Fleet Strategy
Developing a clear Fleet Strategy allows our clients to focus on their core business
Fleet strategy covers several inter-related areas with a broad range of stakeholders, including representatives from Operations, Finance, HR, Procurement, Payroll and Health and Safety. Each business is unique and requires a fleet strategy to meet the organisation’s specific needs, and no one size fits all.
Working collaboratively with our customers, we understand the business, challenge where appropriate, and develop realistic and deliverable strategies that flex as circumstances change. The fleet management strategy process starts with getting a thorough understanding of our clients business by asking questions such as:
1. What is the purpose of the fleet, and how does it align to the overall business objectives both now and in the future?
2. How to operate the fleet effectively and safely?
3. How do I fund the fleet and operate it cost-effectively?
4. What are the risks associated with the fleet, and how do I effectively control them?
5. How do I ensure the fleet is optimised, covering operational requirements and employee benefits?
6. How do I incorporate ESG requirements?
Fleet Strategy Review Process
Our Fleet Strategy Framework uses a robust three-step methodology. Therefore, the output is comprehensive and measurable against the business objectives.
Phase 1 | Diagnostic
The diagnostic starts with engaging all stakeholders who are impacted directly or indirectly by fleet operations. It is important people engage with the process.
We then create a fleet baseline with all current costs and a map of current operational processes.
Analyse existing processes and supply chain to identify gaps in performance or opportunities for development or efficiency.
Review overall business strategy and align how this will impact the fleet in the short, medium and long term.
Review current costs, supply chain contracts and supplier performance measures.
Develop options for change reflecting the internal and external environments. Obtain senior management approval for the proposed strategy implementation.
Phase 2 | Change Management
Identify key stakeholders and ensure they have time to support the project at the correct times.
Speak with current suppliers communicating the strategy and identify how and when they can support the process.
Run a procurement process to identify alternative suppliers where gaps in capabilities are identified.
Communicate progress to stakeholders during the change, highlighting when the changes will impact different groups.
Implement process efficiencies through the new or existing supply chain to support the strategy.
Phase 3 | Ongoing Fleet Management
Create a robust Supplier Management (SRM) process through effective Key Performance Indicators (KPI’s) and Service Level Agreements (SLA’s).
Gather driver feedback through surveys and forum discussions.
Track the benefits of the new strategy against the expected forecast.
Benchmark policy, process and price to ensure these elements continue to align with the strategy.
Provide comprehensive management information to stakeholders.
Why use us to create your Fleet Strategy?
Fleet Experience
30+ years of fleet strategy consultancy experience covering every different type of fleet you can think of. From London Zoo to B&Q we have worked with them all.
Comprehensive Process
Robust and proven consultancy process coupled with exceptional knowledge of the market means you get the right answers for your fleet.
High Returns
We always deliver a high return on your investment improving the efficiency of your fleet operation keeping your drivers and management happy.
Setting the right fleet management strategy can be a challenge for a lot of businesses we work with. Often, an independent viewpoint helps to provide direction and clarity through managing a wide range of internal perspectives.
Creating the right strategy significantly impacts how the fleet operates, creating efficiencies and better driver experiences.
If you need some help with your fleet management strategy, then please contact us.
Fleet Strategy Toolkit
Fleet Market PESTEL | How macro-environmental factors impact your business
PESTEL (Political, Economic, Social, Technological, Legal and Environmental) analysis is a business framework. The tool helps identify the various external factors that might affect a business and, specifically, the fleet’s running. The goal is to figure out just how the different factors influence business performance.
We look at how this is currently positioned for the Fleet Management companies in the UK, although the implications have a similar impact elsewhere within Europe and beyond.
Infrastructure
There is pressure on the Government to upgrade infrastructure for road and rail users due to increased congestion. The Government has confirmed that the high-speed rail link HS2 is proceeding; although the Eastern leg, running from the Midlands up to Leeds has been scrapped. Instead, the Transport Secretary has said money is aside to upgrade the current transport in the area.
Infrastructure spending will become increasingly important following the pandemic to support broader economic growth.
The UK Government originally agreed to ban the sale of internal combustion engine vehicles by 2030. However, in September 2023 Rishi Sunak has extended this to 2035 and made other changes in relation to the UK net zero ambition. It is currently unclear if other tax incentives will change in line with the new deadline or if they will be maintained at current levels.
