Strategy: Fleet experts outline planning priorities

A fleet should gain a thorough understanding of its current operations and costs, existing business policies and processes before establishing its priorities, says Transport for London (TFL).

This information should include vehicle numbers, types, costs, CO2 emissions and mileage, as well as what the cars or vans are used for.

“This stage ensures you have the data to develop an informed fleet strategy,” says Transport for London (TfL). Once this data is collated, a fleet can then look at establishing its priorities.

Over the next three pages we look at some of the areas a strategy should cover:

Vehicles

The most important factor when considering a new vehicle, whether it is a car or a van, is fitness for purpose: it has got to be able to perform its task in a safe and efficient manner.

As well as areas such as size and carrying capacity, fuel type should be considered as some are more suited to specific uses than others.

TfL has produced a table detailing the strengths and weaknesses of different fuels, using diesel as a benchmark (see table, overleaf). This is also useful when considering sustainability aspects of your strategy (see page overleaf).

New technologies and changing tax rules will also have a bearing on which vehicles are acquired.

“If I was a fleet manager, I would be looking at a five-year strategy with regard to vehicle emissions and technologies,” says Chris Chandler, principal consultant at Lex Autolease.

“CO2 taxation is going to go up 2% for the next three years and then increasing 3% a year after that.

“There are some changes within that in that the 3% supplement for diesel is being removed, but the bottom line is that, although we feel it is unhelpful, if tax is going up on ultra-low emission vehicles (ULEVs), the logic is that the Government is looking at future reductions in CO2.

“My view as a fleet manager would be that the Government is obviously taxing on the basis that there will be a lot of ULEVs on the roads in the future to get to  the 95g/km legislative limit that manufacturers have to achieve in 2020.

“Five years is a short time in fleet and for many it’s only just over one to one-and-a-half replacement cycles.

“My key strategy would be to get a significant chunk of my fleet over to ULEVs because otherwise my corporate national insurance contributions are going to increase, my fuel bill  is going to increase and my employee tax liability is going  to increase.”

Replacement cycles

Vehicles should be replaced in line with a formal replacement policy, says the Wales Audit Office, and this should take into account vehicle  condition, mileage, age, wholelife costs and environmental targets.

Traditionally, typical replacement cycles were three years/60,000 miles, but the recession caused many companies to lengthen the time a vehicle stays on a fleet.

Last year, the average company car replacement cycle among Fleet200 organisations – the UK’s 200 largest  fleets by sector – was 3.9 years, marginally up from 3.8  years in 2013, while van cycles were unchanged at an average 4.6 years.

“Organisations should assess the optimum replacement time for each type of vehicle,” says the Wales Audit Office. “Generally, as vehicles become older their maintenance costs increase and reliability can decrease.”

Chandler feels that new technologies will lead to fleets adopting a flexible approach to replacement cycles.

“We have primarily gone to a four-year replacement cycle and that is largely based on a diesel fleet market,” he says.

“There may be a requirement to review those replacement cycles based on the different technologies that are being utilised.

“You may find, for instance, that you want to keep low-mileage electric vehicles for longer to amortise the higher initial cost of the vehicle over a longer period of time.

“If you are driving mainly in an urban environment, then you may have a small petrol or an electric vehicle and, again, you may want to adjust replacement cycles accordingly.”

The Wales Audit Office warns that failing to plan ahead could result in replacement vehicles not being included in budgets and therefore not being replaced when they reach the end of their life.

Partnerships

The fleet manager, finance department, procurement specialist, HR and users should work together to ensure the right fleet is procured.

Their work should be supported by corporate guidance through documents such as the finance strategy and sustainability strategy. Options to be considered may include lease agreements, hire purchase and outright purchase.

The Wales Audit Office advises fleets to consider outsourcing arrangements as part of the strategy, particularly where internal provision is insufficient to deliver an agreed level of service or if the cost of internal provision is uncompetitive compared with external provision.

Two areas which could be considered are vehicle maintenance and fleet administration.

A number of bluelight fleets work in partnership with each other to provide services, such as in the Chiltern Transport Consortium.

This provides a cross-border shared service which attends to the fleet requirements of Bedfordshire Police, Civil Nuclear Constabulary and Hertfordshire Constabulary, as well as Thames Valley Police.

