A strong fleet management system includes essential technologies (i.e., fleet management software, telematics, and fuel card software) and plays a crucial role in keeping your fleet running smoothly and controlling costs.
In this article, we discuss the benefits of effective fleet management and the best practices that help make it all work.
Benefits Of An Effective Fleet Management System
1) Appropriate Fleet Size
An effective fleet management program recognizes that the number of vehicles on the road and the size of those vehicles can have a direct impact on many of the largest expenses that a business will face (e.g., fuel, maintenance, compliance, etc.).
Fielding the appropriate size fleet for a business can help reduce costs pretty much across the board and make it easier for managers to utilize vehicles to their full potential.
2) Reduced Fuel Costs
One of the biggest benefits of effective fleet management is the reduction in fuel costs that can come when owners and operators use fleet management software, telematics, and fuel card software to control the expenses inherent in putting vehicles on the road.
Even if the only tech that a fleet uses is fuel card software, the business will enjoy extensive control over everything fuel-related and will likely see a significant reduction in overall fleet expenses.
3) Increased Productivity
Implementing a fleet management program can help improve efficiency in all aspects of an operation and help the business increase its overall productivity.
In many cases, these increases in productivity are made possible by technologies that allow managers to monitor all aspects of fleet activities quickly and easily, including:
- Fleet management software
- Telematics
- Fuel card software
- GPS
- Vehicle diagnostics and maintenance software
- Driver monitoring systems
- Electronic logging devices (ELDs)
4) Improved Driver Safety
Telematics technology can monitor driver behavior and provide real-time feedback on potentially dangerous vehicle operation, including:
- Speeding
- Heavy acceleration
- Harsh braking
- Fast cornering
- Extreme variable speeds
- Small following distance
With safety as a priority, businesses can work to avoid costly accidents and protect not only their vehicles, but also their drivers and those who share the road with them.
5) Increased Transparency
Transparency is important for businesses of all types and sizes.
An effective fleet management program that includes essential technologies such as fleet management software, telematics, and fuel expense software makes it possible to achieve transparency in three key directions:
- From drivers to management
- From management to drivers
- From business to customers
This type of full transparency can provide managers, employees, and customers with the information they need and help them interact more effectively so the business runs as smoothly as possible.
6) Extended Vehicle Lifespan
Another major cost center for fleet-based businesses is managing vehicle repair and overall lifespan.
Fleet management systems can help businesses use technology to design and implement repair programs based on numbers such as mileage or engine hours rather than a vague notion that it’s time to change the oil.
This proactive approach can help prevent small issues from becoming bigger (and more costly) issues and make it easier for businesses to avoid the catastrophic breakdowns that can cripple a fleet.
7) Real-Time Tracking
Real-time tracking in the form of GPS, telematics, and driver monitoring technology allows managers and dispatchers to see what’s happening to business assets and employees while they’re on the road.
This can be helpful for all manner of cost-cutting and process-improving activities, including:
- Warning of adverse weather conditions
- Avoiding traffic
- Rerouting
- Changing destinations
- Providing accurate ETAs
- Deterring theft
Real-time tracking is especially important in effective fleet management because it can help prevent unnecessary travel and the fuel costs and wear and tear that come with it.
8) Enhanced Route Optimization
Fleet management software can help managers analyze traffic data in real time with an eye toward customizing routes that save time and fuel while also improving on-time delivery and arrival rates.
While the variables that affect route optimization are many, modern technology allows fleet managers and dispatchers to consider important factors like:
- Traffic conditions
- Approved roads (for semis and other large vehicles)
- Fuel requirements
- Deadlines
- Driver proximity
- Number of stops
- And many more
With these factors in mind, a business can create static and dynamic routes that work best while still having the option to monitor things in real time and redirect if necessary.
9) Decreased Administrative Burden
Fleet management systems that include telematics and fuel expense software can automate and streamline many of the administrative tasks that monopolize managers’ time, including:
- Tracking fuel receipts
- Maintaining mileage logs
- Renewing vehicle registration
- Monitoring maintenance schedules
Automating these tasks can free up a big portion of a fleet manager’s time so they can focus on other important issues having to do with the business.