Brexit
Brexit is now complete, and a trade deal in place but there is still uncertainty around both short and long term implications which is disrupting supply chains.
Negotiations are taking place for trade deals with various states in both the goods and services industry, which will influence future costs and product availability in some countries.
Trade
China, US, and EU tariff discussions potentially significantly impact the cost of sourcing vehicles in different territories. The outcome of trade discussions will impact where manufacturers will focus resources over the medium term. In September 2023 the EU announced an investigation into the supply of Chinese electric vehicles into the European markets with the view that Chinese companies have been receiving unfair subsidies.
US Election
The Biden adminstration appears to have a more traditional approach to the presidency compared to his predecessor. However, there is still a significant contingent of Trump supporterers who still maintain an ‘America First’ approach. This will come into focus as the former President appears to have strong support from within the Republican party and is set to run again in the 2024 election.
War In Ukraine
As a result of the Russian invasion of Ukraine supply chains have become disrupted with some specific parts only having a manufacturing base in Ukraine. In addition the inflation resulting from fuel price rises is causing cost of living challenges in many European countries. Interest rates have risen significantly across the world from historically low levels.
Supply Chain Changes
The impact of Covid-19 on global supply chains has been significant. Car production has been hugely affected by the semi-conductor shortage, which has had severe impacts on the technology industry as a whole. 2023 has seen an easing of these challenges although the backlog of demand will take some time to address.
Personal Tax
The increasing tax burden for company car drivers leads to the increased attractiveness of the cash allowance alternative. Company car volumes are lower year-on-year. The reduction of travel due to the Covid-19 pandemic is likely to exacerbate this trend as the tax from company vehicles reduces.
The exchequer will have lower receipts from fuel duty as there has been a reduction in general travel. There has been talk of road pricing due to the tax losses on fuel and vehicle excise duty.
Personal Leasing
The low interest rate environment adds to personal leasing through Personal Contract Hire (PCH) and Personal Contract Purchase (PCP). This segment of the market has seen significant growth in recent years and seems likely to continue. This will likely erode the potential demand from the traditional company car market as drivers opt for company car allowances instead.
Fleet Management Market Consolidation
Low interest rates lead to the consolidation of fleet providers through attractive returns from asset-backed funding. As a result, the leasing market is becoming more consolidated among the largest suppliers. Manufacturers are also expanding their footprint, as demonstrated through the acquisition of Inchcape by Toyota Financial Services.
Shrinking Overall Market
The reduced company run vehicle volumes are forcing Fleet Management companies to focus on profitability. This involves selling more additional value add services as part of a mobility mix. Fleet Management companies will review the relatively unprofitable businesses such as the broker market, with a view to accessing customers directly.
Fuel Duty
The long-running freeze on fuel duty helps with vehicle running costs, but this will come under increased pressure due to the pandemic and increasing penetration of electric and low emissions vehicles.
Asset Ownership Models
Generation Y are challenging the ownership culture, leading to a reduction in demand for passenger cars. Subscription services are becoming a widely accepted usage model within a variety of settings. The increased prominence of Uber and platforms such as Zipcar and Lime are adding to the available mobility mix.
User Experience
Car drivers expect the Amazon shopping experience. Tesla has led the way in creating new deployment models for sales and in-life user experiences.
Climate Change
There is an increased focus from many, especially the younger generations, regarding the environmental impact of travel. Innovations in electric vehicles offer a genuine low carbon alternative to fossil fuel vehicles. Other fuel sources such using Hydrogen as a greener alternative to internal combustion powertrains are also being developed.
Fleet Electrification
New electric vehicle technology is paving the way for a fully electric future. Infrastructure requirements at a local and national level will place additional demands on the national electricity grid. Other fuel technologies such as Hydrogen are also being investigated but remain a niche in the overall mix.
Autonomous Vehicles
Autonomous driving technology is leading several manufacturers to rethink their product development strategy from products to services. However, there is still much work to be done before fully autonomous vehicles hit the roads, with legislation providing the biggest obstacle to deployment.
