Fleet managers are under constant pressure from upper management to control fleet costs. That’s completely understandable, given that fleets account for a significant chunk of business spending.
However, running a cost-effective and efficient fleet is a lot easier said than done. First, you have to factor in the substantial costs needed to purchase and maintain fleet vehicles. Throw in fluctuating fuel prices, labor shortages, and increasing liability, and it’s clear to see why managing costs is no easy feat.
It’s time to take the chaos out of fleet cost management. In this article, we provide data-driven strategies that can help fleet managers accurately assess their expenses, reduce fleet costs and improve their bottom line.
Fleet Costs Reduction Strategy #1: Right-Size Your Fleet
Savings start by looking at your inventory of fleet vehicles. According to FleetFinancials.com, the estimated total cost of ownership for a light-duty vehicle runs between $5,000 and $8,000 per vehicle, per year. The larger your fleet, the greater the cost of ownership.
For this reason, many companies are looking at reducing the size of their fleets. Removing just 10 light-duty vehicles can save upwards of $80,000 annually.
Right-sizing your fleet — making sure you only have the vehicles you really need to get the job done — is the most proven ways to significantly reduce fleet costs. The challenge comes in determining which vehicles are essential to your operation, which are surplus, and if new purchases are necessary. Right-sizing is all about striking an equilibrium between vehicle inventory and customer service levels. Eliminating vehicles reduces the TCO of your fleet, but if you remove too many vehicles you may fall short of customer demands.
How to Do This
So, how do you determine what exactly is the “right” size of your fleet? You’ll need to conduct a data-based review of the following benchmarks.
- Utilization: Compare actual monthly miles traveled per vehicle with the expected miles, and identify which vehicles are falling underneath the established baseline.
- Productivity: One key metric for evaluating productivity is route efficiency. If drivers are doing fairly uniform work and are operating in the same geographic proximity at the same time, it might make more sense to consolidate that activity to a single vehicle.
- Vehicle Lifecycle Costs: Determine the point at which it is more cost efficient to replace vehicles and equipment rather than repairing. This reduces the need to keep around spare vehicles in the event of a vehicle breakdown. Typical metrics for evaluating vehicle lifecycle costs include depreciation, cost of insurance, fuel, and maintenance and repairs.
For the most accurate results, we recommend that Fleet Managers adopt a Fleet Management system and use for 90 days. This will help you establish a baseline to measure the benchmarks listed above.
Fleet Costs Reduction Strategy #2: Combat Fuel Inefficiency
Fuel is one of the biggest and most unpredictable cost centers for fleets. While you might not be able to affect the price at the pump, you do have the ability to ensure your drivers there are getting the most out of each mile per gallon.
The most effective solution to reduce fuel costs is to alter poor driver behavior. According to the EPA, poor driver behavior, such as hard braking, idling, and accelerating, can impact fuel efficiency as much as 33 percent.
How to Do This
Fleet managers should implement a company-wide fuel efficiency program. This means educating and training drivers about fuel efficiency practices, rather than dictating rules. Show them numbers, illustrate the financial impact, and be transparent about why you’re creating this policy.
Driver education can help, but how can you be sure they will follow these policies when they’re on the road? The real savings in fuel cost, just like other expense areas, comes from data. Here’s how:
- Companies that use fuel cards can monitor employee fuel-spending and usage
- Some telematics systems integrate with a fuel card. This allows you to manage where and when your drivers are filling up and identify which routes your vehicles are taking, alerting you to out-of-route miles driven. It also gives you the ability to track fuel fill-ups against miles driven to identify any fuel misuse issues.
- Driver performance programs allow fleet managers to monitor driver behavior, such as speeding and idling. These programs gives you the ability to deliver better-tailored coaching that will change behavior and result in decreased fuel consumption.
Armed with data, you can establish a baseline and track where your fleet’s current fuel costs and idle numbers are. This will allow you to determine whether or not each change you implement is working to save you fuel.
Other Strategies to Reduce Fleet Costs
These are just a few of the recommendations we have . For all five cost reduction strategies – download a copy of our white paper today.