Debbie Mize, fleet manager for Hallmark Cards in Kansas City, MO, was named Automotive Fleet’s 1995 Professional Fleet Manager of the Year in an award ceremony held in Orlando, FL, on May 7, 1995.
Mize will have her name inscribed on a plaque affixed to the Professional Fleet Manager of the Year trophy displayed in the lobby of Automotive Fleet’s headquarters in Redondo Beach, CA.
In addition, Mize was awarded a $5,000 scholarship to be donated to an accredited university of business school of her choice. The Automotive Fleet and Leasing Association (AFLA) contributed $3,000 to the scholarship fund, while Automotive Fleet donated the remaining $2,000.
Mize manages a fleet of 1,660 vehicles.
After the award ceremony, Mize was able to take time out to answer a few of Automotive Fleet’s questions.
AF: One of the interesting aspects of Hallmark’s vehicle selector is that it is comprised of a single driver level with a choice of three models. What are the advantages to a single level selector?
Mize: Getting to one level of vehicles was a major challenge. Hallmark originally had six different levels of vehicles, with up to five models for each of those selectors. In any given year, we had 25 or 30 different models, which is typical for a lot of fleets.
Our philosophy at Hallmark is that an automobile is a ‘work mobile’ not a ‘perk mobile.’ So it didn’t make sense giving different cars to different levels based upon rank, especially when everyone was working on the same mission and was driving about the same mileage.
We consolidated to one level of automobile in 1994. It gave us total control over our purchases. We have much better negotiating power since we are negotiating for three models instead of 25 or 30. It has greatly simplified the ordering process and eliminated a greater chance for error.
AF: Was management support helpful in bringing about this change in your selector?
Mize: Hallmark’s top management has a good understanding of our fleet operation and the needs of our employee drivers, which has been really helpful in implementing fleet policies and making sure they are adhered to.
I have the sincere support of the top management of my company. Anytime I am going to make a major change, I make sure that top management is in agreement with it. If drivers know a decision has been agreed upon at that Level, the acceptance rate is much better.
AF: Hallmark has been a long-time company-owned fleet. What are the factors that favor fleet ownership for your company?
Mize: Because things do change from time to time, a comprehensive study is done on a regular basis where we evaluate the lease versus buy decision, as well as the feasibility of outsourcing.
Some of the items that we evaluate are the tax implications of ownership versus leasing, the cost of money, the internal capitalized cost of the automobile handles in-house versus leased, my internal resale results versus those of a leasing company, and the sales tax implications.
For example, states such as Colorado charge sales tax on the rental payments, thus your sales tax would be much less for a leased vehicle. Some states, such as Indiana, charge excise tax on the capitalized cost and also sales tax on the lease payment, so you’re actually paying more sales tax on leased units that company-owned. You have to take into consideration all these factors. In addition, we also consider the staffing levels required for company-owned versus leased.
There is no magic formula. It is a little bit different for each company.
AF: What are the key factors that should be considered when conducting a lifecycle cost analysis?
Mize: The item that I feel is most often overlooked when considering vehicle lifecycle extension is the dollar impact from lost sales or decreased service levels resulting from increased vehicle downtime.
But the items that need to be considered in a regular cost analysis are depreciation; sales, and excise tax; income tax implications; operating costs such as fuel, maintenance, tires, and oil; downtime; costs associated with extended life; accident repair; and interest costs.
I do a lifecycle costing annually on my sold units, and I also include the administrative cost of my operation and insurance. It’s important to know what your fleet is costing you. It’s very useful in benchmarking. If you want to see how you compare with the industry, you’ve got to have accurate numbers on your own fleet.
A lot of fleet managers use lifecycle costing to look at scenarios for extending life, but is doesn’t have to be restricted to that. It can be an ongoing Study, done every six months or annually, to see what your lifecycle costs are running and to determine your operating costs.
AF: How do you determine how much downtime is going to occur during a vehicle’s service life?
Mize: That’s the difficult part. You need that figure if you are comparing what you’re running today versus extending or shortening vehicle life.
If you have a sales fleet, you need to know the internal figures at your company on how many sales dollars per hour are generated by your sales-people. Or, if you have a service fleet, you need to know the average annual hourly charge for service calls. Then try to equate that to your number of breakdowns.
This data can be derived by benchmarking with other companies to compare their breakdown occurrences. The leasing companies have data on extending vehicle life and how many breakdowns you might experience. The best approach is to use an internal figure by calculating the number of hours of downtime you had and how much it cost your company. This is important because downtime cost is different for every company.
AF: What is Hallmark’s replacement cycle for its vehicles?
Mize: It’s four years or 60,000 miles. We average 27 months in actual service.
AF: Do you use lifecycle costing for other purposes besides determining the right replacement cycling for your fleet?
