RSS feedsCore is king when it comes to running an effective business and it is a key factor behind the growing outsourcing trend among UK firms. The theory is simple. If something isn’t your area of expertise, then get in expert help from outside to do it, pay for what you need and avoid the costly long-term management issues of having additional in-house staff.
Done properly, it can make a business leaner, more effective and more focused on selling its own expertise, which, in turn, means it makes more money.
There are many areas for finance directors to look at when considering outsourcing, but one of the most popular in the past few years has been the fleet.
Company cars are often overlooked when it comes to how a business spends its money, but the difference between a well-run fleet and a badly-run fleet can be hundreds of thousands of pounds. And it is an area in which increasing numbers of finance departments are becoming involved.
Last year, when contract hire and leasing giant LeasePlan contacted 350 companies and spoke to their HR and finance executives, the results were revealing. Of the departments questioned, 97% said they dealt with at least one aspect of fleet, with 75% handling individual driver queries, 71% deciding how a fleet was managed, 59% short-listing potential suppliers and 57% actually negotiating with suppliers and getting involved in the final selection process.
Driver queries and the day-to-day running of a fleet were the areas in which finance executives had most recent fleet contact. This involvement doesn’t mean there is an automatic case for outsourcing the fleet management of every company, but as a benchmarking exercise it pays to ask the question.
If a company cannot guarantee access to the best in-house fleet managers who can keep costs to a minimum and plan effectively, outsourcing really does seem to be the best option. But how does a company reach that decision and what should it do next?
The first move is to be certain that the fleet and drivers will benefit from expert external help. Views differ, with one firm recently claiming that running a “smallish” in-house fleet of 400 vehicles or fewer was not commercially viable and outsourcing was essential.
After a major review, construction firm Geoffrey Osborne outsourced its in-house fleet management and switched from outright purchase to contract hire. The decision was taken because the fleet grew to levels that made it more cost-effective than in-house management, the firm claimed.
Colin Brewer, the construction company’s plant procurement manager, says: ‘When we did a cost analysis comparing the benefits of in-house fleet management with the benefits of outsourcing, we found there were significant savings to be had. For a fleet operator with 400 vehicles I don’t believe the economies of scale are there to run an in-house operation.
'There were also significant service improvements for our drivers. Instead of having to drive 50 miles for servicing or repair work at one of our workshops, we can go to any one of a network of dealers used by our supplier, Lombard.'
Geoffrey Osborne’s now-redundant workshops are being converted into storage and office space.
In contrast, however, Somerset County Council recently decided to run its own vehicles after considering and then rejecting tenders for a seven-year outsourcing contract. Its executive board rejected three tenders that would have covered its entire 480-vehicle fleet because the expected savings did not materialise.
According to John Boon, finance director at 4 vehicle management company LeasePlan, it is best to take a flexible approach. 'Full fleet outsourcing is the best way to remove the day-to-day concerns of managing a fleet. But choose a company with the financial backing and long-term expertise to do the job right. Also ensure your partner is a member of the British Vehicle Leasing and Rental Association (BVRLA) as all members are bound by a professional code of conduct,' he says.
The second issue is to be clear on what services you want an outsourcer to provide. Most companies will turn to a contract hire and leasing provider to fund and manage their fleet. However, there are other options, such as using a fleet management supplier to act as a filter to get the best funding and supply deals in the market. Additionally, a company must decide what other services it wants to outsource, such as accident management, daily rental management and so on.
Third, it is vital to get a wide view of the standards of services on offer in the market through an effective tendering process, including a clear brief for all potential suppliers showing exactly what you want. This doesn’t just involve the reading of presentations, as the fourth key area is to visit any supplier and see the people who will be looking after your cars and your staff. Experts agree that a good personal relationship with suppliers is essential to ensure future problems can be sorted out quickly and smoothly.
'Running a fleet is a strategic consideration, so possible providers should be viewed as any other high-level business partner. Look at areas such as cultural fit, how its services can be tailored for you and if a genuine value-adding consultancy service is being offered to both your company and your drivers,' says Boon.
