Christian Treutler says the cost of fuel is having a significant impact on his fleet's variable costs. "Our intent is to counteract these elevated fuel prices by even closer management of fuel consumption, including grade of fuel required and used, fueling discipline, and eliminating SUVs from the fleet," said Treutler, director of vehicle operations and maintenance for USAA, an insurance and financial services provider for the military community. USAA operates a fleet of 1,600 vehicles. In a nationwide survey of 29 fleet managers, 10 issues emerged as being uppermost on their minds as they assessed the outlook for the fleet in-dustry in 2001 and beyond. The high cost of fuel is the No. 1 issue facing fleet managers for 2001, according to the survey.

1. High Cost of Fuel Is Straining Fleet Budgets "Our primary concern for 2001 is the cost of fuel, which has already had a significant impact on variable costs," said Treutler. "Likewise, our main concern is fuel cost," said Daniel Hayes, fleet coordinator for Kirby Risk Corp. in Lafayette, IN.

"We are looking at saving on our fuel costs by doing a better job of combining delivery routes and logistics." Echoing this is Joe Clark, fleet manager for Qualex in Durham, NC. "Our main challenge is for our drivers to be 'street smart' by finding the most economical fuel stations in order to keep our fuel budget in check."

How long will fuel prices stay at elevated levels? "If I had to venture a guess, and I did for my 2001 budget, fuel prices will continue at their current level or slightly higher," predicted Jim Anselmi, director of fleet operations and travel for Lorillard Tobacco Co. in Greensboro, NC. The impact of fuel prices, as of yet, has not prompted changes in vehicle selectors.

"Thus far, we have not had to adjust our selector list due to the increased price of fuel," said Mike Buffi, fleet manager for MetLife Auto & Home in Warwick, RI. "However, it is something we are keeping an eye on. Perhaps we will have to make adjustments in the future if prices continue to escalate."

2. Difficulty in Recruiting and Retaining Employees A widespread problem voiced by many fleet managers, especially for those employed in the public service sector, was the difficulty in finding qualified mechanics and technicians. "To get qualified mechanics and technicians, we started an apprenticeship program this January 2000 with a local trade school to start a pipeline for new technicians," said David Carr, manager of motor pool operations for the University of Washington in Seattle.

Likewise, John McCorkhill, fleet service director for the city of Lynchburg, VA, shares the same concerns. "We operate our own garage in Lynchburg and are finding it difficult to hire talented help at a price we can afford," said McCorkhill. "The pri-vate sector companies in the area are running ads offering to pay up to $22 an hour for a mechanic, plus a $1,000 signing bonus. We can’t afford to spend taxpayers’ dollars to hire help at that price."

Betty Linck, fleet director for the town of Greenwich, CT, agreed that shortage of qualified personnel was a big issue. "This personnel shortage -- administrative, clerical, mechanical, and technical –- has a long-reaching effect on your ability to service your end-users, be they a sales force with company vehicles, a municipality, or a government agency," said Linck. "The inability of being able to find and hire sufficient staffing that consists of com-petent, trained, dedicated, and conscientious employees is becoming harder."

Just as with Lynchburg, even a town as wealthy as Greenwich finds it hard to compete with private-sector employers. "Even if you are able to find the 'perfect' employees, you may not be able to hire them, or if you do, the funds may not be there to offer them a salary to stay," Linck said. Another concern is the loss of people who have developed an expertise in fleet management.

"There has been a high turnover of highly qualified fleet people due to early-out programs and downsizing," said Bob Brown, manager, vehicle fleet business and operations for Xerox Corp. in Rochester, NY. Another facet of this issue is the lack of administrative staff available to commercial fleet managers, and the resulting lack of time. "My biggest issue is time, in particular, the lack of it," said Sheryl Grossman, fleet manager for GE Medical Systems in Milwaukee. "I have no support. There is no field support and, as a result, drivers will demand more and fires will become hotter." One alternative to the larger issue of employee shortages corporate-wide is to expand the company-provided vehicle program to attract managers and key staffers.

