If a business relies on a fleet of company vehicles to operate — or if it’s considering acquiring one — it’s imperative that owners and managers put carefully researched policies in place for managing fleet vehicles legally, efficiently, and profitably.
Whether a company operates large delivery trucks or small work vans and whether its fleet is five vehicles or a hundred, poor fleet management can cost the business both money and lost productivity.
In this article, we’ll provide a rundown of all of the key considerations involved in fleet management for business owners and prospective fleet admin.
Table of Contents
- Defining Fleet Management
- Choosing The Right Fleet For Your Business
- Important Factors In Managing Fleet Vehicles
- Managing Fleet Vehicles Efficiently
- Managing Fleet Vehicles: Fuel Consumption
Defining Fleet Management
To understand what fleet management is, we first need to understand what it is not. A fleet manager is not simply someone who tells drivers of fleet vehicles where to go and when. In fact, managing fleet vehicles may not include dispatching and scheduling at all.
Rather, the role of the fleet manager is administering fleet vehicles as company assets so that their business gets the greatest possible value out of its fleet operations.
In practical terms, this includes everything from overseeing driver hiring to controlling fuel and maintenance expenses so that the company fleet operates safely, dependably, and profitably.
Choosing The Right Fleet
As with any other business task, drivers need to have the right tool for the job. Effective fleet management begins with figuring out the right vehicle, the right number of vehicles, and the right vehicle acquisition strategy.
Type Of Vehicle
A company fleet includes any motorized, rolling, or moving vehicles the company uses to conduct business. However, odds are the company fleet probably consists of road-going vehicles, like work vans.
Within most fleet vehicle categories, there will be several different competing models from different companies. Choosing the right one requires careful research, and the most popular option might not necessarily be the best fit for a given business.
Are the interior dimensions big enough to fit typical cargo? What kind of gas mileage does the vehicle get? What are the projected maintenance costs? What about safety features and crash test ratings?
Managers should do their best to find out the answers to these questions before vehicle acquisition. That will ensure that the company has vehicles that meet both practical and budgetary needs.
Fleet Size
Acquiring an efficient company vehicle fleet isn’t just about finding the right vehicle. It’s also about accurately determining how large a fleet is needed.
Having the wrong size vehicle fleet can sometimes result in costly inefficiencies. With too few vehicles, orders can be delayed and work can fall behind schedule, resulting in unhappy customers. On the other hand, vehicles sitting idle are a drag on company finances.
Owners and managers shouldn’t launch a company fleet or expand an existing fleet without thoroughly analyzing their business’s vehicle needs. Businesses should strive for a fleet that’s lean and efficient, not one that just looks impressive in the company parking lot.
Cost Analysis
The cost of running even just one vehicle for business use is more than just the purchase price and any fuel drivers put in.
Before adding even vehicles to a fleet, managers and admin should perform a cost analysis composed of at least two variables: total cost of ownership (TCO) and vehicle cost per mile (VCPM). These numbers will help owners understand the true cost of putting a fleet on the road.
Here’s how to calculate the TCO and the VCPM.
Total Cost Of Ownership
Total cost of ownership is calculated with the following formula:
Total Cost Of Ownership = Fixed Vehicle Costs + Variable Vehicle Costs
Fixed vehicle costs include things like:
- Lease payments
- Insurance
- Permits
Variable vehicle costs include things like:
- Fuel
- Tolls
- Maintenance
- Repairs
Fleet admin can make a list of these costs, estimate the numbers for the potential new vehicle, and add everything together to find the total cost of ownership for a single vehicle.
After that, they can take the TCOs for all vehicles that the business owns and add them together to find the total cost of ownership for the entire fleet.
Fleet managers can also manipulate these numbers by looking at specific periods of time.
They can perform a TCO calculation for a day, week, month, quarter, six months, or a year or longer to analyze the impact the new vehicle will have on their business’s bottom line for both the short and long term.