Mize: My main purpose in lifecycle costing is to have a total summary of what it costs to operate my fleet. I want to know my costs per mile, including my administrative and internal costs. It’s very important, when asked by management what it costs per mile to operate your fleet, to have a factual number.
AF: What types of programs do you have in place to promote driver safety?
Mize: There are several parts to Hallmark’s safety program. One is per-employment screening of driver records to make sure, up front, that we’re selecting the best drivers as employees. We also perform annual driver record checks on employees and their spouses – who are allowed to drive company cars under our personal use policy.
Safety training and fleet policy familiarization are done for all new hires before they receive their company cars.
We also have an accident review committee composed of representatives from human resources, legal, risk management, marketing, and fleet. We meet quarterly to discuss the accidents that have happened that quarter and decide upon disciplinary recommendations. The marketing people are responsible to implement these recommendations.
Safety articles are distributed on relevant topics, and safety information and videos are provided, as appropriate, at the district level or at sales meetings.
There has been a marked decrease in accidents since we began doing driver record checks seven years ago.
It makes a difference if employees know their driving records are being monitored and that they are being held responsible for them. Employees that had borderline driving records in the beginning were asked to take defensive driving classes and they now, several years later, have a completely clear record.
I think the fact that employees are accountable for their driving records has made a difference. They know someone is watching and they know they are responsible.
AF: How important is fleet operations to Hallmark’s success?
Mize: The Hallmark vehicle is the key tool for our salespeople to meet their daily needs.
We also have a service group that installs fixtures and does some ordering and stocking of our product.
Our employees depend on having a vehicle that is safe, efficient, cost-effective, and ready to meet their needs. Our drivers, on average, drive about 30,000 per year, and downtime of two or three days can adversely affect their overall performance.
AF: How has Hallmark maximized the resale value of its vehicles?
Mize: Maximizing resale dollars is probably the single most important factor in minimizing lifecycle cost. It’s important to purchase vehicles that are going to have appeal at resale time.
For example, one of the vehicles currently on our selector is the Dodge Caravan. Although the initial cost is substantially more than the other two sedans on our selector, its cents-per-mile depreciation is actually less.
We are currently doing about 50 percent resale to employees. Employee sales are immediate and these drivers are more likely to take better care of their vehicles. However, it requires very careful monitoring on our part to make sure employees don’t make unnecessary repairs to improve the condition of their vehicle during the last 5,000 or 10,000 miles it’s in service. To prevent this we monitor our maintenance very closely.
The timing of the resale is also very critical. The fall market is by far the strongest of the year. It is also very critical to know when to move cars out of soft market states. The resale market is ever-changing and moving cars offers a great opportunity to impact the bottom line for your company.
AF: How do you promote employee sales?
Mize: By word of mouth. Once you have a successful program, which we have had for a long time, it will continue to grow. When we send paperwork to our drivers to select a new car, we remind them that their vehicle is available for purchase. We give them a ballpark figure as to what their vehicle would cost. We price those using AMR data.
Our employee sales program really grew when we started putting these reminders in writing.
AF: Do you allow employee-paid options for your vehicles?
Mize: No we don’t. Everyone is treated equally. That was another factor in getting to the one level of vehicles.
We’ve always tried to be very consistent. Everyone may not get what they want, but everyone knows that they are treated fairly. Years ago we allowed employees to add options. At that time, someone would add power windows, locks, and seats to that car. When they left the company, a new employee would get that car with all this power equipment, while someone else, who had been here 20 years, didn’t have any of these options.
AF: How are fleet budgets and policies established and reviewed at Hallmark?
Mize: I handle all of the capital asset budgeting for the purchase of all company vehicles, the budgeting for the fleet department operation, the executive vehicle program, the vanpool program, and the motor pool. But the operating budgets, which include the monthly depreciation, gasoline, maintenance, oil, and car wash is handled by each operating unit or district.
Each district establishes individual budgets for each employee within that district. Employees have a great incentive to properly maintain their cars. Or, if there are three gas stations at an intersection, drivers are more likely to use the one with the most economical gas. They do a lot better job at trying to control car wash expenses because they are personally responsible for their individual budget.
AF: How do you benchmark your fleet costs so that they are in line with industry averages?
Mize: There are a variety of ways to benchmark policies, practices, and fleet costs. Networking through organizations such as AFLA and the National Association of Fleet Administrators (NAFA) is a good way to find fleet managers with similar fleet operations.
The major leasing companies publish their operating and fixed costs on a regular basis, and they are willing to provide special reports on particular vehicles for comparisons.
Benchmarking with your own standards year-to-year is a useful tool for some operations.
The important thing is to capture costs. Many fleets are still not computerized and don’t have any idea of what their costs are actually running. In this situation, it’s impossible to know whether the fleet operation is working effectively or not. I normally benchmark against similar companies and against national leasing company figures for vehicles similar to our own.