Hennecke & Partners Fleet Consulting

Consulting: FLEET TCO and COST SAVINGS

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 the topic of fleet costs (TCO = Total cost of ownership) and cost savings / cost reduction, in order to give you an idea about our services in that area of competence.

Costs (TCO) of fleet & corporate mobility

Costs for fleet & mobility are one of the biggest cost factors of a company. They can make up to 20% of the overall costs of a company, depending on the industry.

cost-categories-in-fleet-finance-fuel-accident-insurance

Costs of fleet - Total cost of owership (TCO)

 

In order to look at the total cost of ownership (TCO) you have to summarize all costs related to a vehicle over its lifetime. So not only financing and fuel are relevant, but also residual value of the car at the end of the use, repair and maintenance cost, etc.

Cost categories of an average vehicle fleet in detail:

The average values of a fleet are... 

Direct costs for each vehicle

  • 44% of costs is financing(leasing rate, depreciation, interest rate,...)

  • Second largest cost group is fuel cost (19%)

  • Costs for accidents/ insurance (13%)

  • Cost for maintenance, service, repair (11%)

  • Finally there are tyres (5%) 

  • and other costs like tolls, telematics etc (4%)
     

In addition to those direct costs are costs for administration of the fleet in total, e.g. for employees, consulting or software. Thes costs make up to 4%. 

Costs for travel / corporate mobility

Besides costs of vehicle fleet, companies also spend money on business travel. or so called corporate mobility.​ These are costs for travelling by plane, train, taxi, car sharing, other mobility providers.

 

Most companies are not even able to report the relation of fleet costs vs. travel. Individual interviews reveal that costs for travel/ costs of mobility make up to additional 100% on top of the costs for fleet.

Do you know how much you spend in total cost (TCO) and per category of fleet&mobility cost in your company?

CONTACT US to start getting a comprehensive overview of your fleet cost.

Cost savings / cost reduction

In order to achieve Cost Savings on Fleet & Mobility you should follow a structured approach that includes at least the following steps:

Fleet-cost-savings-framework

Cost savings definition:

First you should define precisely what kind of savings you want to achive. Why? Because looking closer at savings, you will notice that there is not one savings-definition, but many different aspects to be considered.

You have to answer at least the following questions:

  • Level: Measure savings on company level, per entity, per vehicle,... ?

  • Time Scale: Achieve savings soon as possible, or long term?

  • Cost Type: Measure savings in terms of CAPEX, OPEX, consider effects below EBIT, count cost avoidance,...?

A precise defintion of cost savings is neccesary, in order to define subsequent strategies. Especially because different savings definitions will lead to completely different savings strategies.

Cost savings strategy

In the next step you should define how to achieve Cost Savings.

There are multiple alternatives to achieve cost savings. Generally  you can achieve savings in/on all areas and all levels of Fleet & Mobility Management. A non-comprehensive list of initatives is the following...: 

  • Negotiating better consitions from suppliers

  • Optimizing the financing of the vehicles (lease vs buy decisions)

  • Implementing a multiple-supplier (multi-bidding) sourcing setup

  • Rightsizing of the vehicles in use

  • Implementation a system of driver recharges for damages or private utilization of vehicles

  • Implementing efficient invoice-control processes

  • Optimizing fleet processes

  • Introducing more efficient techology and Tools, e.g. modern fleet management software

The evaluation and selection of different savings alternatives should then consider:

  • the potential amount of savings with regards to your defined goals

  • the cost and speed of implementation 

  • the risks or eventual (negative) impact on other goals (driver satisfaction, HSE)

Some additional notes

There is no one-fits-all-strategy! The appropriate savings strategy depends on your savings definition, your current internal setup of the fleet & mobility and the external conditions of the markets you operate in. 

Have a broader view on savings! Most savings initiatives focus on either reducing the direct costs per vehicle or the fleet administration processes. We recommend to also consider savings by alternative ways of travel, and by reducing the amount of travel in total. See more here: New Forms of Mobility.

Don't forget your employees! Many savings projects fail because of under-estimation of the need to convince stakeholders. Consider this in your strategy definition, as well as in execution (change management).

We help you to identify the right areas of fleet & mobility and to define the respective activities, in order to achieve Cost Savings. 

CONTACT US to reduce costs of fleet (TCO) substantially.

Quiz:

Focus on the right things! Guess what has the biggest impact on a company's fleet&mobility cost?

Correct Solution:

  • The biggest impact on TCO in this example has the reduction of the leasing rate, closedly followed by the reduction of mileage driven.

  • Least impact has the reduction in software cost, and fuel pricing.

Get the detailed results of this excecise and the calculations/ assumptions behind it. Learn more about the impact of different cost savings activities.
Contact Us.

Measurement of fleet cost savings

"You cannot manage what you cannot measure"​

An integral part of an effective cost management is the measurement of cost savings.

 

This requires:

  • Clear definition of savings (see above)
     

  • Cost reporting systems: Invoice handling, payment services, fleet cost database, reporting rules + the respective technology/ IT systems
     

  •  Alignment of all envolved parties external and internal: Making sure that everybody agrees to the savings definition and ways to achive the cost savings (change management)

We help you to measure your cost savings, in order to control the success of your savings strategy.

CONTACT US to start getting a comprehensive overview of your fleet cost.

Let's generate cost savings on fleet & mobility!