As fleet managers and other admin perform these calculations, they should be sure that the time periods for all of the fixed and variable costs match (e.g., they should all be monthly costs).
If the time periods get mixed up (e.g., some of the fixed costs are for a year, while others are for six months), it can result in incorrect data that won’t benefit the business at all.
Vehicle Cost Per Mile
Once the total cost of ownership has been calculated, that data can be used to figure out the vehicle cost per mile using the following formula:
Vehicle Cost Per Mile = Total Cost Of Ownership / Total Miles Driven
Fleet vehicles will likely drive more than the yearly average (10,000 miles), so managers will have to estimate based on potential routes, customer locations, and trip frequency.
As an example, let’s say that the monthly TCO for a single vehicle is $1,000 and that that vehicle accrues 2,000 miles during the month in question.
That would result in a vehicle cost per mile of:
Vehicle Cost Per Mile = Total Cost Of Ownership / Total Miles Driven
Vehicle Cost Per Mile = $1000 / 2000
Vehicle Cost Per Mile = $0.50
At first, many of the variables in these calculations will be estimates. But, once vehicles are purchased, fleet managers can use real-world data to recalculate and then take steps to reduce both fixed costs and variable costs as a way to control the vehicle cost per mile.
Owning Versus Leasing
Just like with a personal vehicle, purchasing and leasing fleet vehicles each come with their own advantages.
The benefits of leasing generally include lower initial costs, reduced tax burden, and lower labor costs because maintenance and repairs are handled by the dealer.
On the other hand, buying vehicles can bring the benefits of freedom from lease length or mileage limitations, flexibility in retiring vehicles, pricing leverage, certain tax benefits, and depreciation control.
Deciding whether leasing or purchasing is the better option depends on a company’s specific needs and financial considerations.
Important Factors In Managing Fleet Vehicles
Once owners have picked the right fleet for their business, putting that fleet on the road means also picking the right people to drive each vehicle and making sure they operate safely and legally.
Driver Hiring And Training
Fleet vehicles are important company assets, and managers shouldn’t entrust them to just anyone.
Success starts with good hiring practices. Managers will want to set specific qualification standards based on relevant criteria, like driving record, and then screen candidates carefully. They should also consider asking prospective drivers to pass a road test.
Once quality candidates have been hired, a good training program can make them even better.
Fleet managers should take the time to educate employees on the dangers of distracted, fatigued, and impaired driving, and ensure that all employees know there will be real consequences for company policy violations.
To a large extent, a company’s vehicle fleet is only as good as the employees who sit behind the wheel — driver management is an essential part of fleet management that no business can afford to neglect.
Safety
Robust safety policies protect a company’s employees, assets, and reputation.
A comprehensive fleet safety program includes good driver hiring and training practices, but it also encompasses documented procedures, pre- and post-trip inspections, an accident response plan, and proper vehicle maintenance.
Full-time fleet managers may consider pursuing a fleet safety certification. Some of the more popular training programs include those offered by the National Association of Fleet Administrators (NAFA), National Traffic Safety Institute (NTSI), and the federal government’s Occupational Safety and Health Administration (OSHA).
Insurance
Like any other vehicle on the road, company fleet vehicles must be insured. The cost of ensuring a business fleet depends on factors like the type of vehicles, their age and condition, and their intended use.
To save the company money on fleet insurance, fleet managers and admins should make sure to shop around and consider using dash cams and telematics to protect the company in accidents and monitor the condition of the vehicles.
Compliance
Fleet compliance includes everything that a company is required to do to ensure their fleet meets local laws and regulations.
For trucks and vans, this usually means the standards set for commercial vehicles by the federal Department of Transportation (DOT) and the Federal Motor Carrier Safety Administration (FMCSA)
Failure to meet compliance standards can cost a business fines and penalties — and cost even more in lost productivity if vehicles are unexpectedly removed from service to complete the necessary maintenance.
