Fleet Management Outsourcing | Leverage the scale and technology of your suppliers
Fleet management outsourcing has grown in popularity in recent years. Businesses use outsourcing to reduce the costs of providing a fleet.
Outsourcing is contracting to a third-party provider to manage fleet processes that currently sit in-house. Outsourced arrangements can involve the delivery of all fleet-related services and processes.
Partial outsourcing could involve specific services such as accident management, VE103 processing, tax disk administration or driver license checking.
The Benefits Of Outsourcing
The benefits of outsourcing stem from allowing the business to focus on core activities. Generally, organisations and employees are not fleet experts and often lack the internal resource to run the fleet at the most efficient level.
The benefits of fleet management outsourcing include:
Allows internal resources to concentrate on core activities without being distracted by peripheral activities. Therefore you can focus on driving revenue or adding additional value to the organisation.
It generally falls on Procurement, HR or Finance to manage the fleet administration. However, these resources may lack the time or have the relevant skills to perform the role effectively. In addition, fleet management is often only part of someone’s role, so it can be difficult to respond quickly to all requests. Thus leading to gaps in service delivery.
Economies of Scale
Fleet management companies can offer economies of scale in terms of procurement leverage and efficiency of operational delivery.
Fleet management companies are increasingly looking to digitise their offerings to control costs and differentiate their service from the competition. These technologies allow the host business to enhance flexibility and process control. Eventually, generating cost savings through overhead reduction and flexible staffing.
Speed of Delivery
Fleet management companies will have larger teams of resources. Utilising additional resources can significantly speed up the delivery of services to stakeholders, especially where there are peaks in demand.
Having access to a pool of suitably skilled people to service your account removes any single point of failure issues. Moreover, this will typically lead to improved consistency of service to end customers.
The Drawbacks Of Outsourcing
The main drawback of outsourcing is the potential loss of control. Therefore, it is vital that the services are well-scoped and a trusted partner is appointed. Consequently, the supplier works as an extension of the business rather than a commoditised supplier.
Further drawbacks of fleet management outsourcing can include:
Choosing an appropriate supplier is vital. Failing to do so will cause further risk of incurring additional costs. For example, does anyone remember how much a facilities management company wanted to charge the NHS for changing a lightbulb?
Outsourcing companies can often be motivated by profit rather than a job well done. Unfortunately, that means the work you outsource may come back quickly and lack the quality that customers have come to expect.
Small Cog in a Big Wheel
Large fleet management companies will service multiple clients at any given time. As a result, sometimes the biggest customers will receive attention, especially during busy times when workloads increase. To counter this, some fleet management companies offer a tiered service depending on the level of outsourced activity required.
Making the Leap – Supplier Selection
Businesses looking to outsource services should follow a structured procurement process to ensure your organisation make appropriate decisions.
Take time to understand what it is you are looking to outsource. Define the scope of products and services the supplier will provide, with specific technical and business requirements. Agree on a requirements document with an internal project team. A RACI document is handy for this, clarifying where the supplier will be responsible and where there is still a requirement for internal resources. Often it is helpful to have an initial dialogue with potential providers as this can provide a view on service delivery and the capability within the marketplace.
Compile a list of potential providers who could fulfil your service requirements and select a long list to request additional information from. First, issue a request for information to understand each providers proposition better and fit with your organisation. Next, create a shortlist from the evaluation responses, being careful to have a broad panel to evaluate the submissions.
At this stage, you should focus on who can meet your needs and better understand the supplier approach. A close alignment of organisational culture will be crucial for getting an outsourced agreement to work effectively.
Request for Proposal
Ask the shortlisted potential suppliers for a full written proposal. Include detailed specifications, assumptions and constraints and terms and conditions. In addition, seek detailed qualitative responses to support a comprehensive evaluation process.
Requesting detailed pricing schedules will provide a clear cost breakdown for evaluation.
Evaluation and Supplier Selection
Evaluate all responses and score each supplier according to an agreed scoring matrix. Completion should be by a broad stakeholder group using a standard scoring process. Group discussion will calibrate scoring and iron out any outlying opinions to agree on the preferred supplier. Next, base scoring on the strategic objectives for the exercise finding the right weighting between cost and quality.
Following the scoring of the RFP, invite the top suppliers to make a presentation to the selection panel. This is an essential step as it will provide the opportunity to meet the people who will be delivering the services on behalf of the supplier. In addition, make an assessment as to the cultural fit between the two organisations.
Presentations must be based on a clear plan, so all essential areas are covered and any questions from the RFP are clarified. Allow the suppliers to ask questions to further their understanding of the requirements before any best and final offers.
Draft contracts should be requested from the potential suppliers at the Request for Proposal stage to identify any potential red flags in the final negotiations.
At this stage, it is best to identify a preferred supplier and a backup in case of any issues with contract negotiations.
Final Offers and Contract Negotiation
Allow the opportunity for the shortlisted suppliers to submit a best and final offer.
The negotiation phase should look to refine the proposed agreement and contractual obligations. This should reflect the original commercial and operational objectives of the process.
The final agreement should reflect a balanced deal between the two parties. The provider should have incentives to deliver a good service with negative consequences should they fail to deliver.
While there are many benefits to outsourcing fleet management processes, there can be some drawbacks once contracts have gone live. The scope of service needs to reflect the customer’s requirements instead of an out of the box operational model the supplier may wish to propose or enforce.
The implementation phase is when the service transitions from the internal functions to the external provider. This phase needs to have a robust governance structure in place to manage the transition effectively. Project milestones should be agreed upon where both parties can measure progress against the project scope.
Senior-level sponsors should regularly review progress with the outsourced provider to ensure timely decisions are made where appropriate. Failure to implement properly can create lasting impacts on the service delivery and should not be under-resourced or under-estimated.
Once the service provision has gone live, the delivery of the service should be effectively monitored. Namely, through effective key performance indicators (KPI’s) and service level agreements (SLA’s). The KPI’s inform the customer how critical elements of the outsourced arrangement are running against set criteria.
Service level variances should be followed up by the client and service provider, ensuring corrective actions. If any KPI’s are consistently broken, the SLA’s should provide a framework for restorative action. Either in financial penalties or other contractual concessions.
Performance measures must reflect what is important. Many measures such as call handling statistics may be easy to measure but may not be a key to good service delivery. Strong governance around query and complaint handling should form part of the performance metrics.
Customers should also ensure the supplier focuses on the continual improvement of the fleet through innovation and process enhancements. Unfortunately, some suppliers may get lazy or take customers for granted.
Organisations that outsource their fleet management should ensure they frequently benchmark the costs and benefits of service provision. Consequently, this helps ensure costs do not creep up and erode any of the savings generated as part of the business case for outsourcing.
Pricing for individual vehicles will change for several factors such as list prices, residual value forecast changes and interest rate movements. Hence, it is crucial to keep track of the elements driving the price changes.
At EVP we have a broad range of experience in dealing with outsourced arrangements, making sure they work for both parties.
If you would like to know more about what we can offer then please visit our Fleet Procurement or Fleet Vendor Management pages for more information or