Fleet News

Outsourcing: just how far should a fleet go?

WHEN a company outsources its fleet, exactly what is meant by outsourcing?

Full-time fleet managers fear the word as a euphemism for redundancy, but industry experts are deeply divided on the issue.

Outsourcing can cover a number of areas, from simply paying someone else to handle the processing of accident claims to a firm taking over the entire running of a fleet's operations, from ordering vehicles to renewing vehicle excise duty, managing service and maintenance, disposing of vehicles at the end of their fleet lives, dealing directly with company car drivers and even setting fleet policy.

But while passing responsibility for the fleet to an external third party can spell doom to many in the fleet department, it is vital for the company to retain the services of a skilled fleet executive to manage the new contract.

Indeed, the fleet manager could become the lynchpin in making the outsourced relationship work well.

Stewart Whyte, managing director of fleet consultancy Fleet Audits, said: 'There are several cases I know of where firms have misunderstood how outsourcing works. 'Executives have handed over responsibility for the fleet to an outsourcing company without any idea what they want and the result has been to bring the fleet to its knees. They tried to treat buying fleet cars like buying pencils.

'There must be someone in-house to maintain control of the fleet and handle problems because things can and do go wrong in the relationship between fleet and supplier.'

For Graham Rees, UK business development director for fleet consultancy Fleet Logistics, outsourcing can be either a blessing or a curse depending on how it is handled. He said: 'The idea of companies outsourcing their fleets to an external supplier makes good sense, but look a little deeper and it may not appear so healthy. While it may make sense to let someone else do the donkeywork, who is really looking after the strategic and financial interests of your company?'

The key message is outsourcing management of the fleet does not mean outsourcing all responsibility for it. It may even require a more focused approach to ensure the supplier is doing its job effectively and check that drivers are happy.

Rees said: 'When many companies decided to outsource the running of their fleets, they often did away with or downgraded the role of fleet manager and then found this decision came back to haunt them. Companies which no longer have in-house fleet experience or 'know-how' have to seek advice and assistance externally. The first port of call will naturally be their fleet service supplier. However, there are a number of problems.

'If circumstances dictated that the best path for your company was to move away from company cars or completely review your funding arrangements, how could your fleet supplier recommend a line of thought that ultimately might lead to it losing some of your business?'

While fleet management firms disagree that they would give anything other than best advice to their clients, they agree that companies need to have employees with specific responsibility for the fleet, even if they have outsourced their fleet department.

John Pout, head of sales for ARVAL PHH, said: 'Employers should have someone managing the contract, because although fleet management companies can provide a product for current demands, they need to be informed of changing company needs, so the product can be developed as well.

'Someone has to convey changes to the fleet supplier and although that person does not need to be an expert in fleet, they must understand the aims of having outsourcing and why different policies might be suggested.'

This is particularly important if disputes arise between drivers and suppliers which the fleet management supplier is not prepared to handle.

If the driver cannot turn to his or her employer as a last resort because no-one knows how to help, it could provoke them to take action themselves or even look for work with another firm.

Whyte said: 'If you hand your fleet management over to an outside company and do not monitor the relationship, if their operation starts to fall apart then your firm could end up in deep trouble.'

In-house expertise is also vital while tendering to renew contracts, or offering new deals to current suppliers.

If there is no-one in the company who can tell whether the current supplier is doing a good job, it is impossible to tell whether a new supplier might prove more effective in keeping costs down.

Debate has been most heated in police fleet management, where the Metropolitan Police and Nottinghamshire Police have both gone down the outsourcing route, contracting with an external supplier to provide service, maintenance and repairs, and even vehicle purchasing and disposal.

Venson won both contracts, claiming that the future of in-house fleet managers was bleak and that there was an inability to bring about change and innovation in the public sector.

The National Association of Police Fleet Managers naturally rejected such claims, and individual police fleet managers have countered that in-house departments were a by-word for best value and cost-effectiveness.

They added that unlike outsourced services, savings they make go directly back into the police force, rather than to shareholders.

However, Venson's chief executive Grant Scriven cited the company's investment in technical facilities as part of an outsourcing deal for Nottinghamshire Constabulary as a benefit that could only be provided through such deals.

Among private sector fleets, the debate has been just as intense, with commentators arguing that companies need to invest in qualified in-house fleet managers to avoid rocketing costs amid the most challenging times in the history of the company car.

As one industry expert said: 'The key lesson is that no-one takes care of your money as well as you do yourself - once you have put successful controls in place.

'I get irritated with suppliers who assume they can save me money without knowing my business.'

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