The most fundamental elements of compliance are monitoring drivers’ hours-of-service (HOS) to ensure that they comply with regulations for combatting dangerous driver fatigue and making sure they are filling out driver-vehicle inspection reports before and after every trip.
Managers should also be aware that most states abide by the International Fuel Tax Agreement (IFTA), which requires commercial vehicle drivers to record miles driven, the amount of fuel purchased, and the location where it was purchased.
Managing Fleet Vehicles Efficiently
It’s not enough that fleet vehicles simply get where they’re supposed to go more or less on time. Effective fleet management means optimizing every aspect of fleet operations to save a company money and minimize downtime.
Fleet Management Software
Fleet management software (FMS) is an integral part of managing fleet vehicles efficiently and with as little impact on a business’s bottom line as possible.
Fleet managers should look for a software solution that provides access to:
- Hours of service tracking
- Fuel consumption
- GPS
- Vehicle diagnostics (telematics)
- Route analysis
- Compliance tools
- Pre- and post-trip inspection checklists
- Maintenance schedules
- Safety information
- Integrations
A robust FMS in combination with an open-loop fleet and fuel card can give businesses everything they need to manage fleet vehicles effectively and efficiently.
Route Optimization
Another big part of managing fleet vehicles and keeping costs as low as possible is route optimization — planning or directing vehicles along the shortest, safest, and most direct route so that they arrive safely and on time.
Successful route optimization incorporates factors such as:
- Deadlines
- Driver proximity
- Fuel
- Number of stops
- Traffic
- Approved roads
Businesses can also make use of strategies including:
- Static routing — Useful when destinations, loads, and timetables change very rarely.
- Dynamic routing — Useful for all types of trips and includes adjustments to route and timing based on current conditions up to (and after) the time of departure.
- Real-time dynamic routing — Useful for adding new destinations (based on proximity, task, and completion time) to the planned routes of vehicles that are already in the field.
Effective route management and optimization brings with it a whole host of benefits, including saving businesses time and money and improving both customer satisfaction and employee satisfaction in the process.
Driver Performance
Proper driver performance while on the road is crucial to fleet management. If drivers exhibit risky behaviors and detrimental habits behind the wheel, it can have a negative effect on the condition of their vehicle, not to mention the inherent safety risks.
Fleet managers need to train drivers to accelerate smoothly, brake evenly, coast more, limit idling when possible, maintain a consistent speed, and use caution on slippery surfaces.
Improving driver performance in this way can have a net positive effect on the condition, safety, and useful life of all vehicles in a fleet.
Tracking
Driver tracking allows businesses to analyze fleet operations so that dispatchers, admins, and managers can determine how to make the best use of company vehicles and control costs.
In the old days, tracking might have meant drivers simply checking in by phone at each stop or break. Modern technology allows for much more detailed and convenient tracking through telematics.
By tracking vehicles with telematics, businesses will be able to optimize routes, predict when it’s time for vehicle maintenance or replacement, monitor driving behaviors to stop unsafe habits and wasted time, and simplify compliance reporting.
Maintenance
Fleet maintenance falls into two main categories: preventative maintenance (monitoring vehicle condition and servicing regularly to stop major problems before they can happen) and emergency maintenance (fixing the unexpected problems that inevitably come up).
Obviously, a business would want to do more preventative maintenance since it means less emergency maintenance.
To do this, managers should start by getting familiar with the service intervals recommended by the manufacturer of your specific vehicle.
Then they might structure a preventative maintenance plan based on mileage, time since the last service, and telematic monitoring of each vehicle’s “vital statistics.”
Once they’ve made a plan, the next step is to use maintenance metrics — like vehicle downtime, cost of downtime, and maintenance cost per unit — to see how effective the plan is and adjust accordingly.
Optimizing may mean hiring a dedicated fleet mechanic or changing vehicles.