"Given the low unemployment rate, one key to sustained business growth and profitability will be the ability for organizations to attract and retain key people," said Jerry Albertini, senior manager, corporate fleet services for Simplex Time Recorder in Gardner, MA. "A company-provided fleet program can be positioned as an integral part of the employee compensation/benefit pro-gram and provide significant leverage at nominal or no incremental cost.”

3. Management Pressure for Cost Containment The pressure to contain fleet costs has become especially strong in 2001. "Cost is a major issue," said Grossman of GE Medical Systems. "How do you take money out of an already tight budget? Expense reduction and travel opportunities are diminishing for networking and training."

One consequence to cost-cutting efforts is to defer vehicle replacement schedules. "Company cost cutting this year may affect the number of vehicles ordered, and the ability to travel to conventions and shows, along with downsizing of fleets and the vehicle types that are used," said Brown of Xerox. "I foresee increased maintenance costs for fleets as they decide to run vehicles longer.”

Certain fleet expenses such as the price of fuel and interest rates are beyond the control of fleet managers. "However, key manageable expenses remain," said Albertini of Simplex Time Recorder. "Timely maintenance is paramount to efficient fleet performance. By ensuring preventive maintenance is performed, most costly repairs and related vehicle downtime can be eliminated."

High interest rates is another concern voiced by fleet managers. "The one issue I am concerned with is that with the high interest rates affecting the monthly lease payments, there is almost no way to leverage these peaks in rates," said Joe LaRosa, manager-fleet administration shared services for Bristol-Myers Squibb in Princeton, NJ. "I believe this should be a major concern for all fleets using the TRAC lease. You work so hard on negoti-ating with the motor companies only to have those savings diminished due to the financial market situations."

An effective way to control fleet expenses is to minimize vehicle depreciation. "We look at this when we prepare our selector. We look at our history and the industry history with respect to net depreciation. The capitalized cost is important, but the net cost, depreciation, is our main consideration," said Scott Mayo, fleet director for Wendy’s International in Dublin, OH. "We also attempt to control replacement cycles so that we are selling vehicles during prime selling cycles. We place orders as early as possible for fall so that we are selling vehicles early in the fall. We also order vehicles for spring replacement so that we can take advantage of the spring used-car market.”

The cost of commercial insurance is another concern that is making it difficult to contain fleet expenses. "Commercial insurance is a big expense. Vehicle cost, fuel cost, insurance, and fleet maintenance are a real challenge to keep cost down and a big factor in overhead costs that affects the bid or bottom line of all our proposals for new business," said Wayne Flora, general manager for Brenneco, a plumbing, mechanical, HVAC, and fire protection contractor in Lafayette, IN.

4. Mergers & Acquisitions Is a Major Concern One of the greatest concerns for many commercial fleet managers, especially those employed at large Fortune 1000 companies, is the threat of a merger or acquisition of their company.

"I see the seemingly endless string of mergers and acquisitions as one of the biggest overshadowing issues facing the fleet profession in the coming year," said Dennis Hogan, fleet manager for Alliant Energy in Madison, WI. The driving force behind many acquisitions and mergers is to increase market share. "The problem is integrating many different systems and fleets into one," said Grossman.

One concern about acquisitions is providing the same level of service to the drivers as in the past. "We have already been through one major acquisition in the past year. We would be concerned with providing the same quality of service if we go through another in the near future," said Buffi of MetLife.

This is seconded by Katy McFadden, fleet manager for Duke Energy Field Services in Denver. "Mergers have had a major effect on my business performance last year. Our fleet has more than doubled! Managing the growth, developing and implementing systems and processes have been my greatest challenge," added McFadden. "The cultural integration itself is a challenge. Process development is critical, and the support of the new work force to the fleet manager is vital." However, not all mergers result in risk. "Mergers, acquisitions, and expanding global business will offer real opportunities, but will no doubt create a few casualties at the same time. This will be true for buyers and suppliers in just about all facets of our business," said Anselmi of Lorillard.

5. Transition to E-Commerce and Its Promise The challenge that e-commerce presents to fleets is how to implement these systems within their fleet operations.

"The challenges today are new and innovative ways to manage and control your fleet through e-procurement and e-business opportunities," said Suzie Hedger, corporate manager, leased automobiles for Smurfit Stone Container Co. in Alton, IL. "How do we procure our vehicles though an e-procurement system to effectively and accurately control and manage our expenditures?"