Mobile Phone Technology
The age of mobile apps facilitates the rise of mobility alternatives such as Uber, Lyft and Zipcar. The implementation of 5G will offer a vast array of other possibilities within the automotive sector.
Mobility Services
The increasing availability of open-source information is helping to increase interoperability between transport options into a mobility solution. In the medium term, this will reduce the need for company vehicles.
Digitisation of User Experience
Increasing use of digitisation of the company car experience is helping to reduce the cost to serve and maintain or enhance profitability.
Connected Car
Connected car technologies offer increased opportunities within the big data and artificial intelligence space. Many of these services are in their infancy but are growing rapidly.
Worldwide Harmonised Light Vehicle Test Procedure (WLTP)
WLTP legislation impacts short term demand for vehicles due to the phased introduction and impact on personal tax.
EU Emissions Legislation
European legislation regarding new vehicle emissions forces manufacturers to invest in using new technologies to reduce emissions. Manufacturers face potentially huge fines for missing emissions targets.
Air Quality
Clean air zone (CAZ) legislation and legal challenges are enforcing action in many cities. Despite the delay in some CAZ implementations because of Covid-19, there is still a legal requirement for them to be put in place.
Covid-19
Covid-19 had a significant impact on traffic in local environments lowering emissions and improving air quality. There has been pressure from employees to keep some of these gains as we move forward, especially in relation to home or hybrid working practices. However, there has also been push back from industry
Global Warming
There is significant pressure on government to reduce carbon emissions of which road transport provides a considerable proportion. The UK originally committed to stopping the sale of petrol and diesel vehicles by the end of 2030 but subsequently has extended this deadline to 2035.
Clean Air Zones
Local air pollution forcing many local councils to think about introducing clean air zones to avoid significant penalties. To see the impact and breadth of the changes, follow this link: https://www.bvrla.co.uk/resource/CAZmap.html
Urban Environments
The pedestrianisation of inner cities is leading to alternative transport modes such as Santander Bikes in London and the rise of the e-scooter offering from Lime.
Fleet Industry | Porter’s Five Competitive Forces Analysis
The competitive forces analysis examines those factors which influence competition within a particular industry.
Our analysis covers the full-service fleet management industry.
Competition (Med/High)
Fleet management services are commoditised, and hard to differentiate the overall proposition. In addition, many providers utilising the same IT platforms as in-house systems can be cost-prohibitive for all but the largest suppliers.
Many providers use very similar second-tier supply chains for in life services and use the same OEM and dealer networks. In addition, manufacturer discounts are “owned” by the end customer rather than the lessor, so the sale of suppliers is less of a competitive issue.
Pricing can vary according to different assumptions relating to forecasting residual values and maintenance requirements.
There is less competitive rivalry on specialist assets or more complex commercial vehicle requirements as many providers will cap their services at the level of light goods.
Bargaining power of buyers (High)
Wide range of different suppliers and brokers offering vehicle finance and associated services.
Headline pricing is relatively transparent.
Relatively low switching costs, although these can be more significant where services are fully outsourced.
Limited competition for global suppliers
Bargaining power of suppliers (Low/Med)
Many suppliers offering similar services gives a limited chance for differentiation.
Digital enablement offering some opportunities to reduce customer services costs and improve service offerings.
Niche areas such as specialist vehicles or new services linked to mobility as a service (MaaS) offerings can offer advantages where customer requirements exist.
Threat of new entrants (Low/Med)
High capital requirements mean banks, vehicle manufacturers, and private equity are the main players.
Government legislation and FCA regulations can make compliance an onerous and costly activity.
Competitive market for skilled employees
High cost of obtaining new customers in a cost effective manner
Threat of substitute products & services (Low/Med)
Fleet management services are commoditised, and hard to differentiate the overall proposition. In addition, many providers utilising the same IT platforms as in-house systems can be cost-prohibitive for all but the largest suppliers.
Many providers use very similar second-tier supply chains for in life services and use the same OEM and dealer networks. In addition, manufacturer discounts are “owned” by the end customer rather than the lessor, so the sale of suppliers is less of a competitive issue.
Pricing can vary according to different assumptions relating to forecasting residual values and maintenance requirements.
