What is the future role of fleet management? This was a seminar topic at the recently-held National Association of Fleet Administrators' annual convention. As evidenced by the standing room-only attendance, this topic struck a nerve among the nation's fleet managers. One reason for this keen interest was anticipation of a discussion concerning what has been generically referred to as "total fleet management" programs currently offered by several larger fleet management companies.

According to lessors, these programs are in response to inquiries from fleets that neither have the staffing nor time to deal with setting fleet policies or handling day-to-day administrative duties such as determining vehicle acquisition needs, answering driver inquiries, authorizing maintenance and repair work, and all other fleet administration requirements. However, some fleet managers perceive these programs as potentially "shifting control" of a fleet to a fleet management company thereby "threatening" their positions.

To get a firsthand appraisal of this industry issue, AF recently assembled a panel to discuss the advantages and disadvantages of these controversial fleet management programs. The panel included: Jackie MacMillan. fleet supervisor for Monsanto Agricultural Co. in St. Louis, MO; Jim Rogers, president of GE Capital FleetServices in Eden Prairie, MN; Helene Kamon, director of fleet operations for Wendy's International in Dublin, OH; and Tim Hoffmann, manager of employee transportation & travel services for 3M Co. in St. Paul, MN. The moderator was AF's Mike Antich.

AF: Under a total fleet management program, such as GE Capital Fleet Services' Comprehensive Management Program, why would a company need a fleet manager?

Rogers: In most situations, companies have come to us and asked if we can provide the types of services offered by our Comprehensive Management Program. But I don't see a situation where a reasonably-sized fleet wouldn't have somebody in the corporate organization responsible for overseeing a service company. GE Capital wouldn't recommend otherwise, and quite frankly, our Comprehensive Management Program doesn't work very well without a fleet manager because a service company can't get access to the management chain to discuss specific issues. Correctly managing a fleet is a complex set of processes. You can't have a situation where there isn't a receptive "quarterback" at the client for a service company to deal with. We need someone we can sit down with and discuss fleet management objectives. The most crucial aspect of our Comprehensive Management Program is the communication process. This includes educating company management on the amount of assets tied up in fleet and what kind of policies, such as cost control or responsiveness to drivers, best serve the corporate philosophy.

MacMillan: I second that motion to a certain extent. I think companies such as GE Capital, or any other company offering complete service levels, would not be willing to accept a client if there weren't a constant source within the corporation. This requires either a part-time or full-time fleet manager.

Kamon: In general, fleet managers are low on the totem-pole at most corporations. They are not viewed as a priority, but a necessary evil. Fleet is viewed differently as companies go through various stages of up and down financial growth. Management constantly attempts to optimize efficiency for the least amount of money. How does management do that? Sometimes, total fleet management programs are the answer. There are many small fleets that don't have any fleet management. Total fleet management programs are simply another vehicle to manage a fleet which can be helpful in certain situations. At this time, I don't think it is cutting a broad path through the whole industry. Fortunately or unfortunately, corporations going through changes may have an appetite for these type of services.

Rogers: GE Capital views its fleet management programs as a restaurant menu where a corporation can choose the types of service it needs. This is the way most responsible fleet management companies are presenting these programs. And more and more companies are examining these types of programs as a result of the corporate restructuring that's occurring. Many industries are in extremely competitive situations and the primary issue is head-count, in particular, healthcare costs.

MacMillan: You can have quality both internally and externally. A fleet needs to make sure that what it's doing internally is equally as good as what it could obtain externally. If a company goes to an outside fleet management company, it has to be sure the job will be well-done, competitively-priced, and be as good or better than what can be done internally.

AF: Are there any other advantages to these types of programs?

Rogers: The advantages depend on the company. I wouldn't try to tell 3M there's a huge advantage in this type of program because of the size of the company's fleet administration function and the expertise it has developed over time. With companies such as 3M, there is a mature, seasoned group that provides the same type of service we offer. However, a lot of companies aren't in the same position. They want the capability to leverage the economy of scale offered by a service company.

AF: Earlier it was cited that large-scale corporate restructuring sometimes produces the need to reduce headcount. Could not corporate management view these types of programs as a means to substitute fleet department personnel with a service company and eliminate those in-house positions? Secondly, don't these types of programs invite such management action?

