Fleet Management Outsourcing
Fleet management outsourcing has grown in popularity in recent years. At a time where there are cost challenges for most businesses, outsourcing is being used by businesses as a method of reducing the costs of providing fleet by outsourcing non-core activities.
Outsourcing is the contracting to a third-party provider the management of some or all of the fleet processes currently being delivered in house. Outsourced arrangements can involve the delivery of all fleet related processes. Partial outsourcing could involve specific services such as accident management, VE103 processing, tax disk administration or driver license checking.
Benefits of Outsourcing
The benefits of outsourcing flow from allowing the business to focus on core activities. For the most part, businesses are not fleet management experts and maybe lack the internal resource to run the fleet at the most efficient level.
The benefits of fleet management outsourcing can include:
- Allows internal resources to concentrate on core activities.
- Skilled experts – it generally falls on HR or Finance to manage the fleet administration and the person may lack the time or skills to perform the task effectively.
- Business may be able to leverage economies of scale in terms of procurement and operational management.
- Fleet management companies are increasingly looking to digitize their offerings to control their own costs but also to differentiate their service offering from the competition. These technologies allow the host business to benefit from enhanced flexibility and process control, generating cost savings through reduced overhead and flexible staffing
- Having access to a pool of people to service your account removes any single point of failure issues. This will normally lead to improved service to end customers.
Businesses looking to outsource services should follow a structured process to ensure appropriate decisions are made.
- Analyse the business requirements – understand what it is you are looking to outsource. Define the products and services to be provided with specific technical and business requirements. Agree a requirements document with an internal project team. A RACI document is very useful for this purpose to clarify where the supplier will be responsible and where internal resource will still be required.
- Supplier search – compile a list of potential providers and select a long list to request additional information from. Issue a request for information and create a short list from the evaluation of responses received. At this stage you should focus on who has the capability to meet your needs and to get a better understanding of the supplier approach. A close alignment of organisation culture will be a key element of getting an outsourced agreement to work effectively.
- Request for Proposal – ask the shortlisted potential suppliers for a full written proposal. This should include detailed specifications, assumptions and constraints, terms and conditions. Detailed qualitative responses should be requested to support a broad evaluation process. Detailed pricing schedules should be requested which provides a clear cost breakdown for evaluation.
- Evaluation and supplier selection – evaluate all responses and score each supplier according to an agreed scoring matrix. This should be completed by a broad stakeholder group using a common scoring process. Scoring should be calibrated in a group discussion to iron out any outlying opinions and get a consensus on the preferred supplier. At this stage it is best to identify a preferred supplier as well as a backup in case of any issues with contract negotiations.
- Contract negotiation – Original contracts should be requested at the Request for Proposal stage. The object of the negotiation phase is to refine the proposed agreement and contractual obligations. This should reflect the original commercial and operational objectives of the process.
Whilst there are many benefits to the outsourcing of fleet management processes, there can be some drawbacks once contracts have gone live. The scope of service needs to reflect the customer’s individual requirements as opposed to an out of the box operational model the outsourcer 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 strong governance structure in place to effectively manage the transition. Project milestones should be agreed where both parties can measure progress against the project scope. Senior level sponsors should regularly review progress with the outsourced provider ensuring timely decisions are made where appropriate.
Once the service provision has gone live, the delivery of the service should be effectively monitored through effective key performance indicators (KPI’s) and service level agreements (SLA’s). The KPI’s inform the customer how important 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 take place. Should any KPI’s be consistently broken then the SLA’s should provide a framework for restorative action either in the form of financial penalties or other contractual concessions.
Customers should also ensure the supplier focuses on the continual improvement of fleet through innovation and process enhancements. 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. This helps ensure costs do not creep up and erode any of the savings generated as part of the business case for outsourcing.