The high cost of fuel and reducing preventable accidents are the two most pressing challenges facing commercial fleet managers in 2007. This assessment is based on a survey conducted by Automotive Fleet of 240 commercial fleet managers. Other challenges include the struggle to continually deliver incremental cost reductions year-over-year and managing a larger workload with fewer resources. However, fuel and safety were, by far, the most universal challenges facing commercial fleet managers.
The cost of fuel is cited as the number-one challenge, but the issue of fleet safety is a very close second, and, with some fleets, it’s the primary challenge. One reason is the increased influence of corporate risk departments in the area of fleet management. For some fleets, this influence has extended into vehicle selector development. For instance, these fleets are basing selector inclusion on NHTSA crash-test ratings. In fact, some fleet managers are hesitant to acquire vehicles not advised by the risk department out of concern that should a safety-related issue result in an injury or fatality, they might be accused of ignoring the safety recommendation.
The High Cost of Fuel
The most burdensome task facing fleet managers is managing fuel costs and identifying ways to decrease this expense. The corollary concern is pricing volatility, which makes budget forecasting difficult.
“Fuel cost uncertainty is my biggest worry. I am looking to increase overall fleet mpg, such as spec’ing four-cylinder engines instead of six- cylinders. However, as fuel prices fall, senior management’s memory fades and they side with pressure from sales that it ‘needs’ six-cylinder engines rather than four. How do you combat this message?” asked a fleet manager who wished to remain anonymous.
Other fleet managers echo this sentiment.
“Fuel can make or break my budget plans. We are running so tight on cost, the price of fuel plays havoc with my budget forecasting. It keeps me up at night praying that I can deliver the fleet within budget,” said Oleg Cytowicz, automotive fleet coordinator for Unilever U.S.
The volatility of fuel prices makes budgeting a stab in the dark. “Even though we can increase the budget for fuel, who knows where the cost will be by year-end. I don’t think we will see any reduction in the cost per gallon,” said Gene Kendall, fleet operations manager for Hughes Supply.
One strategy to decrease fuel expense has been to acquire more fuel-efficient vehicles.
“We are seeking to increase fuel efficiency by adding hybrid vehicles and vehicles with higher fuel efficiency. Another strategy is optimizing idle vehicles and lowering CPM (cents per mile) for maintenance expenses. We are also exploring telematics,” said one fleet manager who also wished to remain anonymous.
Other fleets are taking similar multi-prong approaches. “We think our approach to fuel savings is extremely proactive. We currently use very fuel-efficient vehicles purposely selected for the job they do, and we monitor our drivers using GPS,” said Charles Bowen, fleet director for Rollins Inc.
As Bowen cited, fuel efficiency goes beyond selector development; it also involves driver compliance and education.
“While we have been on track with our selector list in identifying vehicles with good fuel economy, we need to educate our drivers to keep in mind the costs we face for fuel. While we cannot control the cost element at the pump, we can utilize effective measures to reduce consumption, the majority of which relies on the drivers for sound vehicle operation and efficiency. This includes proper tire pressure, avoiding jackrabbit starts, excessive idling, etc.,” said Vinnie Fugaro, purchasing agent for Henkel of America.
The cost of fuel is an even bigger issue with truck fleets, as the cost of diesel exceeds the cost of gasoline.
“The biggest challenge for us is the ridiculously high price of diesel fuel,” said Paul Harrup, fleet manager for HD Supply Waterworks.
The uncertainty of future fuel prices is causing some fleet managers to reassess their 2008 selectors.
“This uncertainty may affect the vehicles we put on the selector list for 2008,” said Kathy Jebbett, purchasing card & fleet administrator for Cooper Tire & Rubber Co.
Another way to control fuel costs is to set up tighter and more frequent exception reporting to ensure best buying practices and eliminate fraud. This is the approach being taken by Sue Miller, senior fleet manager for McDonald’s Corp.
Impact of 2007 Diesel Emission Standards on Maintenance
Another impact on fuel costs has been the mandated introduction of more expensive ultra-low sulfur diesel fuel. Not only have fuel costs for diesel trucks increased, but so have other operating costs.
“The cost of a diesel truck has substantially increased, the fuel economy will decrease, and maintenance costs will increase. Then we do it again in 2010 when the new, even more stringent diesel emission standards kick in,” said Kendall of Hughes Supply.
In addition, fleets have been reporting problems with the new 2007 diesel engines. “Inconsistent diesel engine performance and reliability by many of the large engine manufacturers have caused excessive downtime, campaigns, and headaches, primarily in Class 6-8 trucks,” said Pete Silva of PepsiCo Global Procurement.
Decreasing Preventable Accidents
Commercial fleets are seeing an uptick in preventable accident frequency. “My top challenge is reducing the number of accidents, along with increasing driver safety,” said Leigh Ann Blake, fleet manager for National Oilwell Varco.
LEIGH ANN BLAKE
One reason for the increase is that drivers are being asked to do more. “Corporate fleet drivers face challenges as well. They are required to do more in the same allotted time. Therefore, they are multi-tasking behind the wheel. This results in their attention to safety being compromised, which leads to increased accidents,” said Jim Anselmi, director, fleet operations & travel for Lorillard Tobacco Company.
Fugaro of Henkel of America agrees. “We have seen a rise in preventable accidents, caused either by fatigue, stress, or simply lack of concentration. We need to look at the root cause and communicate the emphasis of safety to our drivers.”
One risk management strategy has been to select only vehicles that have high safety ratings. “We are constantly looking for the safest vehicles for our drivers, while also trying to keep within a certain price. This is becoming more and more difficult to do. We realize when safety features are added to vehicles, the price goes up, but we still would like to get the best for the least,” said Lois Woolum, fleet administrator for Michigan Millers Mutual Insurance Company.
