Fleet News

Procurement special: measuring performance key to supplier control

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Most business effort goes into obtaining the right price for fleet services, but it is equally important to have processes to measure and monitor service delivery throughout the length of the contract.

Measuring supplier performance is key to long-term business success, says Graham Bellman, director of fleet services at Travis Perkins. Bellman is in charge of a mixed fleet of more than 4,500 vehicles and has worked in the fleet sector for 36 years.

“It is crucial for fleets to be able to measure any savings back into their company and ensure that the price being charged is transparent and measurable,” he says.
While much of what fleet managers buy is service related, the remainder will be product based. It is, therefore, critical to communicate with suppliers the importance of goods, such as tyres or replacement windscreens, being available when required.

“Fleet managers should ensure that service level agreements (SLAs) are written in relation to their own individual business and their specific industry,” Bellman says.

Richard Hipkiss, operations director at Fleet Operations, suggests that representatives from fleet and procurement need to be involved in creating performance criteria.

“Businesses need to have an operational and a commercial slant when measuring supplier performance,” he says.

“What is being measured will then cascade down to form SLAs and key performance indicators (KPIs) which need to be robust and cover a whole spectrum of issues, but must also be simple to interpret, work on and be measurable by both sides.

Simon Staton, director client management at Venson Automotive Solutions, suggests that SLAs/KPIs should be realistic and achievable, “but that’s not to say they should be easy. They should stretch suppliers”.

The purpose of performance measurement is ultimately to drive suppliers’ future improvements with managers using KPIs to measure quality, driver satisfaction, competence, price and other issues to both spot potential problems or opportunities and set targets that will deliver strategic goals.

Crucial to ensuring top delivery is to have SLAs in place that all parties are happy with supported by KPIs – performance standards and processes to measure quality, driver satisfaction, competence, price and other issues.

David Currier, corporate relationship director at Lex Autolease, says: “The first step in identifying reasonable SLAs and KPIs is getting to know the customer.

“Once we understand the customer’s areas of priority, we can devise KPIs in line with them.”

However, SLAs and KPIs are useful only if acted on and used to improve performance and identify areas where fleet managers or their drivers could be more efficient.

Suppliers should not simply focus on initial supply requirements outlined in the tender.

Staton says: “Suppliers should develop new ideas, concepts and services that deliver over and above the original contract and take into account changes in operating requirements, new trends, industry innovation, taxation changes and legislative developments.”

As Andy Fuller, corporate sales director at Arval, points out: “Business priorities can change quickly, so it is an important opportunity to provide value adding insight and analysis to inform future decisions around management of the fleet.”

Standard management information reports are unlikely to be suitable.

Bellman says most suppliers have a standard suite of reports “of which 20% will be interesting, but 80% will not make any difference to a business”.

It is important to ensure that management information reports are “accurate, informative and no longer than one page long” with key issues highlighted via a red, amber and green traffic light system, he adds.

The size of the Travis Perkins’s fleet allows its team of fleet managers to ‘buddy up’ with suppliers which means regular contact is assured.
It also has four implants from suppliers which is a sign of the partners “investing in Travis Perkins”.

However, Bellman acknowledges that the majority of fleets are not the size of Travis Perkins and suppliers say there is no one-size-fits-all approach to how often KPIs/SLAs are applied.

Staton says that fleet contract review meeting frequency can vary depending on the size and/or complexity of the contract, the fleet and the requirements of the client organisation.  

“In our experience, review meetings can be monthly, quarterly, half-yearly or annually,” he says. As well as reporting back on fleet performance, against SLA/KPIs, it is also important to look at continuous improvement – new ideas that continue to support the client’s operational and financial objectives.”

To obtain the “perfect partnership” it is critical to invest time in building the relationship, says Bellman, and “be honest” with suppliers.
“Plans do not run smoothly and may be delivered late. If the plan involves a supplier then keep them informed of developments,” he says.

To determine whether best practice is being achieved, Hipkiss says supplier performance should be 100% in key areas, notably in respect of legislative compliance – for example, in connection with the supply of valid tax discs and MOT certification.

In terms of more strategic aspects of the fleet (for example, all new company cars to meet a pre-determined average CO2 figure during a 12-month period), progress needs to be regularly monitored to ensure objectives are on course to be met or amended if required.

Hipkiss adds: “In many cases 100% is achievable in terms of suppliers meeting SLAs and KPIs, but in some areas there will need to be a focus on continuous improvement.”

Ultimately whether or not fleet suppliers are delivering as expected is likely to be determined by feedback from drivers and stakeholders at the sharp end of operations.

“Fleet managers should not put up with goods or service of an inferior standard and should never be afraid to complain that great service is not being delivered,” says Bellman.

“Good is where fleet managers can have an open and honest relationship with suppliers. Ultimately, fleet managers will discover that great service and product delivery is gauged by how many of their customers contact them to complain.”

Staton agrees: “A simple mechanism for monitoring supplier quality is to ask colleagues who deal with the company on a day-to-day basis. If there are, for example, continual invoice queries, then that is one indication that service levels need to improve.”

Involving colleagues from across the business in ensuring contracts are “right” is vital, according to Graham Bellman.

“Utilising experts in the procurement department is important in getting a contract right and having it signed off by the business, because if something goes wrong it could put the fleet manager in an embarrassing position,” he says.

“Engagement should also come from a company’s legal and finance teams.”

Prior to signing a contract with a supplier there are many challenges for fleet managers to overcome and they include satisfying as far as is practically possible that the company will still be in business at the end
of the contract.

Analysing a potential supplier’s record of investment in its business and its track record for innovation will give clues when future-proofing an organisation.

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