10 Fleet Management Myths
Some are serious, some are fun, but there are a number of myths about fleet management (and fleet managers) that can skew both management’s, as well as drivers’, view of the job and the person.
Some come out in e-mails, some in conversation, some at meetings; whatever the source, there are myths about fleet management and fleet managers that make the professionals who do the job laugh – or cry.
The main goal of this course is to provide the knowledge and the skills to manage any kind of vehicle fleet through all its activities and key aspects. The course is aimed to executives, middle managers, fleet managers and any professional related to fleet management.
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1. Fleet management is a part-time job, at best.
Not sure where this myth came from, but the notion that fleet management is not a difficult, challenging, full-time job is laughable (and not in a funny sense). For one, fleet managers’ deal with more employees, in more situations, often after-hours and on weekends, than just about any other corporate function (save, perhaps, benefits). Much of the day involves dealing with crises and putting out fires (“My registration expired! I ordered my new car; where is it? Can you help me sell my wife’s car? But I had it towed to the dealer down the block!”).
Fleet managers, when time permits, do actually make management decisions, such as which vehicles to use, how they should be equipped, what to do about a driver who just reported his or her third accident in a year, fixed and variable cost tracking, replacement criteria analysis, and much, much more. Part-time job? Not if it’s done right.
2. Vehicles should be amortized on a 50-month schedule or 2 percent per month.
It’s a nice round number, 2 percent per month, and is used more than any other amortization schedule, not only in practice, but in articles, commentary, and proposals. It can indeed be a useful rate for a “typical” fleet car, driving “typical” fleet mileage, and replaced under a “typical” replacement policy. But the spirit of the open-end TRAC lease is that vehicles should be amortized at a rate that will reduce the capitalized cost to reflect the market value at the anticipated point of replacement. That value/date point, in any fleet of any size, happens at widely diverse points; there is no “typical” fleet vehicle.
Vehicles in an inner city don’t accumulate nearly as many miles as those in rural areas and remain in service longer, requiring longer amortization rates. Throwing a 50-month schedule at all vehicles can result in wildly fluctuating cash flows, while carefully matching usage and amortization rates better reflect true vehicle costs.
3. Chargeability = fault when assessing accidents.
Most fleets have some means to determine when an accident is chargeable to the driver for purposes of enforcing policy. Whether it’s a decision the fleet manager makes or the result of committee review, fleet policy takes chargeability and applies consequences. Too many fleets, however, use the driver’s fault as the determining factor.
Fleet drivers cannot merely avoid “causing” an accident; they have a responsibility to avoid crashes, even if not at fault.
Defensive driving techniques require a driver to do everything possible to avoid an accident, even if another party is at fault. This approach includes practices such as not proceeding from a traffic control (signal or stop sign) until the intersection is clear or not insisting on the right of way when doing so can cause an accident. Drivers given a company asset worth $20,000 or more should be held to a higher standard than other drivers on the road.
4. Never recondition vehicles before selling them.
Not exactly a myth, but “never” is too strong a word. It is likely actual repair costs, whether mechanical or body/interior, will not be recovered in additional resale proceeds. Some factors should be considered before selling.
For instance, some buyers will discount the full price of a windshield in the presence of a crack or other break that can be repaired safely for $50 or so. Minor scratches and dings can be repaired for less than they may be discounted in a buyer’s bid. Certainly every vehicle sold should be cleaned and washed thoroughly before presented for sale. For more extensive physical damage or mechanical repairs, a simple calculation can provide the answer.
Finally, sometimes it is better to perform minor reconditioning if it means the vehicle will sell more quickly; money has time value. Maybe “think hard before reconditioning” is a better rule of thumb than “never.”
5. Drivers simply don’t care about costs; after all, it isn’t their money.
Another blanket statement that isn’t at all true. Good employees realize the tools and resources the company provides, whether a laptop, cell phone, copier in the office, or company vehicle, are critical to their job performance, and abusing or neglecting them can have consequences.
Good employees tend to stick around, and bad ones leave (or are told to leave). A vehicle’s condition and a driver’s adherence to fleet’s maintenance schedule often reflect an employee’s general job performance. Yes, there are situations and circumstances in which drivers may not always “do the right thing.” For example, when a driver needs gas, he or she likely won’t survey the area looking for the lowest pump price, but pull off the road at the next available station.
However, don’t assume drivers simply don’t care at all; as with any other expense, your company tracks vehicle expense as well and holds drivers accountable when money is spent unnecessarily.