There is less competitive rivalry on specialist assets or more complex commercial vehicle requirements as many providers will cap their services at the level of light goods.
Fleet Cost Savings | 15 Tips To Make Efficiencies In Your Vehicle Fleet Operations
Fleet cost savings are significant for most organisations as they can be one of the highest costs to hit the profit and loss account.
Managing fleet costs is not always easy, as they tend to be in different accounts. But, typically, the cost for each vehicle on fleet ranges from £5,000 to £10,000 per annum.
The starting point for fleet cost reduction is the existing cost. It is crucial to establish a cost baseline incorporating all costs associated with the running of the fleet. Then, measure any savings from this baseline to ensure any changes to fleet strategy have the desired effect. Often changes may save cost in one area only to increase expenditure in other areas.
When looking to reduce costs, it is essential to look at the different stages of a vehicle lifecycle: acquisition, in-life and disposal.
Vehicle lifecycle: Acquisition
The selection of the vehicle forms an element of fleet cost reduction. There are several key considerations for the acquisition stage, which are detailed below:
Method 1 | Vehicle Funding
A wide variety of options exist for the funding of a fleet vehicle. Therefore, it is vital to assess which option is financially most efficient. Options include outright purchase, contract hire, contract purchase, finance lease, employee car ownership and salary sacrifice. The best choice often depends on the individual characteristics of both the business and fleet concerned.
For organisations that are happy to risk the vehicle’s residual value, then outright purchase or finance lease could be the best option. However, if you wish to pass the risk to a lessor, contract hire is the most suitable funding method.
Method 2 | Manufacturer and Dealer Discounts
Discounts for vehicle purchases are commonplace. They can be obtainable from both manufacturer and supplying dealer. Discounts reduce the price paid for the vehicle or are taken as a rebate.
Discounts usually scale up according to volume (or volume commitments). However, special offers become available at certain times of the year, especially on stock vehicles or where model changes are due.
Method 3 | Vehicle Policy
There are several areas concerning vehicle policy that can yield cost savings. For example, vehicle replacement cycles, fleet vehicle cost of ownership, levels of allowances, fuel reimbursement methods, vehicles offered, and the value of any cash allowance can all impact the cost of providing the fleet.
It is best to restrict choice for individuals who require vehicles for their business role. For those who receive vehicles as part of a benefits package, a broader selection of cars should be made available to employees. However, limit options to certain manufacturers to increase the potential discounts.
Method 4 | Fleet Management Company
Many organisations choose to lease vehicles predominantly through bank or manufacturer owned leasing companies. However, businesses can choose to put some or all of their business through a particular supplier. Where sole supply arrangements are in place, the firm should secure some contractual concessions from the leasing company such as pooled mileage, damage waivers or signing on bonus.
Under a multi-supply arrangement, these contractual concessions are more challenging to achieve. However, vehicle leases will likely be cheaper due to the ability to benchmark the market price for most purchases. Administratively, this may be more difficult to manage multiple suppliers, but the cost difference can be significant.
Whichever solution you select, it is crucial to managing the suppliers to minimise potential cost leakage.
Method 5 | Cash Allowances
Some organisations offer cash allowances as an alternative to a company car. In addition, some businesses provide cash for job needs and perk driver populations, although it is more popular for perk grades.
Set cash allowances at a cost-neutral position to that of the company car, so it doesn’t cost the company more should the employee opt for cash or the company car.
Method 6 | Pool Vehicles
Some businesses would benefit from running a pool vehicle fleet, especially with large offices with large casual driver populations.
Pool vehicles rely on high levels of utilisation to make them cost-effective. Use pool vehicles to replace grey fleet mileage, helping reduce risk and cost.
This has been very effective for some council fleets who operate within confined geographies and have locations with ample parking.
Vehicle lifecycle: In life
When you acquire a vehicle, it moves into its in-life phase. Here, you’ll need to think about the cost of fleet maintenance. It is possible to make fleet cost savings through several areas and initiatives highlighted below.
Method 7 | Fuel
After lease costs, fuel represents the highest cost to the running of a vehicle fleet. Therefore, it is essential to procure fuel well in addition to managing its use. Businesses have the options of fuel cards, bunkered sites, corporate cards and pay & reclaim.