Safety is not a new challenge; it is a perennial concern for commercial fleet managers. The key issue nowadays is how to keep it foremost in the minds of company drivers.
Reducing Operating Expenses While Keeping Drivers Happy
Most fleet managers are already running very efficient fleet operations, so it is becoming more difficult to squeeze additional cost savings.
“Continuing to show incremental savings is becoming more difficult when you are already running a tight ship and are doing all the right things,” said one fleet manager, who wished to remain anonymous.
“Keeping costs under control is, of course, always in the forefront and will continue to be a challenge,” said Barrett. “We will continue to evaluate the best options for the company in regard to vehicle selector and what options return best value for the organization.”
Reducing fleet expenses is a balancing act between cost efficiency and driver morale.
“We will continue to focus on providing our customers (drivers) with great vehicles and services while watching the bottom line,” said Anselmi.
As with fuel prices, other fleet costs have a degree of volatility that makes management difficult.
“Constantly fluctuating vehicle costs, resale values, and interest rates provide numerous opportunities for the fleet manager,” said Anselmi.
However, the mantra from management is to not only manage fleet costs, but to drive down costs.
The difficulty to extract additional cost savings is proving exasperating to many fleet managers. These fleet managers are focusing on the basics and looking at the total cost of ownership.
“Our number-one concern is managing costs. From vehicle selection through maintenance to the ever-changing fuel variable, getting a handle on total cost of ownership is important to us,” said Keith Scolan, manager, corporate global fleet for Illinois Tool Works.
Another approach is to try to wring additional cost savings from suppliers. “I am being challenged by my management to continue to challenge our suppliers and fleet users (drivers) to cut costs and eliminate waste. However, how can fleet managers cut costs and eliminate waste if you don’t know what an accurate baseline is or an accurate target?” asked Robin Robinson, key supplier manager for Weyerhaeuser Co. “Most professional fleet managers have picked the low-hanging fruit and are now faced with diving deeper into the process to search out the root cause.”
Another impact on higher operating expense is the decision by a growing number of fleets to extend replacement cycling.
“Johnson Controls has extended the replacement term of our fleet, and making sure drivers perform maintenance is key to the vehicle reaching its extended life with no mechanical failure or downtime,” said Christy Coyte, global fleet manager for Johnson Controls, Inc.
Increase in Work Load Without Additional Resources
An ongoing challenge for commercial fleet managers has been the increased workload without increased resources to handle it.
Most fleet departments have had staff reduced some time ago, but as the fleet grows, they find they are not getting additional personnel to assist with the additional workload.
In the final analysis, it boils down to outsourcing responsibilities previously handled in-house.
“With cost reductions across the board, our fleet keeps growing, but our staff does not. We are looking at ways to outsource and still be able to provide legendary customer service. The dilemma is what are we comfortable with giving up control,” said Carol Davies, CAFM, fleet manager for Advance Stores Co., Inc.
A smaller staff and increased workload makes it difficult to stay current with changes in fleet management. “Keeping current with vehicle regulations and new legislation will also be a challenge.
We continue to have to do more with less,” said Jebbett.
Another problem caused by limited staff is enforcing policy compliance. “Policy compliance has become more important than ever. As fleets negotiate better deals and source more efficient vehicles, the ‘cost-out’ opportunities are to be found in the driver behavioral changes. This has been an area of frustration for many fleets,” said James Jin, sourcing manager, corporate services procurement for Merck.
Greening the Corporate Fleet
Many multi-national corporations have adopted a strategy to reduce greenhouse gas (GHG) emissions. One area of focus is fleet. However, this overall corporate goal often conflicts with mandates to lower fleet operating costs.
“Until the cost for such technologies comes down to a reasonable level, it will remain a big challenge for companies to justify spending the extra cost to ‘green up’ fleets,” said Jin.
Tim Sombathy, national fleet manager for AutoZone, agrees. “I am looking for solutions that best fit my organization, that give me the lowest cost of ownership without logistic or repair headaches to my field staff, while trying to go green in my fleet.”
But being a good corporate citizen sometimes overrules cost considerations. “It’s important to Illinois Tool Works to be a good corporate citizen, and the environmental impact of our fleet is a focus for us. I’m watching very closely the development of hybrids, partial-zero-emission vehicles, and alternative fuels. I am excited to see them applied to fleets,” said Scolan of Illinois Tool Works.
Donna Bibbo of Novo Nordisk agrees. “Developing an environmentally friendly fleet is a big priority for my top management, as part of Novo Nordisk’s Triple Bottom Line policy, which states that we will operate in a manner that is fiscally responsible, but also environmentally friendly. Much of my time will be spent developing this program and the metrics that will be used to measure its success,” said Bibbo.
Accomplishing this is a balancing act. “How do you have the most efficient fleet possible while reducing GHG emissions, while also reducing fuel consumption?” asked Bud Reuter, national fleet manager for Comcast. Fleet managers also recognize that without the refueling infrastructure, no matter how many alt-fuel vehicles acquired, they will have a negligible impact on the environment if clean fuels are not readily available.
“One of the challenges we face is the infrastructure for alternate-fuel vehicles. As a corporation, we would like to be more environmentally proactive, but most of our locations are in smaller communities unable to support AFVs and be cost effective,” said Jebbett.
Despite these challenges, there are many technology-driven solutions assisting fleet managers to more cost-efficiently manage their fleets.
“It’s not all doom and gloom,” said Anselmi. “Technology provides enhanced reports and the ability to analyze data more efficiently. This helps identify trends and problem areas quicker. These are not boring times!”