Controlling The Costs of a Fleet Reduction

21 May Controlling The Costs of a Fleet Reduction

A sad inevitability of the coronavirus crisis may be the reduction in fleet sizes. Indeed, the latest fleet survey on the impact of coronavirus on the fleet and mobility sector suggests that a reduction in fleet is anticipated by 35% of buyers. In isolation this statistic is concerning. But actually, when it is compared with the 69% of suppliers who anticipate a reduction in their customers fleets, it does suggest a pleasing relative positivity from within the community of people making the actual decisions.

However, whatever the eventual number, it is likely that a reduction in fleet size will occur in some, but not all, sectors. Healthcare and pharma operators are likely to avoid a reduction, but they may be the lucky ones.

Reducing a fleet may seem less tasking than building a fleet, but due to the complexity of fleet supply contracts it will need some careful consideration and planning to ensure it doesn’t attract unnecessary costs.

1. The Power of Knowledge

It is vital to know the dynamics of your fleet. How many vehicles are in which year of their contract? Of those in the later years, how many have high mileage and are potentially incurring high mileage charges. Who are the vehicles allocated to? What are the termination charges for each vehicle?

Well managed fleets will have access to this data from within their own data systems or they will employ a category specialist such as Fleetworx to extract this information from their supply chain and host it in a suitable data repository.

2. Policy Reviews

Understanding the fleet dynamics is vital for then reviewing policy around car allocation. If a company needs to make redundancies the reallocation of vehicles’ will be key in keeping an efficient fleet and reducing associated costs. The objective for any fleet will be to release the older vehicles with more miles and those that are less economical to keep. So, if employees with cars in the first or second year of their contract are being made redundant then these cars should be reallocated to employees with older cars or high mileage cars.

This will require a review of policy to understand whether this can be enforced or whether it is likely to require a consultation process with unions and/or workers councils.

3. What-if scenarios

It will be important to run scenario planning on a fleet reduction as a change in fleet structures may impact the commercial terms with the supply chain. Different combinations of returned vehicles will produce different cost outcomes and these need to be factored into the planning. It is highly likely that a large fleet will have a bonus scheme in place based on purchase targets which will be impacted by a freeze on orders.

4. Negotiating levers

With a likely moratorium on orders, the negotiating position between the fleet operator and the suppliers will change. Having less to bring to the table will make it difficult to negotiate ongoing and new terms and will place the supplier in a strengthened position. The reaction of the supplier to this should be considered for when volumes return to normal and how they respond at this time may dictate supplier choice going forward.

If you are facing a reduction in the size of your company car fleet and would like to speak with a fleet expert about how to minimise associated costs then contact Graham Rees or Tom Osborne on 01926 353 300