Size matters. Especially when it comes to negotiating pricing with fleet suppliers. There is little doubt that the folks out there with 5,000-10,000 vehicles have a good handle on how much they should be paying; for everything from bucket trucks to sedan floor mats. But some of our recent survey data shows that vast hordes of the fleet market are paying close to retail rates for a lot of products and services.
Our current summer intern, a smart young guy who is well versed in linear algebra, multivariable calculus, and advanced statistics came to me recently with a statistical anomaly from one of our recent surveys. Our data on fuel purchasing showed a tremendous disparity in pricing between the largest fleets (500+ units) and the second tier (100-499 units). Further digging showed that the discounts for the second tier were pretty much in line with what the smallest fleets (15-99 units) are paying. He wanted an explanation, and frankly the only thing I can think of is that those mid-tier fleets aren’t aware that discounting is negotiable or they just aren’t asking.
We all know that pricing in fleet is almost always dictated by volume. The war stories we hear from the OEMs and the fleet management companies indicate that fleet and sourcing professionals up and down the size spectrum are grinding them within an inch of their lives on issues like funding, CAP incentives, and maintenance costs. But the data indicates that those same professional negotiators might be leaving some money on the table.
Obviously there are a lot of moving parts in a modern fleet. We’ve got upfitters, OEMs, FMC, telematics providers, fuel, brakes, tires, and a whole list of other vendors knocking on your door. Everyone and their brother knows to ask for a fleet incentive from the manufacturers, and if you buy enough vehicles, you might even know to ask for a CAP allowance on top of that. And your treasury department is going to know where current LIBOR or commercial paper rates are, and they are going to demand rates within a whisper of those benchmarks. There is no reason not to apply those same expectations to the rest of your operation.
When you walk into Costco to buy that 50 gallon drum of mayonnaise or that pallet of Charmin Ultra, you expect to pay less than you would if you were picking up the same products at a Krogers or 7-Eleven. The same rules apply to full-size pickups and fuel when you are spending six or seven figures a year. The best discounts may be reserved for the AT&T/UPS sized fleets but that doesn’t mean your fleet of 150 or 200 vehicles doesn’t represent a significant piece of business to your vendors.
If you disagree, let me know.