Cost management is a constant, never-ending struggle for all fleet managers since every aspect of fleet management revolves around money. While there never seems to be enough money to go around, one of the less talked about aspects of fleet management is the amount of budget dollars that are wasted every year.
I define waste as the consumption of corporate funds and resources by inefficient or non-essential activities. It’s estimated that an average fleet wastes between 5% and 10% of its annual budgeted dollars. For example, how much money is wasted in unnecessary over-spec’ing of vehicles, keeping under-utilized assets on the books, or non-compliance with scheduled preventive maintenance intervals that result in unproductive downtime?
Often, cost-reduction initiatives focus on operating expenses, but depreciation is a fleet’s largest annual expenditure. Are you maximizing the resale potential for all assets? Or, are your remarketing practices wastefully leaving money on the table?
Likewise, what about overloading? This may be perceived as strictly a safety issue, but overloading is another way precious fleet dollars are wasted. Overloading shortens a truck’s service life and increases operating expenses. In fact, fleet maintenance surveys consistently show that overloading is the No. 1 cause of unscheduled maintenance for trucks.
This is an avoidable expense. In addition, there’s a direct correlation between vehicle weight and fuel consumption. Every pound of extra weight requires an engine to work harder, increasing fuel consumption. Conversely, every pound deleted from curb weight is converted into revenue-generating payload.
Proactive vs. Reactive Cost Management
The best time to control waste is before it occurs and the way to do this is by establishing policies and procedures that inhibit unnecessary spending and protect corporate assets from avoidable expenses. Fleet policy provides the mechanism to curb money-wasting behaviors, such as unauthorized rogue spending that often occurs in fleet field operations.
The greatest amount of operating cost waste occurs with the fuel budget. If up to 30% of a vehicle’s fuel efficiency is impacted by driver behavior, you need to minimize this inefficient use of corporate assets. In fact, many of these behaviors are in violation of fleet policy. The amount of unnecessary idling varies by fleet, but some fleets have recorded idling as much as 35% of the time.
Besides unnecessary idling, there are many other ways that fuel dollars are wasted, ranging from inefficient routing to drivers not being price conscious when refueling. But, what about having drivers ensure that tires are properly inflated as per fleet policy? Driving on under-inflated tires is not only dangerous, but wastes fuel dollars as well. This is the easiest, most cost-effective (and most neglected) way to boost fuel economy and avoid wasteful fuel expenditures. Keeping tires properly inflated increases fuel efficiency by 3%.
The overwhelming majority of drivers want to do what’s right for the company; however, just because your company implements a written fleet policy doesn’t mean drivers are following it or even aware of it. A common problem is a fleet manager communicates policy to the drivers’ managers, but the word doesn’t get down to the individual drivers. To increase driver compliance with fleet policy, it is crucial to engage in communication directly to the drivers whenever practical and appropriate.
A fleet policy should be a living document that is updated annually. As changes occur within your company, revise your procedures to reflect these changes. Likewise, eliminate those policies that have become outdated. What was right yesterday may not be right today. When developing or re-evaluating fleet policy, solicit the participation of all affected departments, such as sales, administration, purchasing, maintenance, and accounting, in addition to vehicle user group, such as operations and customer service.
By involving them in the decision-making process, it increases the likelihood of buy-in and support of policies. Similarly, create a driver focus group, with rotating members, and hold periodic meetings to solicit feedback on the fleet program and solicit their recommendations on how to eliminate waste. As part of your annual fleet policy review, you should survey your drivers to give them an opportunity to express their opinions or dissatisfaction about fleet policies that govern them.
It is proven that increased fleet policy compliance will reduce unnecessary costs. Policy compliance is a crucial part of a company’s over-all cost-control strategy. Based on my experience, the best-managed fleets are those whose drivers adhere to a written fleet policy.
Let’s make our No. 1 priority to stop the waste of existing dollars. Again, the most effective way to reduce waste is to increase compliance with fleet policy, which a powerful component of a company’s overall cost-control strategy. Lastly, if a fleet manager wants to minimize waste, you need to pay attention to the details of fleet management and put into practice the saying: "If you watch the pennies, the dollars will take care of themselves."
Let me know what you think.
Originally posted on Automotive Fleet