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Hennecke Fleet Consulting

Consulting: Fleet management strategy / Outsourcing

Hennecke Fleet Consulting offers consulting services for fleet management in various areas. See here: Fleet management services

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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.

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Fleet strategy decisions

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

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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?

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

  • 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?

  • Strategic decision: Given the strategy about unbundling, you have to decide how many suppliers per service to be used: Go for a single-supply strategy, or have multi supply 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 is 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,…). A multi-supplier setup further only makes sense, if your car fleet has a certain size, otherwise you will not be attractive as a customer to your suppliers.

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

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

  • Advantages: 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: TCO).
     

  • 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?

  • A final - maybe even the most fundamental - strategic decision is: What vehicles and how many do you need? This refers to the question of tvehicle type (sedan, hatchback, SUV, LCV,…), what segment (premium, mid, low), what drivetrain (diesel, petrol, electric,…), what engine size, what features and equipment?
     

  • Determinants of this strategic decision are at first the total cost of fleet in the long run (TCO), but also at the impact on other goals in fleet management must be considered - specificly on driver satisfaction (see: drivers) and health, saftety and environment (see: HSE).
     

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

Fleet management: Outsourcing?

Even more fundamental than the strategic decisions above is the decision how to manage the fleet: Do you want to keep the fleet management inhouse or outsource them to an external supplier?

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In principal you have a variety of alternatives, ranging from managing everything inhouse up to outsourcing the complete range of fleet management:

Inhouse fleet management:

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Advantages of keeping everything inhouse are that there no additional costs for the outsourcing services. This is specifically important, if you have free employee capacities anyways and can they handle fleet management. A second advantage is that you are independent from all suppliers and can therefore utilize advantages from unbundling and multi-bidding (see above) to the maximum.

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Inhouse may also be required if you have very specific fleet management requirements that no outsourcing supplier can fulfil. This may be the case with very high requirements of driver satisfaction ("drivers must be pampered by personal contact to the fleet manager") or very specific fleet purposes, e.g. for a fleet commercial that is too complex to handle by an outsourcing supplier.

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Disadvantages are eventually less professional fleet management work of your own employees, the additional costs to handle a multi supply setup, and - very important - the higher risk of own people being not available (due to holiday, sickness, fluctuation). Additionally you will have additional costs for a fleet management software, once your fleet size exceeds a critical number.

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Outsourcing to a leasing company:

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This  means you outsource a large part of fleet management (driver contact, handling of damages and maintenance, fleet reporting etc.) to a leasing company "LeaseCo". This LeaseCo may even manage the vehicles that are leased by other LeaseCos for you.

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Advantages are that you need less inhouse capacity for fleet management work and will receive this service continuously, independent from your employees' sickness, holidays etc.

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Disadvantages are at first sight the additional cost for the oursoucing services. Beyond that you close yourself off from the advantages of multibidding with other LeaseCos and you may not have the fleet management reporting as from a fleet management software or a fleet management outsourcing company.

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Outsourcing to a fleet management company:

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This means you outsource fleet management to a supplier that is independent from a LeaseCo.

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Advantages are that you benefit from unbundling and multi-supply (see above) to the maximum; for example you are free to exchange LeaseCos whenever you like. You will also have a decent fleet management reporting tool without extra-costs for a fleet management software.

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Disadvantages: Costs for the outsourcing service. Eventually the supplier will not ne able to fulfill your specific needs with regards to perfect driver experience or special-fleet-requirements.​
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Determinants of outsourcing decision

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The decision about outsourcing vs inhouse fleet management is the most complex, because it has to base on the decisions about fleet strategy as from above (unbundling, supplier, finance, vehicle selection) and then consider TCO as well as other goals.

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Main determinants are therefore: The previous strategic decisions about unbundling, supplier, finance, vehicle selection. Additionally the cost advantages of a multy supply and unbundled setup versus the cost of handling this complexity, the costs of required fleet management software solutions to handle this complexity and the question how important it is to manage drivers personally or handle purposes of a very special fleet. And last but not least: The size of your company 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.

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OUR SERVICES for your strategic fleet management and outsourcing

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Hennecke Fleet Consulting supports you with consulting services regading all types of vehicle fleets, all areas of fleet management activities and all levels of fleet management.

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We also support you in the execution of projects with change, project and interim management.

 

​For more info on our services see here.

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Alternatively you can CONTACT US directly.

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Consulting regarding fleet strategy and outsourcing

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