6. Replacement can’t be extended policy without suffering additional expense.
In difficult economic times, companies commonly require the fleet manager extend replacement cycles or even prohibit vehicle replacements during the year. The caveats against this move generally surround an increased risk of major component failure, as well as a decline in performance.
While issues require careful analysis, replacement policy can, and should, be part of an overall cost reduction review. The ability to extend replacement begins with a detailed and rigorously enforced preventive maintenance program.
If such a program is in place, adding an additional year’s worth of mileage before replacement won’t necessarily result in transaxles falling to pieces or engines seizing up, and the additional use should offset the additional mileage.
Finally, well-maintained vehicles with higher mileage should enjoy lower depreciation costs in overall lifecycle cost analyses. As with other myths, however, the “never” and “can’t” are more at issue. Careful cost tracking should be done to make certain that the “myth” doesn’t become reality.
7. Fleet managers are ‘car buffs’ whose avocation is their vocation.
A long-time fleet manager tells the story of attending a company-wide function at which he would meet a number of drivers and managers he dealt with on the phone. After being introduced to a particular driver with whom he’d become friendly over time, he was amused at the reaction.
“You really don’t look like I expected you would,” the driver said. “To be honest, I pictured you as a mechanic-type guy, you know?”
The fleet manager certainly did know; since the profession first came about, fleet managers have been viewed as “grease monkeys” – “car people” who, when they go home, are happy to lift the hood of their classic car and tinker with the rebuilt engine.
What is generally forgotten is fleet management isn’t just about cars; it’s about asset management, expense control, accounting and finance, law, and human resources. The job requires a skillset and experience level far broader than knowing how to replace a water pump on the family minivan.
This misperception also goes beyond the mechanical. What fleet manager hasn’t been asked, “Should I buy this model, or that one?” Or, “We need to sell my daughter’s car; what’s it worth?”
Fleet managers track new- and used-vehicle markets. However, the advice game is one that should be played very carefully. While certainly some fleet managers are indeed car buffs, many more are interested in other things when they leave the office.
8. Strategic sourcing leaves the fleet manager out of the decision-making process.
This is a more recent myth, resulting from the current phenomenon of sourcing (as well as purchasing/procurement) becoming involved in the RFP process.
What sourcing professionals will tell you, however, is they cannot do their jobs without a subject expert in the process. In this case, while fleet spend is a tempting target for leveraging, a true sourcing professional won’t even begin the process until he or she has discussed the project with the fleet manager. They need to know the consequences when fleet spend is combined with other purchasing or travel and entertainment spend, usually in an existing corporate card program.
Obviously, the consequences are serious and negative, as data required to properly manage fleet expense are lost in a purchasing environment. This consideration becomes key in the decision to go forward. The mere existence of sourcing in the fleet process does not, and should not, mean the needs of world class fleet management are ignored.
9. Fleet management has changed dramatically over the years, and fleet managers today have different, more complex duties.
This myth has been the subject of much discussion and commentary over the years. The simplest way to answer this myth is to review overall responsibilities today versus 20-30 years ago.
A fleet manager must determine what vehicles best fit the mission, as well as handle vehicle acquisition, maintenance, repair, replacements, and safety. He or she must ensure drivers drive safely, in addition to developing, implementing, updating, and enforcing fleet policy.
This is no different than the job description in 1960, 1970, or 2000. The basic responsibilities are exactly the same. The tools used today, of course, wouldn’t be recognized by a fleet manager in 1980; they are far more sophisticated and technologically advanced.
However, saying these advances “change” the role of a fleet manager is like saying the role of a center fielder in soccer has “changed” because shoes used today are better than when Romario played. Or that the role of investment advisors is somehow different today because they no longer have to watch the market’s ticker tape.
The job has not changed at all; what has changed are the tools and resources available today, which, when all is said and done, simply make fleet managers more productive.
10. Fleet management is a dying profession, as technology and outsourcing take the fleet manager’s place.
It is true enough more companies outsource more fleet functions than ever before. But the fact is, no one outside the company is a better steward of the resources required to run a fleet than an employee – the fleet manager. More companies that experimented with outsourcing the entire function found this reality to be true and returned to some form of in-house fleet management.
In the public sector, fleet management has become far more visible as cities, counties, and states seek credentialed professionals for the job of watching over taxpayers’ money. Much as it was written back in the ’80s about information technology (IT) – that soon, a companies’ technology functions all would be outsourced – stories of the ultimate demise of the fleet manager are greatly exaggerated.
The audit is a key tool to know the overall status and provide the analysis, the assessment, the advice, the suggestions and the actions to take in order to cut costs and increase the efficiency and efficacy of the fleet management. We propose the following fleet management audit.