The Fleet lifecycle

Strategy – This section below sets out the key principles organisations should include in their fleet management strategy. These principles will help an organisation to develop a fleet which is fit for purpose - this Fleet Strategy information has been brought to you by the Wales Audit Office.

Procurement – Top tips for buying fleet vehicles. Whole life costings of procurement options will enable an organisation to secure its fleet in the most cost effective way.
> See Funding and Leasing Section.

Maintenance – Effective service and maintenance. Maintenance needs to take place in a timely, professional and legal manner to secure a safe and cost effective fleet.
> See SMR costs in our Running Costs Calculator.

Running – Best practice for running a fleet. This application of these principles will help an organisation to achieve value for money in areas such as fuel, repairs and tyres.
> See our Running Costs Calculator.

Disposal – Remarketing and disposal of fleet vehicles. These principles will help organisations make informed decisions on the timing and method of disposal.
> See our Remarketing Section.

 

Fleet Strategy

An effective strategy is important as it defines your organisation’s approach to fleet management. Your strategy should be a clearly written document that identifies the business need for the fleet, helps secure a fleet that is fit for purpose and sets out how your organisation intends to manage its fleet in the future.

To develop a genuinely effective vision for your fleet, the fleet management strategy must link in with your organisation’s other strategic priorities. The strategy must be considered as part of your organisation’s overall approach to asset management and should also link in with your environmental aims.

Vehicle drivers, passengers and other users can offer a broad perspective on the strategic direction of fleet management. Consultation with these groups of users will contribute to your strategy being well informed.

The strategy should also look outside your organisation to consider the benefits of working with external bodies to provide the most effective and efficient fleet.

Organisations should aim to reduce the number and length of journeys. This produces financial savings, reduces the impact on the environment and reduces the risk of accidents.

Finally, it is critical to recognise that things change and therefore your strategy must be regularly reviewed to ensure it remains up-to-date and relevant.

User involvement in developing the strategy

Why are the needs of users important?
Vehicle drivers, passengers and other users need to be consulted to ensure your strategy is well informed and captures the key issues for securing a fleet that is fit for purpose. These groups are going to use your vehicles and their operational knowledge and experience is important in ensuring the strategy focuses on the right issues.

What are the dangers of not involving users?
If users are not consulted there may be opposition to using the vehicles that your organisation has procured. Similarly, if the strategy is developed without user input, your fleet may not meet the needs of users in terms of fleet size, vehicle type, legislative changes and training requirements.

How can users be involved in the development of your fleet management strategy?
User groups and benchmarking with other public sector organisations might allow you to access the information they have collected on users’ views. This may be particularly useful if the other organisations have similar vehicles to your organisation.

Efficiencies

How is fleet management performance measured?
Fleet performance should be measured using performance indicators. When deciding what indicators to use, your organisation might consider the examples set out below. This is not a comprehensive list and your organisation may well decide to use other performance measures.

Fleet use

• Vehicle availability – the number of days the fleet is available for use;
• Vehicle downtime – the number of days lost due to maintenance and repairs; and
• Vehicle utilisation – how much the fleet is used compared with its availability. It helps to identify whether the fleet size is correct and other problems with availability of vehicles and staff.

Compliance

• number of accidents – highlights staff training requirements and links to insurance costs;
• number of vehicle defects – highlights maintenance issues; and
• number of MOT failures or first time passes – measures the performance of the maintenance provider.
   

Operational

• Fuel usage – miles per gallon (mpg) figures can identify inappropriate fuel use, help with future vehicle type selection and identify training requirements; and
• CO2 emissions – used to monitor compliance with overall environmental policy and reduction targets.
   

Costs

• maintenance cost per vehicle – used to investigate whether certain vehicles are costing more, perhaps because of drivers causing excessive wear and tear or maintenance charges not being subject to review and checking;
• tyre cost per vehicle – used to identify excessive tyre damage or whether new tyres are being fitted when remoulded / retreads or regrooved tyres would suffice;
• insurance cost per vehicle – helps to identify whether the insurance purchased provides value for money; and
• operating cost per vehicle – this could highlight where significant running costs could be reduced.

How should performance indicators be selected?
You should select performance indicators to provide information that is useful and appropriate. If too many performance indicators are used it will be too time consuming to collect all relevant data or the analysis of performance will be clouded by too much information.

Performance indicators should be reviewed regularly to ensure the information provided is relevant and assists with fleet management decisions. It should not be provided purely on the basis that it has always been provided.

Who should monitor fleet management performance?
The fleet manager should lead the monitoring of fleet management performance and should be given clear responsibilities to report this information to everyone involved in the decision making process at strategic and operational level.

Organisations need to ensure a director (or equivalent) takes responsibility for fleet management issues at the highest level.