Agreeing is Lee Buttrick, field services manager for Boehringer-Ingelheim Pharmaceuticals in Ridge-field, CT. "Technology is playing such an important role in everything we do. The leasing companies are hot to offer the latest Web ordering and reporting. However, it was a technological circus coordinating with our IT department and our leasing company to troubleshoot Internet-related issues. Speed and data integrity were interfering with our performance and service levels to our drivers," she said. "Security and firewall blocks made it difficult to determine if our company was creating problems or if the leasing company needed to fine-tune their system. These issues have been resolved and now everything we do is through the Internet. It’s scary to rely on this so heavily, but society and business have pushed us all in this direction."

Another key attraction to e-commerce is the ability to increase productivity. This is borne out by Randy Shadley, fleet manager for Nextel Communications in Denver. "The main opportunity I plan to explore is improving productivity through increased use of Web-based programs. I’m encouraging our supplier partners to put more of my data on Web-based programs so I can access, process, and distribute data quickly and efficiently."

Agreeing is Tina Kourakos, assistant director fleet & strategic sourcing for CIGNA Corp. in Philadelphia. "The best way to meet the challenge is to stay familiar with the new opportunities technology and automation affords." One stumbling block for many companies’ e-fleet applications is that they have been slow to provide Internet access to their employees in the field.

"The fleet area has countless ways to increase productivity and get information to the field via the Internet; however, Internet access will not be available to the field sales personnel until mid-2001. I look forward to the option of drivers ordering their own vehicles, following the com-pany parameters, versus my department placing the order, or checking on the status of a new vehicle using the Internet," said Buttrick. Many see what is happening today with e-commerce as just the beginning.

"Putting information on the Web or internal network is not enough," said Hogan of Alliant Energy. "True industry leaders will develop and implement a complete e-business strategy. It is incumbent on fleet managers to ensure that they accept and make their fleets part of that strategy." Teri Nelson, fleet administrator for Cargill in Minneapolis, said: "E-commerce will draw users into the realm of value-added purchasing practices, streamline processes, and eliminate the maverick buying behaviors that work against the best-in-class purchasing practices." However, while implementation of systems is one thing, training is another, which is sometimes overlooked by corporate management. "We have established a fleet Web site on our Intranet and are in the process of refining the site and making it available to all of our drivers. We currently have our selector, driver paperwork, fleet policies, and a newsletter on the site," said Mayo of Wendy's.

"The issue facing me is to make sure that I have the training and necessary tools to maintain this Web site so that it is being utilized to its full capacity." Jeff Burisek, administrator, fleet services for SecurityLink from Ameritech, uses a fleet management company Internet-enabled fleet man-agement system to manage his fleet. "I have all of our field management using the Internet site. A lot of what I'm looking at are exception reports such as maintenance and fuel, and forecasting for budgeting purposes," said Burisek. "I want to take a proactive approach and identify problems and issues before it becomes a problem or an issue."

6. Increased Content Raising the Cost of Trucks

"As we move on to a new business year, the challenge that continues to haunt me are the ever-rising cost of construction trucks," said Ron DeAngelo, fleet manager for Sargent Electric Co. in Pittsburgh, PA. "Due to many people using pickup trucks as their everyday vehicle, the manufacturers, of course, are continuing to add features that are not needed to a construction vehicle. Even many of the base models have features that were at one time an option that we would not select.

An area that many fleet managers take advantage of is having a shorter lifecycle. The hurdle that continues to be high is that the construction industry puts more wear and tear on trucks, which results in a reduced resale value." The increased cost of vehicles affects many companies’ business, since they need to factor in their cost of overhead when soliciting new busi-ness. "One of the main factors of overhead is the cost of the company's fleet of vehicles," said Flora of Brenneco. "It seems that the cost of vehicles has increased along with fuel cost, which has skyrocketed."

