27 Oct The Interdependencies of Fleet Stakeholders
As companies grow, especially those who grow at pace, they bring in expertise to manage key functions that become increasingly important to their growth: hence the introduction of departments such as car fleet. However, as the business matures and goes through growth cycles they inevitably land on a period of introspection which results in them deciding to “stick to their knitting” and remove all non-core activities. The fleet department is therefore often sacrificed in this manner.
Although fleet remains critical to the functioning of the business, rightly or wrongly, the management of it becomes less so. This results in the removal of the management structure overseeing car fleet, and its responsibility being carved up between functions who take up control of one particular aspect most related to their discipline.
And here is the rub. Being managed across silos means fleet is no longer managed like a category, with focus on best practice and efficiencies, and ends up being managed piece-meal, with little regard for the interdependencies of each element that makes up the supply chain.
Once the fleet management structure is removed it is the usual protagonists of HR, Comp & Bens, Procurement and Finance who end up being involved in managing and operating their company’s car fleet. They may all have specific responsibility for areas which cut across their function, but they may operate without a full appreciation of how their decisions impact on aspects of fleet outside their immediate remit.
Consider this for example. Younger, more agile businesses enter a market dominated by mature players, in, for example, a sector such as Tech. The disruptor businesses are much more aggressive in their recruitment policy and use enhanced car benefit as a key recruitment tactic to entice talent. The more mature and established players realise they must tackle this head on so the HR department, tasked with managing compensation and benefits, decide to extend the car list to even the playing field. By doing this they on-board new manufacturers to widen the choice. So far so good.
However, they may not realise the Procurement department has already negotiated volume discounts with specific manufacturers and these are based on a defined car list and expected orders. Extending the car list and introducing new vehicles will undoubtedly change the expected uptake and compromise the manufacturer discounts, resulting in a more costly fleet.
Conversely, Procurement is normally the department that source and negotiate car fleet contracts, and naturally they try and strike the best financial deal for the company. A typical contract negotiating tactic is, as mentioned above, reducing the number of car manufacturers on the car list so they are able to negotiate more favourable terms with those manufacturers who are listed. These manufacturer discounts can be so significant that they can drastically reduce the overall cost of operating the car fleet.
However, this naturally restricts the car choice on the car list. If this happens without the knowledge of HR, then it could compromise efforts to use an attractive car list when recruiting for key talent.
The introduction of policy decisions without considering the knock-on effect can also cause real issues across other departments. When sourcing car fleet supply arrangements, it is common practice to consider both single-supply and multi-supply. Some departments are often in favour of a single supply agreement so they can build a relationship with one supplier. However, others may encourage a multi-supply arrangement so they can “horse-trade” the leasing cost and “bank” a saving. If Procurement decides that multi-supply is best for the business, they may do so without consulting the Finance department. This may seem perfectly normal practice as the Procurement department is in charge of, well, procurement. However what is often witnessed in large businesses is that Procurements failure to inform Finance of a multi-bid scenario results in Finance often being wrong-footed and unprepared when they are faced with a huge unexpected workload for legal and AP as they on-board and manage multiple new suppliers
Total Fleet Category Management
This is why Total Fleet Category Management (TFCM) is hugely important. Taking a holistic approach to the category, which is typically the second-largest cost in a business after labour, means huge gains in customer satisfaction, savings and overall efficiency.
TFCM encompasses all aspects of the fleet supply and management process. It removes the reactionary and isolated approach to fleet management that is typical of most businesses without a fleet function and replaces it with a programme of activity dedicated to the control of the car fleet. Effective TFCM is underpinned by good quality and robust fleet information, extracted from the supply chain and analysed with a keen eye and expertise. Having access to this information means it is possible to review department decisions and co-ordinate the impact of the interdependencies throughout the business.
TFCM is the approach adopted by Fleetworx with clients across the globe. Instilling TFCM results in a much slicker and cost-effective fleet supply chain, delivering significant savings and efficiencies. To understand more about TFCM download the Fleetworx ebook “Total Fleet Category Management: Take Control of Your Fleet Universe”, or contact Graham Rees for a confidential chat.Back to Blogs Back to Case Studies List