The benefits of external fleet management

The decision to outsource is often based on how "core" a service is.
In the case of vehicle fleets it is related to how specialised those vehicles are.

If a business is totally dependent on the 24/7 availability of 300 Ford Transits with custom-built racking, a towing device and an on-board 110v power supply, you might want that fleet looked after by somebody in-house. On the other hand, if your salesforce uses Astra and Vectra diesels, a fleet management company could easily look after the tyres and servicing and handle squabbles over sat-nav and aircon. But the chances are that your company will mix both, and the decision whether to outsource the management of the company fleet will turn out to be much more complex.

So what are the key factors that should influence your decision?
The only reason to consider replacing a fleet manager with an external provider is to save money. If you have a good, in-house manager, it will take some fast-talking from an external provider to convince you they can do it better.

"An outsourced solution can allow for greater control of all fleet-associated costs," says Veronica Whittingham of fleet management company MNH Platinum. "Typically, a saving of seven per cent on total fleet costs is easily achievable. In some cases, we have shown a saving of nearly 15 per cent."

A report on the fleet industry published by Marketing Business Development (MBD) in June claimed that having a dedicated fleet manager was only cost-effective for fleets with more than 1,000 vehicles. But fleet consultant and author of the book Managing Your Company Cars, Colin Tourick, says the numbers aren't so simple. "Every fleet is different; for example, perk cars require less hands-on management than mission-critical vans. You almost certainly need a proper fleet manager if you have more than 200 essential-user cars and don't outsource your fleet management, or more than 500 essential user cars if you do outsource it."

Even if you outsource the management of a large fleet, an internal pair of hands is needed to take responsibility for it. Often this person is part of the procurement, finance or HR operation and will set strategy, leaving the mundane, time-consuming administration to the supplier.

Some fleet management companies pride themselves on their ability to keep abreast of legislation governing company vehicles. Andrew Cope is managing director of Zenith Vehicle Contracts, one of the fastest-growing leasing companies in the UK. "A company should consider outsourcing if its in-house resource does not have the flexibility to keep up with important cost, legislative or service-related issues," he says.

Whittingham sees companies starting with just one outsourced service before others quickly follow. "It may be that only limited aspects of fleet management are adopted initially—risk management for example. But, once implemented, it is highly likely the remaining components will be incorporated before the first anniversary of the contract," she says.

MBD predicts a shift towards outsourcing for a growing number of companies. Around 80 per cent of the firms talking to MNH Platinum this year are "first-time buyers" indicating the rising interest in external fleet management. And some sectors are moving faster than others.

Zenith's Cope says: "The most conversion to outside specialists is likely to be in the management of car-only fleets. The conversion of commercial fleets and more logistic-based businesses will be slower. You are likely to see, always, some residual management being retained within a company. Where specific, high-value knowledge is required there will continue to be a role for the internal fleet manager."

In short, the message is: keep strategic, core-business decision-making in-house and farm out the burdensome administration and fleet-specific safety aspects. But, monitor your suppliers closely and review them regularly.

Case study: Contract to expand

MPG Contracts, a 150-employee division of £60m-turnover MPG Group, is an expanding building contracting business based in Waltham Cross. In 2006 and with business predicted to double over the next five years, the company decided to bring in DaimlerChrysler Fleet Management (DCFM) to manage its 60-vehicle mixed fleet. "With contract hire, our fleet costs are fixed and the company does not carry the risks of vehicle depreciation and rising service and maintenance charges," says FD Frank Silvester.

DCFM developed a new car policy to meet potential future demand, suggesting a grading system for vehicle allocation. This was also viewed as important for lowering CO2 emissions and increasing all-round fuel efficiency. Additionally, a number of vehicles are used by personnel involved in site management, who travel frequently throughout the UK. A fuel-management solution also provides comprehensive reporting and analysis to manage costs and fuel consumption.

Silvester, like most directors working with outsourced suppliers, recommends agreeing targets with the provider and ensuring the service level agreement has measurable and transparent service criteria. Responsibilities should be clearly allocated and one person, ideally, should be in charge of managing the relationship.

Martyn Moore is editor of Fleet News.