Another related concern for government fleets and some commercial fleets is reduced capital outlays for new-vehicle acquisition. "For most federal government fleet managers, there are two major issues that impact our procurement decisions: lack of sufficient funding and environmental concerns," said Martha Kobliska of the U.S. Department of Justice. "The U.S. Mar-shals Service’s vehicle fleet has been underfunded for years and the maintenance of the older, higher-mileage vehicles is draining our resources. Even though commercially leased vehicles are more costly over the lifecycle, we are considering reverting back to leases in order to finance the cost of the vehicles."

Agreeing is McCorkhill of the city of Lynchburg in Virginia. "It is very difficult keeping up with the escalating capital cost of new vehicles. In my almost 20 years in fleet management, I have seen the price for a pickup truck rise from $7,000 to around $25,000 for the type of truck we need. I must concede that today's vehicles are much more fuel-efficient, not as toxic, and are much prettier to look at, but spending as much as we have today to cover the capital outlay for vehicles means less taxpayer dollars available to hire good help or to cover other operating needs," said McCorkhill.

That problem is not restricted to government fleets. The biggest issue for Gerald Cumby of Lockheed-Martin is capital funds to replace aging fleet vehicles. "Vehicles are a low priority on the capital budget list when new hydro presses, numerical control lathes, and composite cutting/laser inspection machines are needed for new pro-grams," said Cumby. "When vehicles are placed on the priority list beside the new high-tech machines that will keep the place in business for next year, the finance and upper-management personnel make the evident and, in most cases, the right decision to buy the machines and continue to repair and maintain the old vehicles for another year. Eventually, however, fleet management realizes that this decision can be very expensive due to high repair bills, and possibly even more detrimental and costly in other areas concerning loss of production, safety, and other liability factors."

Order-to-delivery delays continue to be a concern for fleet managers. "I’m concerned with ongoing delivery problems and ever-increasing delivery charges for someone's lousy service. We should get some kind of reverse floorplanning credit when the manufacturer cannot meet their delivery obligations," said Tom Sours, superintendent company fleet for State Farm Mutual Automobile Insurance in Bloomington, IL.

Vehicle maintenance is also a concern from the standpoint of being able to locate repair vendors. "Another concern I have is in the auto repair business where more and more of the fleet business is being pushed aside from the insurance industry. I believe fleet only represents 10 percent of the total repair business. Coupled with the notion of consolidation, more of the fleet business is being turned away or given less priority. The repair vendors of the fleet world, I suspect, are going to find it harder to shop around to find repair shops willing to join their program," said LaRosa of Bristol-Myers Squibb.

7. Complying With Government Regs

Another concern is the introduction of new government regulations. "With a new federal administration in 2001, there is almost assured changes in federal priorities, which will impact our fleet operation and the regulations that govern how we do business," said Hogan of Alliant Energy. Agreeing is Shadley of Nextel. "I suspect that we'll see changes in clean-air and alternative-fuel regulations. California has already announced changes affecting the biggest diesel vehicles used by public agencies, and it's likely that other states will soon follow their lead."

Sharing this concern about complying with future alternative-fuel mandates is Doug Keene, fleet services manager for the Las Vegas Valley Water District. "What does the future hold on the types and kinds of alternative-fueled vehicles?" he asked. Alternative-fuel mandates are prompting manufacturers to develop new hybrid vehicles that use two propulsion systems, typically an in-ternal combustion engine that is supplemented by an internal battery. However, not all fleets think hybrids are a good idea.

"The idea that hybrid vehicles are the answer, begs the real question: An answer to what questions? These vehicles are costly, complex, and will have limited return in fuel mileage for real-world fleet vehicles, not mini-cars,” said Sours of State Farm. Carr of the University of Washington sums up his primary concern as: “EPACT, EPACT, EPACT. How in the world can I meet the 75-percent requirement under the Energy Policy Act (EPACT) if government regulators don't accept NEVs (neighborhood electric vehicles), hybrids, or other affordable vehicles?" The lack of a common nationwide vehicle emission policy is another concern for fleet managers. "The inability to have common emission policies due to the pressure from special interest groups has escalated the cost of vehicles far beyond any reasonable air quality gains, which are already 95 percent better," said Sours.

8. Telematic Devices Will Drive Up Acquisition Costs

Telematics is a general term used to describe the various advanced automotive systems that can include one-way and two-way communications technologies. However, some fleet managers have expressed concern about the emergence of telematics devices in vehicles.