Monitoring a drivers fuel economy is vital. There should be a follow up if there are discrepancies. Managing fuel is central to effective business mileage management. Without this, it is challenging to know what is happening within the fleet.
Speed limiters are now commonplace on light commercial vehicles and can lead to fuel and maintenance savings.
Free private fuel can be a costly benefit to provide and, in many cases, is not beneficial for the driver. Increasingly organisations are moving away from the provision of free fuel due to the cost to the organisation.
Method 8 | Vehicle Maintenance
Maintaining vehicles correctly is important to minimise downtime.
Closely monitor and adhere to service intervals to make sure vehicles remain in warranty and out of contract charges are not levied by the fleet management company. Some organisations, particularly if running “mission critical” assets, will adopt a more proactive maintenance schedule or out of hours servicing to ensure assets are available for the maximum time possible.
Drivers should undertake regular vehicle checks for items such as fluids and lights. In addition, ensure you check any remedial mechanical repair work against the manufacturer’s warranty, avoiding unnecessary costs.
Method 9 | Vehicle Policy and Procedures
Organisations should enforce vehicle policy and procedure at all times.
Where employees leave, fleet managers should reallocate vehicles in the first instance instead of terminating a lease early.
Many organisations charge drivers for misuse of company vehicles or damage charges incurred when handing the vehicle back to the fleet management company.
Method 10 | Fleet Risk Management
Effective risk management can help bring down costs by reducing maintenance, damage, insurance and accident costs.
Risk assess drivers and take remedial interventions where appropriate. This may involve some form of training or the removal of a vehicle altogether.
Method 11 | Daily Hire and Minilease
Daily hire provides a helpful service for short term transport needs. However, the daily rental can also be a considerable cost to a business.
Periodically review daily rental costs to ensure it offers the best value for money solution. In addition, where pool vehicles are in operation, cross-check daily hire records to help avoid any unnecessary hires.
Method 12 | The Grey Fleet
Grey fleet is both a risk and a cost to a business. Monitoring and understanding the grey fleet is critical to identifying and managing associated risks.
An alternative to using grey fleet is using pool vehicles or hired vehicles, particularly for longer journeys.
Vehicle lifecycle: Vehicle disposal
Once the vehicle has come to the end of its useful economic life, it will need to be disposed of. We have highlighted some considerations regarding the disposal process below:
Method 13 | Disposal Channel
The lessor is responsible for disposing of vehicles under a contract hire agreement.
Fleets who own their vehicles will need to select an appropriate route for disposal. This will range from selling via a local dealer, auction, online sale or sale direct to an employee.
The best sale channel will depend on the type, age and mileage of the vehicle. Employee sales generally offer the best sale price as well as reducing disposal fees.
Method 14 | Vehicle Damage
Assess and if necessary, repair any vehicle damage before returning vehicles to the lease company. Leasing companies will charge for vehicles with damage (as assessed under BVRLA standards) and this is usually more than the cost of remedial action. It is worthwhile using mobile repair services to address any minor damage before the vehicle is returned to save on any unwanted invoices.
For owned vehicles the residual value of a vehicle will suffer if it is sold in a damaged condition.
Method 15 | End of Contract Mileage
Leased vehicles come with a contracted mileage as part of the contract. Exceeding this mileage will incur an excess mileage charge at the point of return.
Excess mileage should in the first instance be offset against a mileage pool where it exists. Failing that vehicles can have their contracts re-written in-life but fleets need to be aware that leasing companies will seek to add more profit into a contract where this occurs.
Alternatively, re-allocate vehicles to different drivers based on their anticipated mileage, reducing the impact of excess mileage.
Summary | Fleet Cost Savings
There are several ways to achieve fleet cost savings. First, fleets should establish the cost baseline and look to make adjustments against this baseline.
Evaluating cost-saving initiatives against the baseline will avoid unwanted consequences. Generally, change will impact numerous areas.
Looking for more information on fleet management?
EVP Solutions has years of experience offering expert support for companies looking to outsource their fleet management and finance solutions.
Get in touch with a member of our team today on 0161 973 8579 or send a short introductory email to hello@evpsolutions.co.uk to find out more. Our fleet glossary and blog section offers more useful information and free resources on the world of fleet.