How SMEs in the fleet management industry can cut costs
Business costs are rising 3.5% ahead of inflation a year, largely driven by surging energy and petrol costs, and this poses a real threat to any fleet management business. Despite cause for optimism in the broader UK economy, fleet managers need to keep a close eye on costs and understand how technology, fuel management, maintenance, lifecycles and vehicle policies can help to bring costs down.
Changing industry attitudes towards technology
Installing emerging technologies can help drive significant cost reductions and encouragingly the industry is embracing the power of technology to do this. A recent survey by the BVRLA indicated that 45% of fleets consider themselves to be early adopters of new technology. A further 47% would describe themselves as taking a cautious approach, while 8% felt they were struggling to keep up.
Mobile workforce management technology
Cost-effective investments in technology will cut out inefficiencies and provide better visibility of how a fleet operates. Mobile workforce management technology like Yes Workforce, for example, cuts out paperwork for drivers and allows them to exchange information such as splat diagrams and signatures quickly around the workforce via mobile apps. This accelerates workflow and removes the risk and costs associated with losing or damaging important documents.
Importantly, this type of technology provides a high level of visibility over a fleet, allowing managers to re-coordinate jobs in real time to cut down on fuel costs, identify unnecessary under-use and enable drivers to reach customers more quickly. According to Aberdeen Group research, fleets using mobile workforce management technology can reduce fuel consumption by up to 22% through optimised schedules and route planning to cut out unnecessary mileage.
Vehicle maintenance technology
Technology can also help businesses to cut down the costs of vehicle maintenance. Apps like Lex Autolease Interactive and Hitachi Mobile collate information about vehicles and prompt drivers to book services, MOTs and repairs. Drivers can also book repairs directly via the apps as well as find local tyre suppliers. Fleet managers using this type of technology ensure that vehicles are running efficiently and prevent against nasty surprises when vehicles breakdown, which can create a troublesome dent on cash flow.
Re-evaluating fleet management policies
Beyond technology, managers should re-evaluate their general fleet management policies and reconsider how they buy and manage vehicles. Replacement cycles should be a top priority: around 70% of fleets currently use a replacement cycle in excess of three years, but moving up to four years will deliver immediate savings by reducing monthly lease rates and vehicle holding costs.
Limits on car choice lists
Putting sensible limits in place on car choice lists can generate significant savings too. It’s worth re-evaluating the choice list to remove cars with CO2 figures of more than 160g/km and with average MPG figures below 45mpg. According to GE Capital research, this could realise savings of around £36,000 a year in fuel, based on a 500 vehicle fleet, covering an average 10,000 business miles per year. Adopting an even stricter approach to this and moving to 140g/km and 55mpg vehicles could boost these savings to around £85,000 per year.
Even if vehicles in a fleet are fuel efficient, they may still be eating into revenues if downsizing opportunities are not recognised. For example, fleet managers should ensure that vehicles are not being treated as mobile store rooms for rarely-needed spare parts. Also, if larger vans are only occasionally needed, using spot-hire when the extra capacity is required could be cost effective. Managers should also fit lightweight, space-efficient racking systems to maximise load space.
These cost-reduction initiatives will ensure fleets run more efficiently and help managers expand margins. A regular audit of fuel costs is particularly important in fleet management and companies should be ready to invest in emerging technologies to remain competitive in the longer term.