"I'm concerned that the 'explosion' in telematics will certainly prove to be an ongoing and ever-increasing expense that will be an additional driver distraction, and may or may not be very value-added for many fleet operations," said Sours of State Farm.

Agreeing is Sam Visintine, recently retired director, financial services for Mallinckrodt Medical in Houston. "One concern I have is the cost of additional vehicle 'gadgets' including communications and sensors. The question is, when do you add these to fleet vehicles and what kind of return will we get for these added options when we sell the vehicle?" said Visintine. Another issue that concerns some fleet managers about telematic devices is the possible intrusion into the privacy of their drivers.

9. Concern About Driver Safety Issues

Safety is a perennial fleet manager concern and will continue to be so in 2001 and beyond. "I think my No. 1 concern is driver safety," said Mayo of Wendy's International.

"My drivers are increasing the number of miles that they drive and this increases the concern about their safety. The main safety issues are aggressive driving, safe driving techniques, cell phone usage while driving, and providing vehicles that have the latest safety features," said Mayo. Visintine of Mallinckrodt agrees.

"My challenge is getting drivers to embrace our safety programs to reduce accidents, including the proper use of cell phones in the vehicle," he said. Mayo has created an extensive safety program at Wendy’s International. "We run MVRs on all drivers once a year. If we have a driver who has a history of incidents, we will run their MVR more frequently. If we have a driver that meets certain criteria regarding vehicle incidents, we convene our Automobile Review Committee to review the driver’s history and determine a course of action. These actions generally involve a verbal warning or requiring the driver to watch a training video, but we can require the driver to go through a National Safety Council-approved classroom training program."

In terms of cell phone usage, Wendy’s International is recommending usage of hands-free cell phones to its drivers. Another safety-related issue is minimizing the number of avoidable accidents. "These are accidents such as backing into parked cars, buildings, and docks. Also, following too close, speeding and not paying attention to traffic movement in front of you. This is one of the most underestimated cost to a company and it hits every employee in their pocket book," said Hayes of Kirby Risk Corp. "People don’t realize what a ripple effect it is to a company. Higher insurance rates, down time for repairs, vehicle rental costs, deductibles, and workers’ comp claims, if the employee is injured. The image you display while driving a company vehicle leaves a lasting impression on everyone. We can improve this by educating our employees on the im-portance of their job. The image they portray and the responsibilities to the public to be alert, courteous, and drive defensively, not offensively."

10. Outsourcing and the Role of the Fleet Manager

Internally, companies are still asking themselves how best to manage their fleets: using in-house staff or outsourcing some or all of fleet administration. This is especially the case as the economy appears to be slowing down and corporations are looking to tighten their budgets.

"Tightening resources also offers opportunities to make you more creative and look for alternative ways to do things -- outsourcing of some non-core functions or restructuring of staff, for example," said Linck of the town of Greenwich. "New technology also offers ways to save on staffing and redundant functions. By being able to demonstrate your ability to be flexible and a willingness to take on other functions, you can have an opportunity for ad-vancement. Are we not seeing more managers and directors responsible for fleets than administrators?"

Along with the need to reduce costs is management’s directive to increase value to end-users. "As Cargill continues to focus on reducing suppliers and identifying key or ‘select’ suppliers, the area of fleet is being challenged as well," said Nelson of Cargill. "If two sup-pliers can manage the same type of vehicles and equipment and provide the same equipment and provide the same services, wouldn’t there be value in consolidating the activity with one supplier? Can acquiring equipment from two or three manufacturers through one fleet management source provide greater value than by acquiring equipment directly from numerous manufacturers?" Nonetheless, many companies that previously handled all fleet administration in-house are re-examining the advantages of such and are in-creasingly looking at outsourcing. Agreeing is Gerry Madrid, fleet manager for Airborne Express in Seattle. "I see outsourcing playing a major role in our jobs in the future," he said. Outsourcing is also becoming a factor at utility fleet operations. "For those of us whose operations have been historically internal, the opportunities to develop a strategy that combines internal and external resources to maximize funding limi-tations or enhance service delivery is a key to success in 2001,” said Hogan of Alliant Energy.

0 Comments