Fleet News

Tough demands drive utility fleet policies

The utilities sector is one of the biggest industry segments in the van fleet market, accounting for nearly one-fifth of all light commercial vehicles operated by Britain’s biggest fleets.

In addition to being a large sector, most fleets have substantial responsibilities as they sit at the sharp end of service delivery in a market with a very demanding customer base.

Customer call-outs for utility fleets are rarely anything but urgent, which creates two key challenges for companies.

Responsibility for ensuring reliability of supply and also making sure that problems are fixed quickly requires an efficient fleet to deliver people and equipment to fix the problem. As a result, utility fleets need to focus their attention on acquiring vehicles that minimise downtime, with the right level of support to ensure vehicles are back on the road without delay, but all within normal budget restrictions that any business has to consider.
Secondly, they need to make sure drivers arrive safely and ready to do their job so that normal service can be resumed, through initiatives ranging from driver inductions and licence checks through to on-road driver training, speed limiters and high-tech telematics systems.

It is a war of attrition, as utility fleets have high utilisation, often in very demanding operating conditions, while drivers are employed for their technical skills, not for being perfect drivers. Therefore, fleet managers in the utilities sector need to show strong management skills to engage with employees and ensure they adhere to the rules and restrictions the fleet has in place.

The volume of vehicles involved makes the management challenge even greater, with the largest 20 companies in the sector operating more than 60,000 vehicles, two-thirds of them vans up to and including 3.5-tonnes. Total annual spend among these fleets alone is around £500 million.

Some of the largest fleets include Centrica, owner of British Gas, National Grid, E.On, EDF Energy, Thames Water and Yorkshire Water.

Within these companies, a relatively small band of just over 200 people work directly in fleet management and their response to this tough operational environment has been to become benchmarks for best practice and pioneering fleet strategies.

A recent example of utilities companies leading the way came from British Gas, which has placed an order for 50 all-electric Nissan e-NV200 vans, with a further 50 to be delivered by the end of the calendar year, following trials.

Their unique demands mean utility companies favour internal expertise to manage the specific challenges they often face, especially when it comes to specifying and operating their commercial vehicle fleets.

Market-leading initiatives to ensure their fleets are both efficient and safe reflect the broader safety-first focus of an industry that also has a commitment to using resources efficiently and reducing waste.

United Utilities is just one of several companies to be recognised for its work to reduce accidents, having been named a business champion by the Government-funded Driving for Better Business campaign after its incident frequency was cut from 55% to 34%, slashing repair costs per incident from  £1,136 in 2008 to £780 in 2009.

At E.On, different specifications for the van fleets were slashed from 100 to just 24, driven by the knowledge and expertise of the internal team.

Outright purchase is favoured funding method for vans

According to analysis of the largest fleets in the sector by Sewells Research & Insight, around 40% of utilities companies use contract hire as the main form of funding for their cars, with outright purchase accounting for just 20%.

By contrast, just 15% of van fleets in the sector use contract hire as their main form of funding, with 50% still using outright purchase. This is a significant shift from 2010, when 62% of fleets in the sector were outright purchased.

Companies typically refer to their operational profiles and specialist equipment requirements as the key reason for owning vans outright.

Commercial vehicles are constantly in use, have demanding roles and vehicle care may not be the first priority among drivers.

As a result, damage levels can be high and fleet managers identify this as another factor in their funding decision. If they used contract hire, their fleet would be exposed to substantial damage recharges.

Companies also tend to feel that extensive bespoke work is best carried out in-house, so that specialist racking and other equipment installations meets their exact needs without having to negotiate the management processes of a third-party provider such as a leasing company.

Many also tend to like the benefits of deciding exactly when and where to replace vehicles to meet the exact needs of the business so they can quickly respond to changing economic circumstances or customer demands by ordering and defleeting vehicles as and when required without being exposed to early-termination penalties charged by leasing companies.

However, external suppliers can play a critical role in helping utility companies to remain mobile if they can prove they are knowledgeable and can meet the specialist operational demands that fleets face.
Centrica has shown that working in partnership with a leasing supplier can be an effective way of running a commercial vehicle fleet.

The company used the expertise of Hitachi Capital Vehicle Solutions to develop an asset optimisation model that helped drive down fleet operating costs by millions of pounds.

The leasing company helped to identify the best vehicle and the optimum leasing period and this was then combined with expert advice and support on effective, proactive vehicle maintenance to ensure vehicles remained in good condition during their working life.

This is backed up by a continual review of Hitachi’s performance against agreed targets.

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