Fuel Expenses
There’s no better illustration of the adage “You have to spend money to make money” than fleet vehicle fuel costs. Saving money on the fuel a fleet needs to run is therefore a key responsibility in managing fleet vehicles.
One way fleet admin can reduce fuel costs is by using a fuel card. These specialized cards can be used by drivers to fill up vehicles as needed. Besides discounts and rewards, fuel cards can also save money by reducing administrative work such as receipt tracking and reimbursement.
Fuel expenses are a huge issue for fleet-based business and are typically one of the largest outlays the business has to contend with.
Because it’s such a big part of successfully managing fleet vehicles, we’ll talk more about fuel consumption — and how to reduce fuel costs — in the next section.
Managing Fleet Vehicles: Fuel Consumption
There are many ways to reduce fuel consumption in fleet vehicles. Here are some of the most effective.
Maintain Correct Tire Pressure
Maintaining correct tire pressure is an extremely effective way to improve fuel consumption while improving the life of the tire and the life and safety of the vehicle itself.
Businesses should make sure that every vehicle (or every driver) has a pressure gauge and make it mandatory for drivers to check tire pressure before taking the vehicle on the road and every time they stop.
Doing so can prevent tires from deflating and increasing the rolling resistance of the entire system. When that happens, the engine has to work harder (use more fuel) to maintain forward movement.
Ultimately, that means businesses will have to spend more on fuel to keep the vehicle moving between stops.
Reduce Cargo Weight
While managers and drivers can’t control the actual weight of the vehicle itself, they can control the weight the vehicle has to carry.
It doesn’t take long for the weight of a few extra tools, another piece of equipment, and a passenger to add up to the point of reducing a vehicle’s fuel efficiency.
Minimizing this extra weight can lead to dramatic savings in fuel costs over the service life of the vehicle.
Distribute Loads Evenly
The loads that fleet vehicles carry should always be as evenly distributed as possible.
Instead of stacking all the tools and equipment on one side of a work van, for example, and leaving the other side empty, drivers should spread half the tools on the right side and half on the left side.
Similarly, tools, equipment, and supplies should be centered between the axles (from front to back) whenever possible.
If too much weight is concentrated in one area of a vehicle, it causes the engine to use more fuel to get up to and maintain surface road and highway speeds.
Consider Aerodynamic Solutions
Depending on the type and size of vehicles a business uses, adding aerodynamic solutions can help fleet managers control fuel management and improve fuel efficiency.
Many new vehicles already incorporate these solutions, but older vehicles — and vehicles towing trailers — can often experience a significant drop in fuel consumption with even some relatively inexpensive aerodynamic upgrades.
For example, companies may decide to add a wind deflector (a curved cap) on top of the cab of a box truck to help it cut through the air more efficiently.
In many cases, this kind of addition reduces drag and improves fuel economy overall because the vehicle doesn’t have to “fight” against air pushing on the flat front of the box. As a result, the vehicle may use less fuel over the course of the trip.
Pay Attention To Fuel Price Trends
Another strategy that can help businesses control the costs of keeping all feel vehicles fueled is to pay attention to fuel price trends.
Fuel prices tend to be higher on Fridays, Saturdays, and Sundays and lower on Mondays and Tuesdays. Businesses can save money by filling up at the beginning of the week rather than waiting until prices go up at the end of the week.
It may not always be possible for drivers to stick to this schedule, but when managers pay attention to fuel price trends — and encourage their drivers to do the same — they can help reduce the fuel cost load on the business’s bottom line.
Fleet Management Made Easier
The Coast fleet and fuel card can help simplify and optimize the work involved in managing fleet vehicles for businesses of any size.
Fleet managers can centralize fleet gas and maintenance expenses on a fleet fuel card that’s accepted at any service station that accepts Visa. Real-time reporting, activity alerts, and advanced security features allow managers to accurately track costs and protect against fraud.
For more information on how Coast can help businesses control fleet costs and streamline their fleet management programs, visit CoastPay.com today.
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