The consortium manages more than 2,300 vehicles and operates from a main office in Bicester, with workshops in Bicester, Aylesbury, Sulhamstead, Kempston and Welwyn Garden City.

Sustainability

Fleets should consider environmental factors when compiling a strategy, says the Wales Audit Office, particularly as this may reflect the company’s overall carbon reduction aims.

“Sustainable development is about ensuring a better quality of life for everyone now and for generations to come,” it says.

“Transport faces a tough challenge as it depends essentially on oil as a single energy source.

“Vehicles emit significant quantities of CO2 and other pollutants harmful to the environment and human health such as nitrous oxides, non-methane hydrocarbons and particulate matter.

“Fuel economy is therefore a key environmental consideration. It is also a key financial consideration because not only do efficient vehicles use less fuel, but efficiency is also directly linked to car tax rates.”

Technological advances have resulted in several alternative fuels to petrol and diesel, although none of these can be used in as broad a range of vehicles as diesel/petrol (see table, page 42).

The Wales Audit Office suggests environmental policies that could be implemented include:

■ Use of electric vehicles on shorter journeys.

■ Driving fewer journeys to reduce mileages and hence CO2 emissions.

■ Introducing car-sharing schemes, cycling, walking or using public transport.

■ Introducing car mileage payments that pay higher rates for lower-emission vehicles.

■ Introducing incentives for the driver to select more fuel-efficient models when it is time to change.

■ Training drivers in more fuel-efficient driving techniques, such as reducing speed and smooth acceleration and braking.

Other alternatives to travel to be considered are home working and telephone and video-conferencing.

Fleets can take a more strategic approach to CO2 reduction across vehicle type (including the use of hybrid and electric vehicles) and vehicle usage (for example, for urban usage, fleet managers can consider electric vehicles).

For long journeys, diesels still tend to be the most efficient, says the Wales Audit Office, but the emergence of plug-in hybrids may be a realistic alternative.

TfL adds: “Investing in new technologies can be a significant and complex decision. In assessing the technology, three key issues need to be considered: environmental priorities, operational requirements and lifecycle costs.”

The organisation says that irrespective of which fuel or technology is chosen, the basic principles for a sustainable fleet procurement policy are:

■ Specify the smallest, most fuel-efficient vehicle appropriate for the required task, as larger vehicles will tend to cost more and use more fuel.

■ Aim to get the vehicles with the best fuel economy and lowest CO2 emissions in any given class.

Review your fleet strategy regularly

The fleet industry is constantly changing, whether the change is through the development of technology, the introduction of legislation or the launch of new products.

It is therefore important that strategies are reviewed regularly to keep them up to date.

ACFO recommends they are reviewed at least every vehicle operating cycle and “almost certainly more frequently than that in the light of organisational changes in respect of, for example, job creation or contraction and merger or acquisition, and legislative or tax changes”, says John Pryor, chairman of the fleet operators’ association.

“All such changes can have a major impact on organisations and fleet is no exception.

“Pursuing the status quo in the light of such changes can prove to be a recipe for disaster for the organisation, particularly in terms of cost and compliance.”

Transport for London recommends that fleets should also look at their data collection processes as part of any review. It asks: “Are they providing the information you need? Are administrative costs acceptable?”

The organisation also advises fleets to:

■ Review business needs and drivers – for example, to take account of any changes in customer requirements, or new legislation or regulation.

■ Ensure regular reviews of performance of new vehicles, or new technologies that have been trialled, to ensure they are meeting expectations and are appropriate for that fleet’s business needs.

Pryor says that, as when formulating a fleet strategy in the first place, consultation is vital.

“Ideally, any changes in fleet strategy should involve employees,” he adds. “Management meetings taking place behind closed doors can lead to leaks and wrong information being imparted and, if changes in strategy are imposed, it can result in ill-feeling from drivers.

“However, explaining to drivers why a new strategy is being developed and the benefits to them and the business of taking such action can be expected to engender a feeling of goodwill.

“For example, imposing telematics on drivers may give rise to a cause for concern, but explaining that the technology delivers safety benefits and will help the company reduce its large accident bill and save fuel, thus ultimately cutting costs and potentially saving jobs, can be a winner in getting drivers onside.”