Avoid these top 10 pitfalls on your road to better fleet management in your business.
Even for a small business, managing a fleet will include things like maintenance, financing, telematics (vehicle tracking and monitoring), driver scheduling, fuelling and safety. What can seem initially like a great way to increase productivity and reduce transportation costs can quickly become complicated and expensive.
A host of issues can get in the way, like compliance with duty of care legislation or everyday things like making sure that everyone keeps the car clean. That said, here are ten pitfalls you should definitely avoid when it comes to fleet management:
Pitfall #1: Don’t have more cars than you need
Finding a balance here is difficult. You will need to do the kind of monitoring and analysis that can stretch over a period of months. After all, few businesses have constant transportation needs. Basing your vehicle needs on a slow time will leave you short of fleet when you need to have ample vehicles. Still, if you have 15 vehicles but find you only need 10, sell the extra five, find a higher return for the money and save on depreciation. Again, you’ll need good utilisation data to make this work. But it’s worth doing the analysis.
Pitfall #2: Never think of vehicles as “soft perks” for employees
This is a tempting mistake, because a vehicle can be seen as a way to reward employees. There’s a two-fold problem with this: first, the most efficient way to run a fleet is to think of function first, “perkolating” muddies the waters and second, any tax benefits are marginal today. Sure, a business might have historically tried to induce long-term employment in this way as part of a salary package, but companies should really think more creatively about how to offer perks. Explore the deductability of public transport or the attractiveness of other travel benefits.
Pitfall #3: Don’t centralise; always manage by department
For most small- to mid-sized businesses, centralising might seem to make sense because of organisational size. Avoid if possible. Why? Centralising diminishes incentives. The best way to incentivise is to establish a clear and trackable connection between cause and effect. Centralising makes this less likely. Why not charge departments for each trip? There might even be a way to help fleet management become a profit centre. The bottom line here is that the more actively you connect vehicle use and responsibility to departments (and ultimately to individual employee/drivers), the more accountability and savings you’ll have – again, you’ll need really excellent data management.
Pitfall #4: Don’t let your drivers remain anonymous
This follows from Pitfall #3. Even in small- to mid-sized businesses, when it comes to driver responsibility, faulty logistics can cost a lot of money. For example, a fleet can be fined thousands of dollars by the state for not being able to identify the driver who used a fleet car and got a traffic ticket. The problem here is that the ticket might come through weeks after the event and trying to connect the driver to the ticket might be hard – if honesty doesn’t prevail, then fines will follow.
Pitfall #5: Don’t ignore resale values
If you end up buying vehicles for your fleet, you need to be aware of resale values. For example, Toyota sedans will sell for much less than a late model Yaris hatchback even though then a sedan was more expensive bought new. The differences in resale costs could be in the thousands. You also need to be aware of model lifecycles. Most model lifecycles last from five to 10 years. The closer you get to the end of that lifecycle, the lower the price when you resell the model (as much as 15 percent lower).
Pitfall #6: Don’t ignore the culture of your company when it comes to fleet
As a de facto outsourced fleet manager, GoGet’s experience taught us something very important about the psychology of managing vehicles in a business context. When we first decided to trial our vehicles in a business context, our customer had a fleet of two. One vehicle was ours and the other was owned by the business. I assumed that their car would be treated best. I was wrong. Ours was. It turned out that GoGet acted as a third-party arbiter of company culture and put necessary distance between employees and the vehicles that meant the vehicle would be treated with more respect and even used more efficiently. We had rules for keeping cars clean and for returning them on time for other drivers to use. If these guidelines were overlooked, after a while an employee could lose his or her driving privileges. As a result, everyone, be it the boss or the newest employee, was on a level playing field. This did wonders for maintenance and fleet efficiency. Take your business culture into account. Are there employees who are likely to take liberties with the vehicles? If so, rules, even penalties, need to be put into place to curb this behaviour. Don’t forget that your current company culture might change. Today’s solutions need to be rugged enough to support business growth and employee changes over the years.
Pitfall #7: Don’t pay the driver excess for at fault accidents
If an employee knows that he or she –not the organisation—will be on the hook for their driving, they will probably drive more carefully. So make it very clear that all drivers will pay the excess in an at fault accident.
Pitfall #8: Don’t think that all financing arrangements are the same
Leases and financing arrangements can help initial outlay, but you need to be careful. Finance leases, novated leases, chattel mortgages, corporate hire purchase, operating leases… it gets complicated quickly. If you go this route, be most aware of penalty clauses. They can be harsh and can skyrocket financing rates 50 percent. Seek professional guidance, get multiple quotes, scrutinise and make sure you understand payment schedules.
Pitfall #9: Don’t forget to maintain and benefit from your insurance claim history
If you do go the vehicle ownership route, after a while you should have a detailed claim history. This will enable you to compare the premium you’ve paid with the cost to your insurer of any accidents you may have had. You can and should use this history to get better insurance pricing.
Pitfall #10: Don’t forget to automate everything you possibly can
Fleet management can involve a lot of paper pushing: fuel receipts; allocation of tolls; and rostering. One organisation we dealt with had three full-time staffers handling bookings for 90 vehicles. Automate everything you can. From GoGet’s perspective, car sharing necessitated automation and using smart telematics to make booking as seamless as possible. As a result, we know that automation of almost everything from allocating tolls, determining fuel expenses, to vehicle rostering can be tied into a system that means employees will be free to do the work that matters, not the paper pushing that is no longer necessary.