Arval is confident that a fleet can cut its costs by 10% when all areas of expenditure are identified and understood.

That is why it chose to work with the University of Buckingham in developing a true cost of operations model.

A computer-based cost management tool, it allows a high degree of accuracy in fleet planning and decision-making by not only considering wholelife costs, but also factoring in a range of other elements.

“What about the end-of-contract charges that companies receive and what about the out-of-scheme charges?” asks Jon Mackney, head of consultancy at Arval.

“For example, if somebody damages a wing mirror then that cost is charged to the company because it’s not covered in the contract hire rental.

“It then follows that if we know the typical level of incidents and if we know the average costs, we can then start benchmarking companies.”

With a database of more than 100,000 vehicles, it has been able to benchmark the full spectrum of costs and feed them into its true cost of operations model.

These include: vehicle selection, capital costs, residual values, operating and maintenance costs, expenditure on tyres, fuel costs, CO2 footprint and accidents.

“In the past, fleet calculations have not included the full range of costs, whereas this places the full spectrum in scope,” says Mackney.

“This model is also about managing your carbon footprint and driver safety, as well as ensuring the fleet is as efficient and effective as it can be.”

Nevertheless, by employing a true cost of operations approach, Arval has seen average savings of £657 per vehicle so far this year.

“But to reflect changing conditions, the data that feeds into the model will be updated on an ongoing basis,” says Mackney.

Arval is also looking at segmenting its data by industry type to enhance its reporting qualities even further.

“We might find that the benchmarked costs for a construction company are actually different to those of an IT or pharmaceutical company and so we can start to introduce different levels of sophistication into the true cost of operations,” explains Mackney.

Either way, he believes it’s now time for fleets to take a holistic view of their operation.

“With a holistic view you gain control of cost in all areas,” says Mackney

“You also start to manage your emissions, the impact on driver satisfaction through vehicle selection, driver safety and you have a tool to engage all stakeholders within the business.

"However, most importantly you optimise the value of your fleet to the business.

“It’s easy for a company to see a fleet as an overhead, but the companies that will gain real competitive advantage will ensure their vehicles truly support their corporate objectives.”

Arval’s cost of operations approach earned it the Best Leasing Initiative award at the 2009 Fleet News Awards.

Developing the true cost of operations model

Arval’s in-house consultancy team worked with the University of
Buckingham’s Centre for Automotive Management to develop its true cost of operations model.

The new model took six months to develop and was tested against a wide range of applications and fleet operators to ensure its credibility.

“The key was to have very high-quality, basic cost data,” says Professor Peter Cooke, KPMG professor of automotive management at the University of Buckingham.

“The tendency was for certain costs to be omitted from the calculations. That’s why this new model stands apart.

“It is the most advanced and comprehensive tool of its type.”

Jon Mackney, head of consultancy at Arval, adds: “Arval had all the practical experience because we had a database of more than 100,000 vehicle costs.

“But what Cooke and the University of Buckingham brought was the academic perspective, the desire and the ability to start the modelling to help us with benchmarking costs.”