Benefits of outsourcing your fleet
Should you allow your operations to be run by another company? Let experts Fleet Operations answer your questions
1. How should a fleet decide which fleet services are best to outsource?
Like many non-core business functions, considerable time and cost saving benefits can be realised by outsourcing fleet services. Companies must first look to determine the levels of resource and expertise they have in-house to manage the key fleet areas of procurement, operation and administration – from vehicle ordering, in-life management and driver support, to short-term rental and accident management.
If fleet is core to the business, as it will be for delivery and logistics companies, for example, it may make sense for ownership of key management areas to remain in-house. Where this is not the case, a specialist and dedicated external resource will often be better placed, have greater expertise, resources, systems and management processes to efficiently handle all or some of a company’s requisite fleet services.
The business case for outsourcing may often be self-evident, but in some cases may call for a cost-benefit analysis. A transparent and independent fleet consultancy can help advise or conduct this analysis on the company’s behalf.
2. Is outsourcing a menu-style arrangement or does a fleet have to outsource its entire operation for the strategy to work?
It’s not necessary for a business to outsource the whole fleet operation to realise the strategic benefit of outsourced services. It is entirely dependent upon the individual business need and companies can be selective.
In many cases, companies may have a strong fleet policy providing for good vehicle choice and low wholelife costs, but will be inadequately applying the policy with a lack of control in some of the key areas such as fuel spend, cost approvals, expense processes and risk management.
Where a fully-outsourced fleet management solution is the preferred option – a knowledgeable and experienced supplier should be able to provide a best-in-class service for every area of the fleet and take ownership of all resource-intensive administration.
Complete transparency of all costs and performance data is essential. Businesses should then be able to receive meaningful interpretation of this data to allow them to make informed, strategic decisions and benefit from operational and process efficiency – along with associated bottom line savings.
3. How does outsourcing differ to contract hire?
Fundamentally, contract hire is simply a vehicle financing option, where a business is paying to ‘rent’ a vehicle over a period of years, although it often forms part of a wider outsourced solution.
While contract hire agreements often include maintenance packages that cover vehicle servicing, contract hire does not address all the administration and wider vehicle and driver management needed to effectively operate and manage a fleet. Companies moving from a purchase to a contract hire environment sometimes have an expectancy that all the admin disappears – it doesn’t; it simply changes.
When looking for outsourced management of all areas of fleet procurement, administration and operation, businesses must look beyond contract hire.
Outsourced fleet services, we believe, offer greatest value and transparency when provided independently and impartially.
4. Does a company still need a fleet manager after outsourcing?
An outsourced management provider that is looking to implement operational and efficiency improvements will invariably do so more effectively if they are able to work with an internal fleet manager or key fleet stakeholder.
A fleet manager can be instrumental in driving change within an organisation, achieving buy-in across the business, facilitating implementation and helping to deliver on the strategic goals. If no one has ownership of fleet internally, this process can be a great deal more challenging.
5. How does a fleet maintain control of costs and suppliers after it has outsourced?
First, it is crucial to choose the appropriate supplier for your organisation, one which can offer the required level of visibility and insight into the different variables that impact upon cost.
This is more possible when working with an outsourcing partner, as the fleet operator will have direct contracts with all its suppliers, ensuring the cost in is completely clear. In a leasing environment, the contract is with the leasing provider, which then manages contracts with suppliers such as accident management and wraps these services up in its own fee.
That transparency allows fleets to identify exactly where spend is going and begin to work on control measures in areas where potential reductions can be made. In order to do this, it is important to begin by setting a benchmark for each area of spend. This might represent an average taken for spend in previous years or a perceived ‘best case’ cost, and will provide a starting point with which to measure the outsourcing partner’s effectiveness in terms of cost control and savings.
6. What sort of key performance indicators should measure an outsourcing contract?
All spend should be benchmarked and monitored – from the biggest costs, such as vehicle leasing, to smaller costs, such as spend on super unleaded fuel.
There is sometimes a tendency for fleets to focus on the bigger costs as they have the most obvious impact, but this means they ignore a number of smaller areas where a big difference can be made.
Service levels and KPIs should be built around service delivery to drivers and stakeholders, cost control procedures, delivery of data and reporting, accuracy of data, key compliance areas (e.g. MOT), timeframes for key processes (e.g. vehicle ordering) and vehicle off-road management.
Although that represents a huge range of variables, the evolution of technology makes it much easier to bring all those components together. Outsourcing partners can take and receive information from various suppliers and act as a central repository to manage all that data for the customer.
7. How will company drivers receive the same level of service from an external supplier as they do from an in-house fleet manager?
Once more, this comes down to selecting the appropriate supplier, particularly looking for an outsourcing partner that does not simply manage assets but also services the driver. An outsourcing partner should have a range of departments that deliver best-in-class services for all fleet-related processes, with the appropriate technology to support the service and the people. To truly get a grip on costs, the supplier must demonstrate a commitment to working with drivers to help them improve aspects of performance such as safety and fuel efficiency. This is additional to managing all the elements related to the vehicles.
For example, at Fleet Operations we have a dedicated driver helpdesk team responsible for the care of drivers and we operate a ticketing system that allows queries to be highly visible and dealt with quickly and efficiently. It’s about putting together a framework where training, education and support are all available to drivers.
8. How can a fleet be sure it will receive the same level of priority from an outsourcing supplier, and not be pushed to the back of the queue?
Service is crucial to outsourcing providers so success in their field should be based on a high level of support delivered to both management and drivers. Tools like a dedicated driver helpdesk help to demonstrate that a provider is on hand to provide constant support.
But it’s also important to look at client-led case studies, reputation in marketplace, demonstrable savings and the level of transparency provided by the outsourcing provider. These elements will help to prove whether the provider is capable of offering long-term support and visibility that is vital to proper management of a fleet.
9. What scale of savings can a fleet expect outsourcing to deliver?
The return on investment can be significant and ranges from 2:1 to 8:1 when looking at the entire savings across the board against fees over three to four years. It very much depends on the customer and individual circumstances.
We have noticed average savings of £21 per vehicle per month for clients using our MOVE platform. These lease cost savings alone equate to more than £1,000 per vehicle on a typical four-year lease, meaning a 200-vehicle fleet should realise savings in excess of £200,000.