Fleet managers are being warned not to confuse ‘value for money’ and ‘low cost’ as they seek new fleet providers in a bid to cut costs following the Coronavirus pandemic.
As businesses start to take tentative steps out of lockdown, Venson Automotive Solutions says fleet managers will be assessing strategies to reduce costs while adapting to a changed and challenging landscape
There are many hidden costs involved in running any fleet, and the lowest up-front cost may distract from the true costs across the lifetime of the contract, particularly so when procuring a fleet management (FM) service.
Danielle Tilley, business development director at Venson, said: “Fleet buyers may encounter ‘free FM’ but not understand that maintenance and repair invoices will be marked up, or they may see a low FM fee without realising they’ll receive an administration fee for each maintenance event.
“Pricing should always be clear and transparent, such as a monthly FM fee with maintenance costs passed on at net cost recharge concise, and show scalability so that you can see implications to changes in fleet policy.”
Venson recommends procurement and fleet decision makers employ a balanced score card approach. This means assessing and weighing up each aspect of the contract and scoring it individually, then going on to produce a final score to compare with other providers.
The criteria to be judged should include capability, risk, service levels, financial stability, corporate social responsibility, value for money and price.
Calculating the ‘cost’ of all inefficiencies and extra charges will help procurement teams understand the potential impact on fleet operations as well as the actual costs and benefits of each offering.
“Vehicle leasing is the most common form of fleet funding for cars and vans, but we find that the up-front cost is all-too-often the main focus of the procurement process when it comes to making the final decision. Price is of course an important factor but so is customer service and minimising vehicle downtime when things go wrong,” Tilley added.
When scoring a tender response, price should account for 25-40% of the scorecard in terms of capability. Any provider that scores more than 50% for price - unless it is a very simple commodity which vehicle leasing is not - is missing a trick and making price too important, according to Venson.
Venson’s top tips for fleet procurement:
- Use a scorecard approach to find the best provider – fleet selection is a significant business decision and should not be rushed
- Price should account for 25-40% of the scorecard in terms of capability – attributing 50% of the score to price is missing a trick and making price too important
- Do not confuse value for money with price
- Consider rate creep in your calculations, how monthly lease rates can rise due to the numerous variables that affect rental terms
- Do not forget to include other costs in calculations: End-of-contract charges, early termination charges and damage waiver fees to name a few
- Look into how vehicle downtime is managed and minimised by each potential provider – do they offer night-time servicing and repairs?
- Investigate the maintenance clause. Does it include service scheduling, service due reminders and vehicle collection and delivery, to save time for the fleet manager or driver?
- Research customer service performance – poor service can decrease efficiency and use up valuable working hours when problems are not managed effectively
- Ask for customer case studies and references and take time to speak to someone who is already receiving the service
- Visit each supplier and meet the people who will be looking after your fleet and see how they will manage it day to day
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Matt has been an automotive journalist for eight years. As senior staff writer he is responsible for the automotive content on Fleet News and also contributes to Automotive Management. Prior to this, Matt worked in the automotive industry for 10 years.
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