THE PROSPECT of outsourcing the management of fleets must be sorely tempting – purchasing, lifetime maintenance from servicing and MOTs to licence checking and administrating fines, and eventually selling to best advantage – as it is a laborious and time-consuming undertaking and one that could easily be handled out of the office.
However, making such a case is not as straightforward as it sounds, as senior manager for Deloitte car consulting Dan Rees points out: “It is quite a complex subject. Does a company have the necessary experience to employ a person or team of people to run company cars internally? Does it have to fund software to manage and track all these staff? And acquisition procurement and divestment later is where you crystallise gain and if you sell badly, you do badly. And what vehicles do you want on the fleet? That has an impact on what happens when you sell them and is a skillset in its own right.”
Historically, if companies bought and ran vehicles, they had the expertise in house to do that, but the benefits of outsourcing presented themselves when certain tax advantages were introduced into leasing in 1995, providing an opportunity to save money. However, companies do not have to put all their automotive eggs in one basket. Expert providers with a dedicated workshop could handle maintenance, with operational management handled separately for example, although too many suppliers could risk fragmented management information.
“A good fleet management company would reduce the need to train a fleet manager, who would have to understand the legal, financial and tax aspects of fleet management. It would relieve the organisation of that duty and allow it to focus on core activities,” says head of consultancy for Lex Autolease Andrew Hogsden.
“When we undertake a review for customers, we normally expect to find at least 10% of cost savings compared to the existing method of running the fleet. We recently signed a major customer in the engineering sector, which has outsourced the running of its fleet of more than 5,000 vehicles to us, having traditionally run it in house, and they have saved more than £1m.”
Fleet management is a highly competitive sector and to maintain an edge, suppliers have invested heavily in technology, an investment made so they can run clients’ fleet. But, says national sales manager for Hitachi Capital Car Solutions David Jackson, “there are a number of factors to consider above and beyond finances”.
“When looking at a supplier, organisations need to be confident that the service drivers were receiving in the years before outsourcing will at least be maintained, if not enhanced. And I would need to believe the fleet management company could complete the process faster, cheaper and better than my company could,” he adds.
There is, however, a caveat: if an organisation has used someone in house to manage the fleet, that individual will understand the business better than any outsourcer could, and removing that expertise could prove unwise. Reducing in-house resource makes sense but to abolish it brings the need for a structure within the outsource provider to ensure KPI and service levels are observed and complacency does not creep in.
It is also vital to have sufficient back-up in-house to oversee the transition to a fleet management company. “You cannot outsource outsourcing,” says Jackson.
Even with the potential savings outsourcing can bring, it still comes at a cost and if a quote looks too good to be true, it probably is. And it is not an opportunity to wash your hands of fleet management.
“Up to 75% of our customers are fully outsourced, sole-supply customers,” says Jackson. “If several providers tender competitive quotes, clients can benchmark one against the other. But that does not give a long-term fix; they are not working alongside the client with shared objectives; it becomes transactional. If you have shared business goals and aspirations then it is a long-term relationship, a partnership.”
Sgfleet also sees it as a team effort. “We work with clients to identify the component parts of running a fleet and reporting on those in regular review meetings regarding key areas with the objective of reducing risk and cost,” says director of sales and customer service Peter Crabtree.
One vital fact for organisations to remember is that they are always responsible for duty of care, so it is crucial they receive appropriate levels of data, ideally with some kind of analysis attached, to give them not just an overall idea of the fleet’s status quo but a clear picture of driver behaviour as well.
“The company develops a policy that is right for the industry sector, the strategic needs of the organisation and will own responsibility for that but can outsource day-to-day management of that policy to a third party,” says Andrew Hogsden.
“If companies outsource fleet arrangements, they should definitely continue to monitor best behaviour of fleet and drivers. Suppliers should provide customers with KPI and a dashboard that shows how the fleet is doing: operational reports and performance analysis. You are likely to get better information than internally because you are getting their expertise – they know what to look for.” ?