Efficient management of a range of fleet solutions’ suppliers is the secret to cutting costs and not reliance on sole supply arrangements, according to a leading fleet management consultant.

Fleet Operations’ founder and managing director Ross Jackson calculates that savings of up to 10% over a three or four-year vehicle operating cycle are typical through the delivery of managed multi-supplier fleet solutions.

There are two routes to making the switch to a multi-supplier arrangement.

Businesses can opt for a do-it -yourself approach and manage the whole process and chosen suppliers internally or they can opt for a managed multi-supplier mechanism, which will see a third party take on both vendor management and the subsequent day-to-day administration of the fleet.

Jackson says: “The ‘DIY route is nothing new. It is exactly how businesses typically ran their fleet operations 20 years ago.

“Sole supply has become more prevalent because businesses have cut back on people and fleet departments.

"As a result, fleet responsibility often ends up with employees who are not fleet professionals.

"The upshot has been sole supply agreements because they are viewed as needing minimal organisational involvement.”

Jackson explains: “For some time, procurement departments have focused on delivering products and services through the fewest number of suppliers.

"It’s ideal for many products and services, but not for vehicle management, so our view flies in the face of conventional practice.

“The on-going banking crisis has highlighted the disastrous consequences of organisations and individuals having all their assets in one place and fleet management is no different.

“Few businesses truly understand the complexity and volatility of the fleet marketplace.

"The complexity of fleet management, with so many variables, means that unless decision-makers are tracking the market place monthly, they are at the mercy of a sole supplier who may increase costs at any time – or they may lose out on financial benefits that are not passed on.”

While companies may opt for the DIY route, Jackson warns that for the unwary it can prove to be a hugely cumbersome administrative process.

“Not only will the fleet decision-maker continue to be responsible for fleet strategy, they will also take on day-to-day fleet management issues that can range from direct contact with drivers who require help, to regular liaison and management of the multitude of suppliers,” he says.

Additionally, Jackson points to potential problems managing the delivery of data from third-party suppliers, which invariably would be sent in different formats.

Complex to manage

“The DIY approach will deliver cost savings but the trade-off is that it is more complex to manage.

"If time is already constrained and there is insufficient organisational focus or expertise, businesses can become bogged down with administration, while strategy and cost savings can suffer.”

Meanwhile, the ‘managed’ route delivers, according to Jackson, the same ‘light-touch’ approach as sole supply but the chosen external management business will manage and control the supply base.

“Such companies have no vested interest in which organisation supplies the services required. But they do have a vested interest in making sure their client obtains best value,” he says.

“Because these businesses typically employ experts, customers benefit from independent expertise. As a result, the fleet decision-maker is able to macro-manage and plan strategy.”

A number of major companies have already switched to managed multi-supplier agreements, but Jackson says: “Too many companies discount the idea because it is outside of conventional thinking.

“We often find that companies have little idea of the true costs of managing their fleet.”

Instead of customers relying on a single manufacturer, contract hire and leasing company or fleet management organisation to deliver a package of solutions, consultant fleet managers use their knowledge to select providers from a cross-section of suppliers.

Being ‘supplier neutral’, they identify the solutions required by a fleet and then work with its customers to arrive at the best available suppliers at the most cost-effective price.

Effectively, companies like Fleet Operations aim to deliver a one-stop shop solution by utilising a wide range of best-in-breed suppliers to meet individual fleet requirements.

“In reality it is only what we do in our personal lives. When buying goods we don’t always go to one store. We shop around,” says Jackson.

“There is undoubtedly a value in businesses forming relationships and partnerships, but they can be with more than one supplier. It is more time consuming, but there are benefits.

"The issue for fleet decision-makers is can they physically handle the com-plexities or do they need an external organisation to do it for them.”

Cutting operating costs

But, with the corporate spotlight on saving money, including cutting fleet operating costs, Jackson says: “Coupling expertise and an absolute focus on fleet management, on average we have identified and delivered cost savings of around 10% by questioning the logic of relying on a sole supplier for fleet management solutions.”

Financial savings can accrue across the board. However, for companies that contract hire perhaps the largest savings come in terms of ensuring a range of leasing suppliers.

Jackson explains: “We’re continuously tracking the market. As an example, current interest rates being paid by leasing companies vary from 3.76% to 8.51% and that cost will be reflected in their rates to you.

“Fleets that don’t complete the right level of due diligence may find themselves not only paying higher rental rates, but could find themselves subject to additional charges as interest rates rise.”

Aside from interest rates, Jackson highlights a current example of a BMW 320d saloon where the residual value being quoted by two rival leasing companies on a four-year lease was £2,000 apart.

As a result, one firm was charging a monthly lease rate of £453 and another £512 – a potential cost of £2,832 over four years on a single car if opting for the ‘wrong’ supplier.

“With a multi-supplier arrangement every potential supplier must compete on every vehicle otherwise they won’t get the business. Businesses that opt for sole supply are at the mercy of a single supplier,” he said.

“In the current economic climate, the supplier’s very business survival may be questionable and any price increases introduced by them, no matter how large, will have to be swallowed.

“Too often we find organisations accepting the status quo, but in reality loyalty to one company is costly.

“Vehicles and a range of fleet management services are crucial to the successful operation of thousands of UK businesses.

“Companies must hedge their bets amid financial uncertainty, be focused in how they address a costly area, and use a number of organisations to supply services.”

Top tips on moving to a multi-supplier base

Communicate. Make sure everyone understands the changes and ensure drivers know exactly which supplier to contact when issues arise.

If clear channels of communication with telephone helpline numbers are not provided to drivers con-fusion can arise.

Plan the multi-supply strategy so as the fleet decision-maker. you know exactly which services are being provided by which company.

Track all cost areas and work with suppliers on strategy, delivery and cost reduction.

Competition is healthy. If companies know there is a second or even third potential supplier of services complacency is less likely to creep in.

Vehicle acquisition and fuel may be the two single biggest costs related to fleet management, but don’t forget about all other fleet- related services.

For example, for outright purchase fleets multiple vehicle disposal routes can be important – online and via auctions.

If leasing, consider using independent dealers for SMR work on potentially all but premium badge performance cars instead of franchise dealers.

Drivers may benefit from the multi-supplier strategy as the potential cost savings may be diverted to enable employees to drive ‘better’ cars with more specification.

Think logically. Only having one supplier can be risky, particularly in the current economic climate with corporate failure a possibility.