More than ever, fleets are rethinking how they manage overall costs. Fleet management experts Jim Pattison Lease share some of the trends that are emerging in the face of a “new’ normal.
The constant evolution in mobility (especially in recent months) will most certainly have an impact on how fleets currently operate and will need to position themselves to effectively operate in the future.
Given the current economic climate, managing overall fleet costs is now front and centre and vehicle operators are increasingly searching for ways to lower fleet costs, while safely and effectively managing operations.
Some of the trends that we are currently experiencing and what we will continue to experience into the future include:
Vehicle Selection & Acquisition Strategies
- Fit for purpose – Determining what types of vehicles are needed to operate the business. Do they need a pickup truck or van for cargo space or load capacity. Do they need a four door truck to manage physical distancing? Is an all-wheel or 4x4 vehicle required for the terrain and conditions that the vehicle will be operating in?
- Vehicle Factory ordering – with the currently high demand due to disruptions in vehicle production related to COVID-19, fleet operators are using data available through most fleet management companies to help predict replacement cycles and order vehicles well in advance to ensure they have the right vehicles at the right time. Fleet Management Companies are recommending order management cycling to maximize savings and vehicle delivery scheduling.
- Pre-owned (used) vehicles – with the increase in demand and short supply (especially pickup trucks and cargo vans), many fleet operators are utilizing fleet management companies to help source and fund used vehicles to meet their business needs
- Lease vs. Buy – Many companies are opting for vehicle leasing instead of purchasing so they essentially “only pay for what they’re using”, which also helps them better manage their cash flow.
- Shorter lease terms – with the uncertainty in the economy and constant technological developments from the vehicle manufacturers, many fleet operators are opting for shorter term leases as opposed to buying vehicles. This ensures they have the flexibility of right sizing their fleet based on business needs and also enables them to take advantage of new vehicles and technology available in the market
- Closed-end (Operating) Leases – with significant developments in vehicle technology, volatility in the economy, and uncertainty in the used vehicle market,; many fleet operators are opting for closed-end leases to for easier budgeting and to eliminate residual risk.
- Environmental Sustainability - fleet operators are utilizing data available through most fleet management companies to identify and implement vehicle options that will help reduce their carbon footprint; including more fuel efficient options and hybrid or electric vehicles.
- Local Support – given the current travel restrictions in place, many companies are looking to “support local” including utilizing local dealers for vehicles as well as fleet management companies that operate locally. This benefits the fleet operator as the supplier will have a good understanding on local economic and market conditions.
- Scheduled & Full Maintenance Packages – in an effort to manage budgets while avoiding surprise maintenance/repair costs, more and more fleet operators are utilizing maintenance packages that can be included in a vehicle lease price.
- Fuel Usage & Cost Management – companies are utilizing robust reporting available through fleet management companies to not only help select the right vehicle from a fuel efficiency perspective, but also to track and manage fuel costs and trends.
- Telematics – telematics adoption is one of the fastest growing trends in fleet management and rightfully so as it helps increase productivity, lower costs, while maintaining a safe and efficient fleet. Some of the key features of telematics include:
- Safety & Risk - custom alerts that identify areas such as excessive speeding, seatbelt usage, harsh driving and driver safety scorecards
- Productivity – live vehicle tracking, route optimization, geo-fencing, excessive idling, and maintenance reminders including the ability to predict future part failures (for instance, a battery that may fail without advanced warning)
- Cost Efficiency – odometer tracking, fuel consumption, vehicle utilization, and vehicle sharing features
Most fleet management companies will offer an integrated telematics solution through their online platforms which combines operating data with financial data, ultimately creating an even more powerful reporting functionality.
- Safety & Risk – fleets of all sizes continue to put a major focus on managing fleet safety including implementing programs such as telematics, driver abstract checks, driver training and accident management programs. Most fleet management companies can help fleet operators implement and manage these programs
- Mobile Device Integration – on average, most adults spend approximately 3 hours using their cell phones in a day (that’s about 20% of their waking hours), which explains why mobile device integration in fleet continues to be a growing trend. Most fleet management companies offer applications for fleet operators to track their mileage, enter data, locate maintenance vendors, and manage their overall vehicle using proprietary software applications. These data points feed into a user portal that allows fleet managers to efficiently monitor their fleet of vehicles while using data to make meaningful changes to enhance their fleet operations
- Report and Operational efficiency – Big data and predictive reporting available through most fleet management companies are becoming increasingly popular with fleet operators to identify vehicle utilization, manage fuel and maintenance costs in detail, and ultimately help lower total fleet operating costs.
- End of Vehicle Lifecycle Options – many fleet operators are taking advantage of various options of de-fleeting vehicles depending on market conditions and business needs. Most fleet management companies can offer services to support selling leased and owned vehicles at auction, selling to a driver or employee of the company, or selling a leased vehicle to the fleet operator directly.
- Vehicle cycling – depreciation accounts for approximately 40% of a vehicle’s total lifecycle cost and has and continues to play a major role in identifying and lowering total cost of ownership. Most fleet management companies have the data available to determine the best time to cycle vehicles based on business needs, vehicle type, and market conditions.
- Driver & Employee Purchases – Many fleet operators are adopting options that include allowing drivers or company employees to purchase vehicles that are ready to be cycled. These programs are sometimes implemented as a way of retaining talent, as an employee “perk”, or to help instil the pride of ownership while the vehicle is being operated by the driver within the fleet. Most fleet management companies will also offer pricing recommendations which helps create an arm’s length and unbiased approach to employee vehicle sales.
- Globalization & Cross Border Sales – given the ease of moving products between different countries in the last few decades, many operators are utilizing fleet management company auction programs that market used vehicles to a global audience. This service helps maximize marketability and financial return on a vehicle, while reducing sale times. In addition, recent implementation of USMCA will also have an impact on vehicles that cross borders within North America.
- Vehicle Acquisition with the end in mind – More and more fleet operators are utilizing expansive pools of data available through fleet management companies to help determine average future values in order to acquire vehicles that are a right fit for their business needs, while lowering total lifecycle costs
As the fleet world continues to rapidly evolve, we believe that these are some of the areas that fleet operators will need to continue to focus on to align with their company’s safety, operational, and financial goals.