10) Streamlined Maintenance Scheduling
Fleet management software in combination with the data provided by telematics can streamline the maintenance scheduling process so that essential repairs and checkups don’t fall through the cracks.
Preventative maintenance can save businesses both time and money and help ensure that vehicles are available where and when they need to be to keep operations running efficiently.
11) Valuable Data Collection
Fleet management software, telematics, and fuel card software can be set up to collect valuable data about:
- Vehicle location
- Vehicle performance
- Current vehicle condition
- Driver behavior
- Fuel consumption
- And many more
Armed with this data, managers and administrators will be better positioned to identify positive and negative trends, improve efficiency and productivity, and make better decisions for the fleet and the business as a whole.
12) Better Customer Service
When a business can harness the power of essential fleet technology to track vehicles in real time, optimize routes on the go, and provide real transparency into its activities, customer satisfaction may improve in the process.
This overall boost to customer service can benefit the business in many ways.
Fleet Management Best Practices
Track KPIs
Fleet management software can provide a lot of data — so much so that those trying to put it to use can get lost and lose sight of what’s important.
Rather than leaving it all up to chance, owners should first establish key performance indicators (KPIs).
KPIs can help managers and administrators find what they’re looking for in the mass of information that will come rolling in when technologies go online. KPIs can also help managers evaluate whether or not the changes they implement are effective.
For more harnessing the power of data in a fleet-based business, take a few minutes to read this article from the Coast blog: 16 Crucial Fleet Management KPIs Managers Should Track.
Streamline IFTA Reporting
Abiding by the rules and regulations put forth by the International Fuel Tax Association can be complicated and, if done incorrectly, can lead to unexpected expenses that can cut into a business’s bottom line.
Managers should be encouraged to use fuel expense software to streamline IFTA reporting so that it doesn’t fall through the cracks and potentially cost businesses money in fines and penalties.
For more on the ins and outs of IFTA regulations, check out this article from the Coast blog: International Fuel Tax Agreement (IFTA): Fleet Owner’s Guide.
Simplify Fuel Purchases
Fuel purchases are essential for the continued operation of a fleet. But those purchases don’t have to (and shouldn’t) be difficult for drivers to execute.
Yes, managers want to maintain control over expenses and keep accounts secure, but the process of putting fuel in the tank shouldn’t be a major roadblock in a driver’s workflow.
Advanced fleet and fuel cards (and the software that comes with them) can help businesses simplify fuel purchases with easy-to-manage distribution and card activation so drivers don’t have to jump through hoop after hoop and can just focus on filling up and getting back to work.
Calculate Total Cost Of Ownership
One of the best things fleet owners and managers can do to build an effective fleet management system is to calculate total cost of ownership (TCO) and use it as a benchmark to help control business activities.
Total cost of ownership is calculated with the following formula:
Total Cost Of Ownership = Fixed Vehicle Costs + Variable Vehicle Costs
Fixed vehicle costs typically include things like lease payments, insurance, and permits, while variable vehicle costs include things like fuel, tolls, maintenance, and repairs.
Here’s an example calculation:
Timeframe: Three months (one quarter)
Data:
- Fixed Costs = $18,00)
- Variable Costs = $36,000
Total Cost Of Ownership:
Total Cost Of Ownership = Fixed Vehicle Costs + Variable Vehicle Costs
Total Cost Of Ownership = $18,000 + $36,000
Total Cost Of Ownership = $54,000 per quarter
With that number, you can extrapolate down to find the TCO for one month, one week, or even one day by dividing the result into smaller units.
For example:
TCO for one month: $54,000 / 3 months per quarter
TCO for one month = $18,000
TCO for one week = $18,000 / 4 weeks per month
TCO for one week = $4,500
TCO for one day = $4,500 / 7 days per week
TCO for one day = $642.86
With any of those numbers in mind, you can then focus on reducing the TCO by cutting back on what you spend for the variables within the calculation such as fuel, lease payments, insurance premiums, etc.
