Your business is growing. As you’ve expanded, you’ve gone from one or two vehicles to more than five. While adding a few vehicles may not seem like much, whether you realize it or not, your business now operates a fleet.
Entering the world of fleet management means you have to look at things a little differently than before.
Unscheduled breakdowns equal vehicle downtime, which means work is not getting done and the company is not earning money. The total cost of a few extra gallons of fuel used – multiplied by five or more vehicles – quickly adds up.
“Approaching your vehicles from a fleet standpoint will not only reduce related expenses, but increase the efficiency of the assets,” explains Michael Buck, president of MCB Fleet Management Consulting.
Not looking at your company-owned vehicles as a fleet means you are leaving money on the table, so to speak. Taking the time to designate a dedicated fleet manager, organize your operations, and follow some best practices is much easier than you might think.
“A fleet is often a hidden expense in many small organizations and doesn’t rise to the level of importance until a major incident occurs (e.g., fatality, litigation, lawsuit, failed compliance) that threatens the organization’s reputation or bottom line,” says Steve Saltzgiver, business development director for fleet management consulting firm, Mercury & Associates.
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What Does Vehicle Fleet Management Mean?
So, what is fleet management? At its core, fleet management is simply the act of managing a company’s fleet operations.
A fleet is typically considered to consist of five vehicles or more. While fleets vary significantly in size, those with 50 or fewer vehicles or that purchase five or more vehicles per year are typically considered a small-business fleet.
A fleet can consist of cars, pickup trucks, vans, or a combination. Companies that commonly operate fleets include (but are certainly not limited to!) food and beverage delivery, furniture or appliance delivery, laundry delivery services, flower delivery, and maintenance or service providers.
Fleets aren’t only for major corporations such as UPS. Many companies operate a fleet of vehicles, whether they realize it or not. A small brewery that just added its sixth truck is a fleet. So is a local organic food delivery service that operates five pickups and three vans.
“In most cases, a fleet grows proportionally with the business and is a critical expense as well as a key factor in the success of the organization,” Buck explains. “If handled properly it can be accomplished at a very substantial cost savings, in comparison with outsourcing, which our data shows comes at a 17% to 22% additional cost.”
Managing a fleet involves several areas of responsibility, including (but not always limited to):
- Vehicle purchase, title, and licensing.
- Safety and accident management.
- Asset management.
- Fuel management.
- Vehicle disposal or remarketing.
- Route planning and optimization.
“In most cases, a fleet grows proportionally with the business and is a critical expense as well as a key factor in the success of the organization. If handled properly it can be accomplished at a very substantial cost savings, in comparison with outsourcing, which our data shows comes at a 17% to 22% additional cost.”
- Michael Buck, president of MCB Fleet Management Consulting
Why Is Fleet Management Important?
Understanding a business’s key goals and how their drivers and vehicles can support these goals is vital to any fleet operation’s success.
“Simply put, you can’t measure what you can’t see,” says Saltzgiver. “Fleet management is essential to control costs, preserve driver safety, maintain user accountability, protect an organization’s reputation and brand, and so much more.”
Fleet management software can help monitor vehicle health, maintenance, fuel costs, driver performance, and other variables — all of which can significantly impact the company’s bottom line.
1. Vehicle Management
First, let’s consider vehicle acquisition. Those buying a single vehicle have to go to their local dealer, hope they can negotiate a reasonable price, and repeat the process each time they need another.
Many automakers have a fleet program or discount offered to companies that can heavily discount the purchase price. Some automakers, such as Ford, FCA, and General Motors, also provide a variety of flexible finance options. Dealerships will also often offer a fleet program to local businesses.
Purchasing the right vehicles for your business needs is key to effective fleet management. Why spend an extra $5,000 on a truck when your drivers don’t need to haul anything? Or perhaps you find yourself renting trailers or bigger trucks on a regular basis because your current company vehicles don’t have enough cargo space.
In addition to purchasing a vehicle, don’t forget about the title, licensing, and insurance. Fleet managers are responsible for making sure these items are handled and kept up-to-date. An uninsured vehicle can’t hit the road and, therefore, can’t make you money.
2. Vehicle Maintenance & Safety
Maintenance is another critical area. As noted, a vehicle in the shop is not doing its job, so proper scheduled and preventive maintenance is essential.
Ensuring your fleet is always in top condition also ensures the safety of your drivers and the motoring public. But accidents do happen, and handling accident reports and repairs is also a part of fleet management. Accident management can include driver safety training and disciplinary action after an at-fault incident.
Tire management also falls under maintenance and safety. Properly inflated tires can save a fleet money, up to 11 cents per gallon, as well as extend tire life by 4,700 miles, according to the U.S. Department of Transportation (DOT).
3. Asset Management
Asset management is essential, too. Understanding the lifecycle of your vehicles, including when is the best time to replace them, saves a fleet money in unscheduled repairs and breakdowns. A newer vehicle may be more efficient, but understanding the total cost savings on fuel and maintenance compared to the investment in a new vehicle is essential.
4. Fuel Management
Next, let’s look at fuel. While fuel prices currently are not the highest we’ve seen in the past decade, they are still one of the top fleet operating costs. Fleet managers who know when, where, and how much your vehicles are fueling up each time can help a company spot trends and discrepancies.
