Unless you’re an oil sheik, you won’t have a bottomless pit of money or fuel to run your company fleet.
Liz Swanton looks at the increasingly complex factors involved in running a fleet cost-effectively while also complying with regulations and responsibilities
When it comes to fleet management, the all-important word is ‘management’. Unless someone is keeping an eye on the bottom line, that line can bottom out, especially in these times of seemingly constant increases in fuel prices.
Fleet management is no longer just about paying the cheapest price for the cars your company wants. It’s about keeping the ‘whole of life’ cost of a vehicle under control, from purchase to resale and everything in between, so there are not too many surprises. That includes service, maintenance and tyres, registration and insurance costs, and fuel.
There is now a wide range of specialist fleet management service companies operating in Australia who can take care of those issues. There’s also the do-it-yourself alternative of keeping the fleet management job in-house. However, one expert suggests it is not an either/or situation.
"It’s our view that you can outsource activities such as buying, registration, insurance, and servicing," says Marja Thompson, executive director of the Australasian Fleet Managers’ Association (AFMA). "But you still need someone within your company who has an overview of your business and the company’s transport needs, someone who understands your company’s culture and can ensure that the transport needs are being met in the most effective and cost-efficient way, whether that person is doing that job directly or liaising with the independent provider."
The AfMA is a professional association for fleet managers across all types of government, emergency service, and private organisations, as well as associated suppliers. It provides information for its members and lobbies governments regarding any legislation that is likely to affect those members.
According to Thompson, while managing a fleet efficiently and within budget is important for anyone with that responsibility, there is now a bigger issue for any professional or part-time fleet manager in meeting the requirements of the Corporations Act and occupational health and safety laws.
"While you can transfer or outsource your direct fleet management issues, you can’t do the same with the responsibility you have to provide a safe working environment for your employees and this includes when they use any vehicle, whether supplied by the company or not, when performing company business."
One of the difficulties when referring to ‘the fleet’ is that there are actually several different fleets within the company fleet–vehicles that are integral to doing business known as ‘tools of trade’, vehicles that are provided as a ‘perk’ of the job, and vehicles provided under salary sacrifice arrangements (usually in the form of novated leases).
"Each one of those fleets requires its own particular analysis and its own set of rules and procedures because they perform different functions," Thompson says.
"There is also the fourth ‘invisible’ fleet vehicle which is when your employee is performing work for the company in their own car, such as you asking them to drop off a parcel to a customer.
"Under the law, the employer needs to know if that vehicle is fit for that purpose, whether the employee has the correct insurance, whether they have a valid driving licence, and whether the vehicle has been serviced properly.
"If the employee has an accident, because they were performing company business the OH&S legislation says there is an automatic duty of care which comes back to the organisation."
It becomes even more complicated if the employer provides a company car and allows the employee’s family to use it, and outside working hours. The employer should specify who can use it and when and under what conditions.
"That means, if I ask you to drive to Adelaide from Sydney I need to ensure that you don’t drive for too long. There needs to be an understanding that the driver is comfortable with taking breaks on the basis that they might get too tired and risk being involved in an accident," Thompson says.
"Another problem is, what can be seen to be adequate today won’t be accepted tomorrow, depending on what happens between. If someone is involved in a horrific accident and it was found that something wasn’t quite right, or we could have done this or that to prevent it, then the subsequent court ruling will mean new decisions and expectations. You will be judged on what you should have known–but what is ‘enough’ knowledge?"
Budget Issues
Aside from the relatively new minefield of OH&S requirements, the biggest issue for most companies looking at investing in a fleet is the cost of paying for it and how to manage those costs.
There is no definitive answer on whether buying or leasing will work best for you. It’s a matter of doing the homework (see Evaluating Your Fleet Needs, below), researching the ‘whole of life’ costs of the vehicles and talking to your accountant about the tax implications (including logbook requirements for Fringe Benefits Tax, and issues with GST), the company’s cash flow and the payment/purchase style that works best for you.
A way to monitor at least one part of the cost equation is to consider providing staff members with a petrol card. You can choose to allow certain fuel types (and quantities) to be bought with the card, and even some access to shop items, as you see fit, and a good provider will offer online reports and invoices for easier data management. You should also be able to pay by direct debit, so you have detailed records and can track costs accordingly.