Calculate Vehicle Cost Per Mile
Vehicle Cost Per Mile (VCPM) is a financial metric that represents the average expense incurred by a fleet for every mile that a vehicle travels.
Like the Total Cost Of Ownership calculation, the real power in your CPM isn’t necessarily the final number you get, but what it reveals about the smaller numbers that make it up.
When you actually see what your business spends every day, week, month, or year on variables such as miles traveled, fuel, tolls, maintenance, lease payments, and insurance premiums (just to name a few), you can start thinking about ways to bring those expenses down.
Here’s the formula for Vehicle Cost Per Mile:
Vehicle Cost Per Mile = Total Cost Of Ownership / Total Miles Driven
Once you have the VCPM for a single vehicle, you figure out the VCPM for all the other vehicles, add them all together, and divide that number by the total number of vehicles you operate to get the average cost per mile for your entire fleet.
Here’s an example calculation for a single vehicle:
Timeframe: 3 months (one quarter)
Total Cost Of Ownership: $54,000
Vehicle Cost Per Mile:
Vehicle Cost Per Mile = Total Cost Of Ownership / Total Miles Driven
Vehicle Cost Per Mile = $54,000 / 60,000
Vehicle Cost Per Mile = $0.90
Per that calculation, it costs your business $0.90 to drive that vehicle one mile.
Now, let’s say that you figured out the vehicle cost per mile for your other five vehicles. Add them all up and divide by the total number of vehicles in your fleet (in this case, six).
Average Cost Per Mile For The Fleet = Sum Of Each Vehicle’s Cost Per Mile / Total Vehicles
Average Cost Per Mile For The Fleet = ($0.90 + $0.98 + $1.04 + $1.09 + $0.94 + $1.19) / 6
Average Cost Per Mile For The Fleet = $6.14 / 6
Average Cost Per Mile For The Fleet = $1.02
Once you have your vehicle cost per mile (for one vehicle) or the average cost per mile for the fleet, you can start thinking about ways to change the variables that go into the calculation to reduce costs and make the final numbers smaller.
Right-Size Your Vehicles And Fleet
There are many different types of vehicles available these days, including subcompact cars, sedans, compact pickup trucks (and vans), full-size pickup trucks (and vans), heavy-duty pickup trucks, and semi-trucks.
Each option comes with its own unique set of variables (e.g., MPG, cargo capacity, maintenance costs, etc.) that can affect your fleet’s bottom line. That’s why it’s important to use a vehicle that’s not too small nor too big for the job at hand.
It’s worth the time to examine whether your fleet needs vans and pickup trucks, or whether it can do the same job with smaller vehicles such as minivans, sedans, or even smaller (more fuel-efficient) vehicles.
For example, if your IT techs are making service calls with little more than two tool bags and a box of cable, can they use a minivan or even a four-door sedan instead of a full-size van or pickup truck (of any size)?
In most cases, the former two options get much better gas mileage, so using them on a regular basis can help reduce fuel expenses, total cost of ownership, and vehicle cost per mile.
Additionally, extra vehicles — those that sit idle for long periods — are a drain on resources because they still cost you money without contributing to income.
You can combat this drain by making sure that all vehicles are being used as much as possible.
To do this, analyze the data from your fleet management systems (your tech stack) for information such as vehicle activity percentage, fuel efficiency, and distance traveled to determine the minimum number of vehicles necessary to keep your operation running smoothly.
If, for example, you find that two of your vehicles only get used once a week for short trips to pick up supplies and parts, could you eliminate those two vehicles from the fleet and use other vehicles to cover the work?
Doing so would reduce fleet costs considerably by eliminating insurance premiums, lease or loan payments, and maintenance expenses and allow you to use those funds for other, more impactful spending.
Focus On Preventative Maintenance
Preventative maintenance is the practice of making small, regular repairs to vehicle systems before those systems develop more complex issues.
As the name suggests, preventative maintenance seeks to prevent the major breakdowns that can sideline a vehicle and cost your fleet hundreds, if not thousands, of dollars that you weren’t expecting to pay.