Small businesses that let their employees bring vehicles home or allow any form of personal-vehicle use can fall victim to additional fuel and maintenance costs. These expenses can be due to drivers filling up their vehicles on the company dime, filling up their friend’s truck, or even using a vehicle for after-hours side-business. All of which costs the company.
By monitoring fuel consumption and costs, as well as vehicle location in real time, fleet managers can not only be aware of precisely what is going on but put a stop to it as needed.
5. Upfitting Needs
Some businesses, such as maintenance or service providers, require specially designed vehicles. After a vehicle is purchased, but before it is put into service, it must have the necessary equipment added. This upfitting takes time and, if not properly managed, can add weeks to vehicle delivery.
6. Disposal and Resale
We’re getting to the end of our list here, so we have to mention vehicle disposal. When your vehicle has reached the end of its useful life, it must be sold. Whether that’s via private party, dealership, auction, or employee sales, someone must manage and handle the process.
Implementing a fleet management system ensures you get the most of your vehicle-related investments at every stage, from purchase to disposal.
7. Route Planning and Optimization
Last but not least, let’s talk briefly about route optimization and planning. Some fleets operate on a fixed route, while other operations have routes that vary day-by-day. Making sure you have the fastest, most optimized route for your drivers helps guarantee the jobs are completed on-time and efficiently, allows real time location tracking, reduces fuel consumption, enables you to add more stops in your route, and keeps your drivers and your customers happy.
Read more: 8 Best Route Planner Apps: Review
How Do You Manage Your Fleet Effectively?
The first step to effectively manage your fleet is to realize you have one. Once you have accepted the fact that you are a member of the fleet world, you can start taking steps to effectively manage your fleet operations.
Now that you understand what fleet management is and why it’s important, we want to share a few additional tips to help you manage your fleet operations effectively.
1. Hire a fleet manager
While it may be tempting to add fleet management to the job duties of your purchasing or finance department, a dedicated fleet manager will ensure your fleet receives the attention it deserves. If your company cannot hire a dedicated fleet manager, consider hiring a part-time employee to handle the tasks. Dividing the responsibilities between several people and departments can cause a headache down the road should your fleet grow.
“Have someone on staff who is knowledgeable and savvy on fleet maintenance and management,” Buck recommends. Having such a team member in your fleet’s corner can help you manage costs and stay up-to-date on constantly changing regulations.
Saltzgiver of Mercury & Associates agrees. “Designate and assign an individual who is primarily responsible to oversee all fleet vehicles,” he recommends. “This person can ensure that all fleet-related issues are properly addressed and serve as a ‘go-to’ person as needed.”
2. Consider a fleet management provider
There are many fleet management companies that specialize in helping businesses, regardless of size, properly manage their fleet operations. Outsourcing some or all of your fleet management tasks can save your staff time. A fleet management provider can be an excellent option for small operations that are unable to create a dedicated fleet management role.
“Find vendors and dealerships that want to develop a win-win relationship for both parties, and who will treat you like you are a key element to their business. Hint: These are often ‘mom and pop’ establishments,” Buck says.
3. Establish clear lines of communication
Once you have a dedicated fleet manager in place, hold regular meetings and send out regular communications to drivers and other key stakeholders.
4. Train your drivers
Proper driver training ensures that your drivers are doing their jobs correctly, driving safely and efficiently. Have clear driver safety rules set in place regarding cell phones, distracted driving, and crash incidents.
5. Use technology where possible
Even a small fleet generates large amounts of data, and effectively gathering and analyzing this data can help a fleet generate significant savings. Fleet management software can help with routing efficiency, vehicle maintenance, driver management, vehicle tracking, real time reporting, and so much more.
“It’s helpful to have a user-friendly software system,” says Buck. “If the correct software is found, the return-on-investment will be returned in very short order.”
6. Monitor, analyze, and act
Data is only worth what you can get out of it. Fleet managers need to monitor all data points, take the time to examine the analytics, and come up with clear action plans. Is fuel spent on one of your vehicles 30% higher than the others? Perhaps it’s time to replace that unit for a newer model. Or does your vehicle tracking show a driver often going off-route?
“Consolidating all fuel purchases under a fuel credit card is one way to help prevent fraud, misuse, and abuse,” Saltzgiver advises.
7. Get involved in the industry
There are several fleet industry associations, industry publications, and trade shows that aim to help educate fleet managers and provide them with information and resources for continual improvement.
Benefits of Fleet Management
Fleet management is a part of many businesses, and small fleets face bigger challenges due to a smaller team and available funding. But taking steps to implement a fleet management system, regardless of your fleet size or specific business vocation, has many benefits, including:
1. Cost reduction
Fleet management software can help trim costs related to fuel transactions, accidents, reporting, maintenance, and vehicle acquisition.
2. Accident reduction
Proper fleet management can lower the number of crash incidents and better monitor driver behavior.
3. Routing efficiency
The use of efficient route planning can save a company fuel, moderate maintenance costs, and get more business done in less time.
Fleet management may seem intimidating or overwhelming for those who are just starting. It may be tempting to ignore the bigger picture of fleet management and not think of your operation as a fleet at all. After all, you don’t operate hundreds of vehicles!
But even managing just five vehicles creates cost-saving opportunities through efficient fleet management. Implementing a fleet management software and using the best practices shared above—whether it’s five vehicles or 50—can increase efficiency and help your organization thrive.