Hennecke & Partners Fleet Consulting

Consulting: FLEET MANAGEMENT STRATEGY

Hennecke & Partners offers consulting services for fleet management in various areas. See more about this in general here

The following is a deep dive into fleet management strategy, in order to give you an idea about our services in that area of competence.

Fleet strategy decisions

Managing the fleet strategy means to make structural, long-lasting decisions about the setup of your fleet and mobility management.

Typical questions of fleet strategy relate to the setup of your suppliers, the financing of your vehicles and the selection of vehicles.
Even more general is the the question of outsourcing fleet management activities or do them inhouse. Finally  see how to manage the process of strategic fleet management.

Unbundling of services?

  • How many services to your fleet (financing, maintenance, accident, insurance, fuel, telematics, driver contact …) do you want to give in the hand of one supplier? Should you bundle all services in the hand of just one supplier, or unbundle the services and have different suppliers for each service?
     

  • Advantage of unbundling are usually cost savings due to increased transparency of pricing. Advantage of bundling is less complexity in supplier-management.
     

  • Important determinants for the decision about unbundling vs bundling are e.g. the availability of reliable suppliers and the software systems you have in place to manage those suppliers.

Single or multi supply?

  • Given your strategy about unbundling, you have to decide how many suppliers per service to be used: Go for a single-supply strategy, or have multi suppy strategy per service in your fleet (e.g. multi-bidding with leasing companies, buying auctions with multiple participants, multi brand strategy)?
     

  • Advantage of a single supply strategy are less complexity in supplier management and often a one-time signing bonus when signing an exclusive agreement. Advantage of multi supply are permanent cost savings from an ongoing competition between suppliers.
     

  • Determinants of the decision about single or multi supply are your cost savings-perspective (shot vs long term savings) and the available software systems (e.g. multi-bidding functionality, e-auctions,…)

Financing: Leasing vs buy (vs. other financing)?

  • How to finance your vehicles: The general alternatives are purchasing and leasing or renting of vehicles (with various alternatives in the detailed contractual setup).
     

  • Which alternative is better has to be determined in a financial calculation over multiple periods (DCF discounted cash flow, or similar). Important is to take into account the total cost of owenership (TCO) of the vehicle - means: not only looking at finance cost but all other cost elements (see more here).
     

  • Determinants of the financing strategy are: Direct costs (leasing components, purchase price, costs for maintenance, insurance etc.), but also cost of internal administration (e.g. cost of labour if you manage the contactto the drivers yourself), cost of capital (WACC weighted cost of capital of your company), the uncertainty about interest and residual values, taxation and your internal accounting standards need to be considered.
     

  • Besides lease or buy, there are more options, specifically the option to have no determined cars in your company at all. This can be achieved e.g. with paying a cash allowance for drivers who use their own vehcile, or by using new forms of mobility like car sharing, ride hailing, public transport etc.

Strategic vehicle selection?

  • What kind of vehicles do you need: What type (sedan, hatchback, SUV, LCV,…), what segment (premium, mid, low), what drivetrain (diesel, petrol, electric,…), what engine size, what features and equipment?
     

  • This decision finally has to be made by looking at the impact of the vehicle selction on your cost of fleet (TCO), in a financial calculation over multiple periods. In addition to the costs, also the impact on other goals in fleet management - specificly on driver satisfaction (see here) and health, saftety and environment (see here) must be considered.
     

  • As this is a fairly complex decision and different vehicle types are required for different purposes, a stepwise approach is recommended ("fit-for-purpose-analysis"): In a first step do a clustering of mobility purposes  (e.g. long transportation trips overland, short maintenance trips inside cities,...). In a second step determine the optimal vehicle type for each of the clusters.
     

Driver Eligibility

  • A final strategic question is: Who receives a company car?This is specifically important for benefit cars (what employee job level is entitled to receive what type of car?). But also for tool of trade-vehicles (transport, service, sales) this can become relevant, if the cars are equipped with certain options so that drivers also see the cars as some kind of benefit.
     

  • Determinants of the decision about driver eligibility are the cost of fleet (less eligibility means less cost), but also HR-strategy is important, as eligibility changes will have high impact on driver satisfaction (see here).

Fleet management: Outsourcing or inhouse?

Even more fundamental than the strategic decisions regarding the fleet is the decision how to manage the fleet. This is the decision about the fleet management system setup: . This management system How many of the fleet management activities do you want to keep inhouse – vs. outsourcing them to an external supplier?

  • Outsourcing to a full service leasing company:

Advantages are a professional handling of your fleet and no need to keep internal resources for this. Disadvantages are extra costs for a management fee and extra costs due to the lack of competition between key suppliers; also usually a less direct personal contact to your drivers.
 

  • Outsourcing to a fleet management company:

Advantages are a professional handling of your fleet, no need to keep internal resources for this and even with outsourcing the possibility to create competition between key suppliers (i.g. leasing companies or manufacturers). Disadvantages are extra costs for a management fee, plus usually a less direct personal contact to your drivers.
 

  • Inhouse fleet management:

Advantages are direct control of all activities, reduced costs due to permanent competition of suppliers, often a more direct contact to your drivers (e.g. via own onsite-fleet managers), plus no extra costs for a management fee. Disadvantages are eventually less professional work, the additional costs to handle a multi supply setup, and higher risk of own people not available (due to holiday, sickness, fluctuation) especially in smaller fleets.
 

  • The main  determinants of the decision about outsourcing vs inhouse fleet management are: the cost advantages of a multy supply / unbundled setup vs the cost of handling this complexity, the costs of fleet management software solutions to handle this complexity and the question how important it is to have a direct driver contact . This all is also very much influenced by the size of your company and fleet.

Fleet strategy: Management process

A systematic process for your strategic fleet management comprises at least the following steps:

  • Analysis of the current situation. Obviously, clear data about vehicles, drivers, contracts and costs is necessary.
     

  • Decision about strategic alternatives, based on the impact of different alternatives on the goals of fleet management:

  • Execution of the strategy: Main aspects here are…

    • Selection and negotiation with fleet management suppliers

    • Changes of internal structures and processes

    • Definition of a Car Policy as a way to summarize and formalize the fleet strategy

    • Selection of technology: What are the consequences regarding hard- and software?

    • Change management: Gaining the acceptance of the stakeholders
       

  • Control: Measure the success of the activities, data based.

Notes regarding fleet management strategy: 

No "one-fits-all" strategy: Strategic fleet decisions depend on a variety of internal and external factors. What is right for one company can be wrong for the other. Even for the same company, what may have fitted in the past might be worth changing later. Structured decision making is essential.

New forms of mobility: New forms of mobility become available (see here) and increase complexity in fleet strategy decisions. Nevertheless, in principal for those alternatives the same questions as mentioned before have to be answered.

Let us help you with your fleet magement strategy!