When it comes to saving on fuel costs, there are now more options than ever before. In terms of driving more efficiently and getting petrol at the best price, see the box below (Smart Savings), you might consider changing your fleet to a different type of fuel, and there are several possibilities.
A few years ago, ethanol was a dirty word. Now the renewable energy source is gaining in popularity but myths still abound. If you’re not sure if your fleet is safe to run on ethanol, check the listing of vehicles which can operate satisfactorily on ethanol blend petrol on the website of the Federated Chamber of Automotive Industries, www.fcai.com.au/ethanol.
Sales figures show many Australians are thinking outside the square when it comes to a new car. According to VFACTS, the car industry’s official new vehicle sales figures, diesel and hybrid (petrol/electric) cars are around twice as popular now (February 2007) as they were the same time last year, and sales of LPG-powered vehicles have also increased strongly.
Fuel costs are not the only motivation, and the government’s tax concessions for making a switch should not be either. While ecologically-minded government departments are responsible for some of the push, particularly towards hybrid cars, private individuals and fleets are also showing their concern for the environment–Toyota Japan has increased its allocation of the Prius to Australia because of growing demand, and we are also joining Europeans in embracing the new wave of clean and efficient diesel-powered cars.
Evaluating Your Fleet Needs
The Australasian Fleet Managers’ Association suggests a fleet owner should consider:
• Do we need vehicles and why?
• If we don’t, what are the alternatives (i.e., bus, taxi, more couriers etc), and is that a saving?
• What vehicles do we already have? Can we change the way we use them to reduce costs?
• Do they need to do local or lon
g distance work or carry loads and, if so, should we replace them – having four-cylinder models instead of six?• What would be the changeover cost?
• What about switching to a vehicle using an alternative fuel such as LPG or diesel?
• How often should we replace the vehicles? Consider that in the US, many companies are now holding their vehicles for five years rather than three. What makes the best economic sense for us?
* Membership of the AFMA is open to any company with more than 10 vehicles. It provides a huge range of information and education about the fleet business, including the OH&S issues. Yearly membership costs around $280. More information is available from http://www.afma.net.au
Smart Savings
Road service organisations such NRMA/RACV/RACQ have guides on their websites as to how motorists can save money on fuel. If a fuel card is not the appropriate way to monitor fuel costs in your business, consider this:
Shop around: check with the NRMA/RACV etc websites (or http://www.motormouth.com.au) for the cheapest daily petrol in your area. Fill up when the price is down, not when the tank is empty.
Fill up early–petrol is often cheaper on a Tuesday than the rest of the week. Use your supermarket shopper docket discounts.
Modify driving habits. Smooth driving reduces fuel consumption by as much as 30 percent. Driving at 90kmh not 110kmh can also reduce consumption.
Lighten the load. Roof-racks, bull bars, golf clubs and tools add weight and increase fuel consumption.
Smart money-saving moves include regular servicing and running tyres at the correct pressure as well as planning your trip to take the most direct route (satellite navigation systems might prove to be a cost-saver).
Case Study:
Lube Mobile
Using LPG powered Toyota Hi-Ace vans has saved mobile mechanic company Lube Mobile 25 percent in fuel costs, and provides other benefits too.
"Our vans average 2500km each month," says general manager, David Sayer. "The savings on LPG Autogas can be up to 10c per kilometre cheaper than petrol which translates to a saving of $250 per month.
"These saving pay for around half a new van’s lease cost, so with two vans making those savings we can afford to buy another one.
"Renewing our fleet at a quicker rate also compounds the savings by ridding ourselves of older, less fuel-efficient vans."
Lube Mobile tried three of the Toyotas in late 2005 when Autogas first became a factory-fitted option. The fuel availability and cost savings soon convinced the company this was the right way to go.
It now has 41 in use and plans to be running the whole company fleet (currently around 180 vehicles Australia-wide) on Autogas by 2010.
The stable price of Autogas has also allowed the company to predict its fuel costs with more certainty, which has simplified the fleet budget.
For more information on LPG Autogas, visit http://www.lpgautogas.com.au