Should fleet management be part of a business plan?
Fleet management should be part of a business plan and include service objectives and more detailed targets which link to the organisation’s corporate objectives. There should be a clear link to financial budgets and capital programmes as well as staff development and training.

What happens if fleet management is not performance managed?
If your performance is not measured effectively then you will find it difficult to manage your fleet and there will be a risk that fleet management becomes an activity operating in isolation on the rest of the organisation.

If your fleet is not being managed effectively there may be a reduction in service quality or value for money.

How often should vehicles be replaced?
Vehicles should be replaced in line with a formal replacement policy. The policy should take into account the following factors:

• condition:
• mileage;
• age;
• ‘whole-life’ costings; and
• environmental targets.

Organisations should assess the optimum replacement time for each type of vehicle. An example might be to replace cars after four years or 80,000 miles.

Vehicle rotation should also be considered to even out vehicle mileage and this may involve moving vehicles between locations.

What are the dangers of not planning for the future replacement of your fleet?
Generally, as vehicles become older their maintenance costs increase and reliability can decrease.

Failing to plan ahead could result in replacement vehicles not being included in budgets and therefore not being replaced when they reach the end of their life. A vehicle which exceeds its planned mileage may result in excess mileage charges being made by the leasing company. It may be possible to have an agreement where the mileage costs are on a net mileage basis so there is a refund on vehicles which have not completed the contracted mileage.

Why do you need to reduce travelling?
Organisations should aim to reduce the number and length of journeys. This produces financial savings, reduces the impact on the environment and reduces the risk of accidents.

Partnerships

Who should be involved in procurement?
The fleet manager, finance department, procurement specialist and users should all work together to ensure the right fleet is procured. Their work should be supported by corporate guidance through documents such as the finance strategy and sustainability strategy. Options to be considered may include lease agreements, hire purchase and outright purchase.

Should you use only one method of procurement?
No, as there may be financial and operational reasons to alternate between procurement methods. The organisation should review this on a regular basis and communicate it to users.

What other partnership arrangements should be considered in the strategy?
You should consider outsourcing arrangements as part of the strategy, particularly where internal provision is insufficient to deliver an agreed level of service or if the cost of internal provision is uncompetitive compared with external provision. Two areas which could be considered are vehicle maintenance and fleet administration.

Sustainability

Why should environmental factors be considered?
Sustainable development is about ensuring a better quality of life for everyone now and for generations to come. Transport faces a tough challenge as it depends essentially on oil as a single energy source. Vehicles emit significant quantities of CO2 plus other pollutants harmful to the environment and human health such as nitrous oxides, non-methane hydrocarbons and particulate matter. Fuel efficiency is therefore a key environmental consideration. It is also a key financial consideration because not only do efficient vehicles use less fuel, but efficiency is also directly linked to car tax rates.

How can targets be set to reduce CO2 emissions?
Targets to reduce CO2 emissions by three per cent per year from 2011 are being considered by the Welsh Assembly Government.

It is important to know how much CO2 your vehicles are emitting. The UK Government publishes this information for cars using the following bands:

• Band A – Less than 100g/km – very green, low emission new cars
• Band B – 101-120 g/km – green, low emission new cars
• Band C – 121-150 g/km – low emission new cars
• Band D – 151-165 g/km – medium emission new cars
• Band E – 166-185 g/km – medium high emission new cars
• Band F - 186-225 g/km – high emission new cars
• Band G – 226 + g/km – very high emission new cars

One target could be to replace high CO2 emitting cars with low emitting cars.

Websites are available which help calculate fuel economy, vehicle excise duty, running costs, company car tax percentage brackets and information on alternative fuel types.
European Union (EU) legislation classifies truck engine emissions and since 2005, vehicles have needed to comply with the Euro 4 emissions standard.

What are the alternatives to petrol and diesel powered vehicles?
Technological advances have resulted in several alternative fuels to petrol and diesel although none of these alternatives can be used in as broad a range of vehicles as diesel/petrol.

One of the main alternative fuels biodiesel which is blended to a maximum of five per cent with regular diesel without voiding the manufacturer’s warranty. It is manufactured from crops including corn, rapeseed and sugarcane. Several Welsh public sector organisations have run trials with biodiesel and some are now using it as a matter of course.

Hybrid vehicles employ a parallel hybrid system in which a petrol engine provides the main power to the vehicle with an electric motor assisting when necessary. This leads to lower CO2 emissions. They are more suited to urban travel where there is more start/stop motoring and where high speed is either not possible or not necessary. Hybrid technology is available in a range of commercial vehicles as well as cars.


See Fleet Strategy
See Procurement Strategy and our Funding and Leasing section
See Maintenance Strategy
See Strategy for Running your Fleet and Running Costs Calculator
See Disposal Strategy and Auctions and Disposals in our Remarketing Section

Source: Wales Audit Office