal and business use data for imputed income calculations."