10 Critical Issues Facing the Fleet Management Industry

There is a more current version of this article! Learn about the latest issues facing the fleet management industry here.

Donlen President Tom Callahan also serves as president of the Automotive Fleet & Leasing Association (AFLA). In the February and March issues of Spec Sheet, AFLA’s online newsletter, Tom presented what he believes to be 10 critical issues facing commercial fleet managers. Check out Tom’s insights below, reprinted with permission from AFLA, and give us your feedback. Is there anything not presented here that you feel will be a critical issue for you?

Volatility of Fuel Costs

Many fleet managers believe one of their greatest challenges is planning, budgeting, and mitigating the variable cost of fuel. A combination of addressing driver behavior (over speed, idling, deceleration, acceleration, etc.); selecting more fuel efficient vehicles; adhering to preventive maintenance schedules; and monitoring fuel usage reports can help.

You also need to understand the various fuel saving technologies that are available, including electric vehicles, hybrids, and diesel, as well as the fuel saving devices. Each OEM offers different technologies, and they all offer various direct injection, turbocharging, and transmission options that drive better fuel economies. Although this makes the acquisition process a little more complex, understanding all of this is important so you can equip your vehicles in the proper manner.

It still isn’t cost-effective in most cases to go electric; the sales of these vehicles have not met their OEMs’ expectations. Chevrolet Volt and Nissan Leaf sales have picked up as a result of reduced pricing, but I believe real opportunity for fleet managers exists to educate drivers that a four cylinder engine can be as effective and efficient as a six cylinder. Some fleets are also seriously looking at downsizing to smaller classes of vehicles.

Finally, I don’t see President Obama’s climate control initiative going anywhere for quite a while. Congress has other priorities to deal with, such as long term, sustainable deficit reduction – which will require entitlement reform and a dose of courage. We’ll keep you posted on this one.

Impact of Recalls

It is important to understand the implications of recalls. OEMs are spending more time making sure everything is right before they launch a vehicle. This has created some delays in order-to-delivery times.

Regulatory Compliance

Enforcement of the regulations already on the books is increasing, and you can count on even more regulation. That’s going to create more complexity, and potentially more cost, but the biggest issue is a lack of awareness of what fleets have to do to achieve compliance. One example is the Compliance Safety Accountability (CSA) program launched by the Department of Transportation’s Federal Motor Carrier Safety Administration.

The AFLA role is to educate in this regard; there are a lot of compliance issues that fleet managers need to understand, especially with trucks.

Growing Adoption of Telematics

Overall, the momentum of telematics is building. There are a lot of opportunities for sales, service, and delivery fleets for better route optimization and driver productivity. Some companies are reticent to micro-manage their top sales people, but that’s gradually changing.

Rising Fleet Transaction Costs – Acquisition and Resale

OEMs are adding more content to vehicles and making money, even on smaller cars. But all that content (fuel saving technologies, electronics, etc.) is increasing acquisition costs. Discipline is required to ensure selectors contain the lowest cost per mile vehicles that can do the job.

In terms of resale, we’ve had an excellent market during the past couple years, caused in part by low supply of off-lease vehicles. There’s still pent-up demand for used vehicles, but it’s not as good as it was. The peak is over. The market’s not going to save you, you’re going to have to carefully scrutinize each of the remarketing channels utilized to make sure sales proceeds are maximized – whether auctions, direct to drivers, or employees. It’s time to go back to basic blocking and tackling.

Corporate Average Fuel Economy (CAFE)

With CAFE standards now set through Model Year 2025, fleet managers need to understand the long-term impact to the bottom line. Increased fuel economy technology is going to add cost to vehicles and fleet managers will need to implement cost-reduction solutions across all areas of the fleet to offset the additional acquisition expense. Long-term planning should include analysis of fleet utilization as OEMs produce more electric, hybrid, and alt-fuel vehicles to meet government mandates.

OEM Globalization

One of the areas we all need to understand is the global fleet market and how different regulations will affect the tasks we perform every day when managing a fleet. Fleet managers will need to be well-versed in globalization, including working with OEMs to acquire vehicles and understanding the culture and best practices within each region.

Safety and Distracted Driving

Driver safety will be a huge focus for fleet managers as the mandate to reduce cost and improve productivity continues. In addition to the human safety factor, there’s insurance, maintenance, and loss of productivity with downtime of both drivers and vehicles – not to mention the administrative cost to process accident-related information. And the cost of violations will become significant as more states pass distracted driving laws.

Role of the Fleet Manager

Gone are the days of having resources dedicated solely to managing the fleet. Fleet managers are tasked with multiple functions and that trend will continue. Traditional reporting structures are shifting; a greater percentage of fleet managers now report to sourcing or procurement as cost reduction continues to be the number one mandated corporate initiative.

IASB/FASB Accounting Rules

Although the convergence of U.S. and international accounting standards has been delayed until at least 2016, both lessors and companies will need to understand the implications of the change. Lessors will need to provide the software and consultation to companies on how to do this, and companies will need to address adding their vehicles to the balance sheet. For now, the good news is that it doesn’t seem to be as onerous as we first thought – the further it gets pushed out, the more benign the change seems to be.

We look forward to your feedback on these issues.

AFLA President Tom Callahan provides insight into the role of the fleet manager, the trajectory of the corporate fleet industry, and the value AFLA offers to keep ahead of the curve. Watch the video here: http://vimeo.com/49971393

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Driver’s Corner

Help to do your part to conserve our water. If you have a choice, select a car wash in your area that recycles water on site. If you decide to wash it yourself, check out these tips from the Arizona Department of Water Resources.

And Finally…

And finally, every year on March 22 we honor the earth’s lifeblood with World Water Day. We all need to conserve this precious resource. The automotive industry is setting and meeting goals: GM’s goal is to reduce water intensity by 15% by 2020 at their global facilities; Ford’s strategy includes a water-per vehicle reduction goal of 30% from 2009-2015; and Toyota reports they achieved their 2012 target water reduction goals. You can do your part as well: turn off the water while brushing your teeth and save up to 25 gallons a month; fix the leaky faucet or running toilet and save up to 300 gallons per month; use a commercial car wash that recycles the water; wash the dog on the lawn and when refreshing the water bowl, use the “old water” to water houseplants. Small things can add up. Added benefit? Saving and conserving water at home also helps to save money on your water bill. Everyone wins.

Have a nice weekend. Safe travels.

Originally appeared in FridayFleet on March 22, 2013

About Donlen
A wholly owned subsidiary of The Hertz Corporation (NYSE:HTZ), Donlen (www.donlen.com), with headquarters in Northbrook, IL, is the fleet industry’s most comprehensive and integrated provider of financing and asset management solutions. Since 1965, Donlen has offered its clients highly personalized and responsive customer service, and their workplace excellence has been recognized as one of Crain’s Chicago Business “List of 20 Best Places to Work in Chicago” each year from 2009-2011, a Leader on “The Global Outsourcing 100®” list by the International Association of Outsourcing Professionals (IAOP) for seven of the last eight years, and a National Association for Business Resources “101 Best and Brightest Places to Work For in Chicago” each year from 2007-2012. Donlen’s innovation has been awarded with the Computerworld “2012 Honors Laureate for Economic Opportunity,” the “2012 InformationWeek 500” list for innovative technology; the Stevie® “2012 Gold Award for Business Intelligence Solution,” the Silver Award for “2012 Front Line Customer Service Team of the Year,” and the “2011 Corporate Environmental Responsibility Program of the Year.”