By focusing on preventative maintenance and addressing small issues before they become catastrophic (and more expensive), you can keep vehicles in that sweet spot where they have a relatively low TCO and a high contribution to your income.
For more information on how this type of maintenance can benefit your fleet, check out this article from the Coast blog: The Complete Preventative Maintenance Checklist.
Investigate Owning Versus Leasing
For some fleets, owning the vehicles outright makes the most sense. For other fleets, leasing is the better option.
Purchasing a vehicle outright comes with a major upfront expense and introduces a number of variables that your business may not be ready to handle, including maintenance, compliance, and government-mandated paperwork.
Leasing a vehicle, on the other hand, requires a lower initial cost and often less administrative overhead and maintenance burden (depending on the terms of your lease).
When investigating your leasing options, be aware that some suppliers have mileage restrictions and may require you to lease more than just one or two vehicles at a time.
Take stock of your budget, your income, your current needs, and your projected business growth before deciding whether buying or leasing is right for you.
Develop A Strategy For Vehicle Use
Developing a strategy for vehicle use based on factors such as size, capability, and purpose can help your business focus its efforts in a more economical manner.
For example, your fleet may choose to restrict its electric fleet to within a certain radius to avoid issues with recharging. For trips greater than that distance, you may allow your full-size vans and work trucks to cover the area. But, if a trip goes beyond a certain mileage, you may restrict coverage to sedans, minivans, or other more fuel-efficient vehicles.
All of this contributes to your fleet’s efforts to conserve fuel and to keep costs as low as possible.
Developing a strategy for vehicle use can give you a baseline set of standards for vehicle activity and help you make decisions when it comes to covering your territory, making customer calls, and doing business without breaking the bank.
Maintain A Standard Operating Procedure For All Vehicles
Encourage drivers to maintain a “standard operating procedure” for all the fleet vehicles they drive while on the job.
Your business will come up with the standards that work best, but some common procedures are:
- Maintain correct tire pressure
- Minimize extra cargo weight
- Distribute cargo evenly
- Wash vehicles twice a week
Standard operating procedures like these are part of a larger fleet management system that helps to reduce fuel consumption in vehicles large and small.
Create A Driver Safety Incentive Program
Promote safety and fuel savings with a driver incentive program that addresses fuel-efficient driving techniques, such as:
- Maintaining a consistent speed when on the highway (via the cruise control)
- Accelerating and braking smoothly
- Coasting more when a stop is imminent
- Cornering appropriately
- Obeying the speed limit
- Avoiding distracted driving
- Wear the seat belt when the vehicle is in motion
- Prevent unnecessary idling
Consider gamifying these techniques and using vehicle telematics data to track who in the fleet is doing the best. Provide prizes and rewards for those who exhibit these techniques most consistently through a certain period of time.
Easier, More Effective Fleet Management With Coast
Managing a fleet involves juggling many moving parts, from fuel expenses to vehicle maintenance and employee spending. That’s why an effective fleet management system is crucial.
Coast is the all-in-one fleet card and expense management solution designed to help businesses save money, improve efficiency, and take control of their operations.
- Control and streamline spending
Coast helps you set spending limits by driver, vehicle, or department, ensuring that every dollar is spent wisely. You can restrict card use to specific categories — like fuel or maintenance — and even block transactions at unauthorized merchants, reducing unnecessary expenses and preventing fraud. - Track and optimize fuel usage
With Coast, you get detailed reporting on fuel consumption and efficiency for every vehicle. Real-time odometer readings and MPG tracking allow you to identify trends, spot inefficiencies, and make data-driven decisions to cut fuel costs. - Automate record-keeping
Say goodbye to manual tracking and paperwork. Coast automatically logs every transaction, linking it to the appropriate vehicle or driver. You can add receipts and memos for a complete and accurate record of fleet-related expenses. - Enhance fleet maintenance
With fuel and maintenance costs automatically flowing into Fleetio, calculating your vehicles’ total cost of ownership is easier than ever. With all your data in one place, you can quickly identify vehicles needing attention or repairs.
To learn more about how Coast can help make fleet management easier, visit CoastPay.com today.
