Procurement
When fleet is probably your 2nd or 3rd biggest expense there’s lots of procurement going on and best of all fleet expenses are negotiable (excepting petrol) provided you plan and focus your buying - “don’t spread the jam so thin that no one can taste it”
Let’s start with vehicles. The benefit starts when your vehicle selection policy has a reduced range. Yearly planning enables you to go to a dealer group saying this is my plan for the year, what can we do? The group approach will overcome your problem of supporting a national fleet as dealer groups generally have a national structure of dealerships. They will see it as a single transaction and deliver to your national offices. Local fleets require focussed support of local dealers.
Initially, fleet discount is the starting point but incentives can be discussed where achieving certain values generates further benefits which could be in the form of discounts or admin fees reduction.
On the subject of vehicle procurement, the fleet management companies offer a fee based procurement service. Their volumes are substantial and likely to exceed your own. Check it out there may be benefit.
Procurement success is about relationships, be careful not to buy in one area and expect the local dealer, not the one you bought from, to give you best service.
Having focussed your vehicle purchases the next thing is servicing labour and parts. The delivering dealer will give you support but what if you have a fleet out of warranty and serviced in-house where you buy in parts.
Again focussed procurement pays dividends but you also have to create a competitive environment. Keeping your procurement to 2 suppliers has value. Let them know this is your policy, apply it and measure your spend. Share expenditure reasonably otherwise one may lose interest and not participate, and then you lose. Term contracts for the supply of specific parts are of benefit.
Reducing maintenance expenditure is not restricted to buying best it’s also about correct diagnosis of repair, eliminating unnecessary work and the application of warranties and guarantees. To fully manage these items you need a quality Fleet Management Information System (FMIS) or an outsourced managed maintenance service where these issues are routinely addressed.
Accident repair costs are another area of cost reduction. Assuming the cost of crash parts influenced your initial vehicle selection, the choice of repairer offers further benefits. Insurers will remove some of the opportunity as they direct repairs and appoint their own assessors. An outsourced independent accident management service may overcome this as their focus is to reduce your costs. Reduce turnaround times as this too is a substantial saving.
Fuel is your largest operating expense. Diesel is negotiable but not petrol. Again focussed procurement is the only method of saving money. Certain of the fuel companies have preferential rates for volume procurement. They are linked to a Fuel card and / or bank card which may have deposit, transaction fees or interest payments linked. These are additional costs which may offset price benefits but they do give the advantage of transaction downloads which facilitate best fuel analysis and management practices.
Independent fuel suppliers provide fuel at preferential rates and this service can be extended to home based refuelling. Fuel procurement requires a most detailed cost benefit analysis.
Another area of benefit is on license fees. Each province has different fees. There may be benefit if you have an office based in the cheaper province. The traffic authorities do not like this but companies with highly mobile fleet may enjoy this benefit.
There are many areas within fleet management where best and focussed procurement practices will provide significant cost benefits. With a good understanding of your needs and a short list of suppliers the final challenge is that of supplier selection.
Have a question?
Contact Nigel Webb - Latitude Fleet Services - nigelw@latitudefleet.co.za