A fifth key element is creating a watertight service level agreement, with penalty clauses for not delivering adequate service, which guarantees your company will get what it pays for. This can range from how quickly the phone is answered to dealing with errors on vehicle orders, pricing benchmarks and access to named customer service contacts.
Throughout the process, it is vital to work closely with drivers and management to secure both their backing and their understanding of what the company is trying to do, while full management support is essential to make any changeover work.
Once a new outsourcing company is in place, the contract should be constantly reviewed, by referring back to the original aims and comparing them to actual results, while at the same time benchmarking against rivals to ensure the supply deal is competitive.
But the final point is one of the most important no matter how much you try, you can’t completely wash your hands of responsibility for your fleet. Even when fleets are outsourced, they still need someone within the company to manage the contract and ensure the employer is meeting its duty of care to drivers on the road. Because much of the administration has been passed to an outsourced company, it should be much easier to focus on areas such as duty of care.
With a new corporate manslaughter law expected to be introduced this year, now is not the time for a company to distance itself from the fleet entirely. Fleet managers’ association, Acfo, says that, although handing over the running of a fleet to a specialist company can be a sensible move for some companies, it is imperative that at least one member of staff within the organisation has some sort of fleet role.
'Outsourcing is undoubtedly happening and at a rate of knots. The move to outsourcing is legitimate as long as it’s not seen as a fit-and-forget option,' says an Acfo spokesman.
'It must be controlled, with service level agreements and regular policing. Acfo isn’t anti-outsourcing, but in terms of good fleet management, outsourcing is a process and not an end. There must be a rational and commercial business choice, but get rid of the fleet manager and companies risk the outsourcing provider becoming judge, jury and executioner.'
OUTSOURCING CONSIDERATIONS
Does your company need to outsource at all? If not, don’t do it.
Investigate what you need to outsource and what services you require.
Carry out a wide-ranging and detailed tender.
Visit suppliers in person and meet the staff who will look after your fleet.
Create a detailed and well-researched service level agreement.
Communicate with drivers and management to ensure you have their support.
Constantly review the contract once it is in place, referring back to original outsourcing aims.
Regularly benchmark against rival suppliers to keep costs competitive.
Retain in-house expertise to manage contract and focus on issues such as duty of care and corporate responsibility.
CASE STUDIES
High street retailer Boots outsourced its in-house fleet department in a bid to introduce new services for drivers. The company, which has a fleet of 1,200 cars and 200 light commercial vehicles in the UK, brought in an outside supplier to handle all driver contact, vehicle acquisition, disposal, re-taxation and vehicle maintenance management.
GE Commercial Finance Fleet Services (GECFFS), which won the contract to manage the fleet, is introducing online services as part of the new deal, offering electronic vehicle selection, configuration and ordering through its iQuote system.
As part of the deal, GECFFS has also introduced a specialist finance product to fund the fleet, called Hybrid Lease. The new deal follows an agreement announced early last year between the two companies, which covers the management of an additional 450 vehicles in continental Europe.
Michael Hunter, manager of business services at Boots, says: 'We believe that
we have managed to retain the service ethos of an in-house operation to car
users, while benefiting from the operational and financial capabilities of
a company such as GE.'
Inspired choice
Chartered surveyor and estate agency Humberts outsourced the management
of its user-chooser company cars and owner-driver vehicles. The company has
110 vehicles, which will now be looked after by Inspire Fleet Solutions, which
will provide a service that includes competitive vehicle tendering, online
vehicle selection and ordering, a 24/7 driver helpline, accident management and
health and safety advice.
When the deal was announced, chief accountant Andrew Golding said: 'We have a number of owner-drivers who use their own cars on company business. Inspire will play a key role to ensure we comply with the latest health and safety regulations. Overall, this new service will free up more of my time and allow me to concentrate on the core activities of the business.”
Love me tender
Mailroom equipment supplier Neopost outsourced the management of its
430-vehicle fleet. Neopost, which supplies equipment across Europe, awarded the
contract to Leasedrive, following a tender and chose the group partly for its
web-based fleet management system. Leasedrive will look after client policy
advice, vehicle acquisition, disposal, maintenance, rental and driver
management.