Rogers: In a naive sense there could be validity to that assertion. But if company management understood the complexity of fleet management, I doubt whether they would want an outside company working directly for them. They would want a buffer - a quarterback. They will want someone who can interpret the company's culture, its philosophies, and policies. If I were a company CEO under intense pressure, I would look at anything outside the core business to see whether it is more-efficient to have a function handled externally or internally. In some cases, it's more efficient to do it internally; in other cases it's more efficient to do it externally. That's the dynamics of an individual corporate fleet. A corporate fleet manager shouldn't wait to be asked about a service company. They should always be evaluating available options. A fleet manager's goal is not to build an empire of people, instead it is to provide high-quality transportation to drivers. If you want to get real value from corporate fleet management, it is not the number of people managed, rather it is providing a service which will achieve corporate fleet policy in the most efficient manner. Today, it's almost a detriment to be managing huge staffs. Health care costs are accelerating at a pace much faster than reasonable productivity gains can offset.

Hoffmann: The measure of any fleet management program, regardless of whether it is a lease program or a company ownership program, is what that group can return to the bottom line. At 3M, while transportation services aren't its primary product, my group would not exist if it didn't make a positive contribution to the bottom line. There seems to be some hysteria in the industry as to who is going to manage the fleet tomorrow. If you are a professional situations. Large fleets tend to have multiple divisions so they can separate by division. Dualing depends on the size of the fleet. If you are small, it precludes dualing. Regardless of whether you have a sole source or a dual source, I think it is incumbent upon the corporation, with the fleet manager in the middle, to set up objectives based on the goal on continuous improvement. Continual changes in suppliers is very nonproductive. I've been in a lot of different industries, but fleet management is by far the most "out-to-bid" industry I've experienced. It is incumbent upon fleet management companies to develop a high level of credibility, a consistent delivery of "ease of use," quality, and better communications in order for corporate fleet managers to buy into the concept that there is value in long-term relationships. Companies are not going to remain competitive if they are always changing partnership relationships.

Hoffmann: One of the things that drives this multiple-bid, multiple-service company philosophy is what we walked about earlier - headcount reductions and financial belt tightening. Sometimes companies are not sure if they are making the correct decision, so they hedge their bet by going with two companies. However, when they go with multiple companies they dilute their advantages across the board. Now they have the same problems as a decentralized fleet. Suddenly, they've lost their leveraging power; they've cut in half their buying leverage and they've cut in half their ability to develop a partnership. They would have been better off keeping a very highly-professional fleet staff on board and going with one company, even if they are a larger fleet. Nobody wants to put all their eggs in one basket, especially someone else's basket. This philosophy comes out of a company's audit and financial groups because they don't understand the complexity of fleet management, yet they are often asked to make decisions involving fleet. So they say we'll go halvsy on this deal and have one balance the other.

Kamon: Fleet management is like a puzzle with a lot of pieces. You can't see the whole picture by looking at just one piece. I find it offensive that every year there are certain companies that are out to save two dollars a car on a lease. I truly wonder if they actually save this money. The trauma you put company drivers through when you change constantly, sometimes for a little as 50 cents a car. I truly wonder whether it's worth it. You get what you pay for.

Rogers: The tough part for the fleet management industry is to come into a company that simply has a "just cost" purchasing mentality. They don't understand vehicle lifecycle cost and that's what a fleet management company should be managed on.

Kamon: Benchmarks can be done on a cost-per-mile basis, for instance. But there needs to be accountability. Maybe, if everybody was accountable this hysteria would be more controlled since managers would be able to measure themselves against a benchmark.

Hoffmann: In the fleet management profession, as in others, there's a significant number of people who are not truly professional fleet managers but who carry the title of fleet manager. If a fleet management company does a good job, pretty soon the in-house fleet manager may finds himself moved to another job and blames the leasing company. Secondly, if there wasn't a need for fleet management, GE Capital nor PHH wouldn't have the organizations they have. All service industries fulfill a need. The need lies in the fact that there is a whole group within our ranks who are not professional fleet managers, who do not do a good enough job in returning to the bottom line of their company. When these situations exist, companies find ways to fill the gap and sometimes decide to use a fleet management service.