Should fleet-decision makers outsource vehicle management?

What is the role of the fleet manager? Is it to micro-manage every detail of the fleet policy, placing orders, taking calls, doing the admin? Or is it to set strategy, appoint suppliers and manage relationships?

Today’s fleet manager, or more accurately fleet decision-maker (the role can have many job titles, from fleet and travel to procurement and finance, and, more contemporarily, mobility manager), needs to add value to their business.

Value may come from managing an entire travel operation (vehicles, public transport, hotels), understanding company priorities and matching the fleet to those priorities, setting strategies to reduce cost, improve safety, tackle environmental concerns, reduce/eliminate grey fleet, or create funding offers, such as salary sacrifice, employee car ownership or personal contract hire (PCH) for employees unable to access the company car scheme.

Limited value can be achieved by giving drivers a hotline to fleet, even though there are plenty of decision-makers who believe this is a way to engage drivers and show they – and, importantly, the business – care. And that’s fine, if driver satisfaction is the core fleet/company pillar.

However, companies increasingly require their fleets to show value and worth to the business, and this is where supplier partnerships and collaboration comes into play.

Outsourcing can be viewed as a dirty word; a way to rid a company of a fleet manager/team or an attempt to offload fleet responsibilities to a third party. In reality, that is the last thing it should mean.

Fleet is unique.

Procurement, cost management, safety, taxation, compliance, etc. all require expert knowledge to maximise efficiencies and effectiveness.

Outsourcing the lower value elements to a leasing or fleet management company can free up a fleet decision-maker to focus on the strategic side, but it is crucial the business retains someone with knowledge to manage the supply chain.

“Drivers have increasing service expectations on availability and turnaround times that small fleet teams – who often fulfil a number of key functions within a business and with competing priorities – simply struggle to keep pace.” Simon Carr, Alphabet

Checks for maximum value

While some leasing companies may argue the contrary, service level agreements (SLAs) and key performance indicators (KPIs) need monthly, weekly, sometimes daily checks to ensure the business is getting maximum value from its partners. There are plenty of examples of price creep and service deterioration when this does not happen.

A fleet decision-maker can also ensure that partners work in collaboration with the business; they should be required to constantly improve service and offer cost-saving ideas.

All FN50 companies report a growing level of outsourcing. No surprise, perhaps, as it is something they all encourage as part of a mutual remit to tie customers more tightly to their businesses.

Former Lex Autolease managing director Tim Porter, who retired at the end of October, says outsourcing enables organisations to concentrate on core business activities by relying on the supply chain to provide efficient, cost-effective systems and fleet management expertise.

“This is also being driven by procurement who are increasingly trying to reduce overheads to increase profits and reduce risk,” he added.

Arval UK managing director Miguel Cabaca believes the market remains split over outsourcing and in-house management of key fleet functions, although he has seen some shift towards outsourcing as the business of managing a fleet becomes more complex with ever changing legislation and a broad range of stakeholders to satisfy. But, when it comes to policy, there is no one-size-fits-all.

“Even within an outsourcing solution there are different approaches as some companies retain a fleet manager, or small fleet team, to work with us on fleet policy and strategy, while others outsource the whole operation,” he says. “From our perspective, both can work well as long as the business objectives of outsourcing are clearly agreed from the outset.

Brexit leads to 'an inevitable slowdown in decison making'

Leasing companies increasingly try to position themselves as mobility providers, as they begin to offer a range of solutions to satisfy fleet needs. Often these solutions remain wedded to a car; it’s just the contract term that becomes flexible, with rental from an hour to a five-year lease.

In the near future, though, mobility solutions will facilitate the best way to move goods, people and services around – or not at all in the case of video conferencing – whether by company vehicle, public transport, bike or some other form of transport, with technology providing seamless organisation, booking and payment.

Alphabet says more customers seek a combined funding, fleet management and mobility solution, as the demands placed on the business by the growing complexity and range of travel options outstrips in-house resource or competency.

“Running a fleet is an area of complexity that requires expert know-how, 24/7 customer service and robust, auditable processes,” says Simon Carr, Alphabet chief commercial officer.

“Drivers have increasing service expectations on availability and turnaround times that small fleet teams – who often fulfil a number of key functions within a business and with competing priorities – simply struggle to keep pace.”

Carr also points to the greater scrutiny and regulation faced by companies operating vehicles, including duty of care.

“It’s vital that running a fleet is resourced correctly with the right levels of experience, insight and expertise,” he adds.

Matt Dale, ALD head of consultancy, outlined some of the issues which are prompting businesses to outsource some or all of their fleet management requirements.

Brexit, he says, is creating uncertainty resulting in “an inevitable slowing down in decision making” but would require major reviews of fleet policy, total cost of ownership, employee remuneration and wider business mobility solutions.

As cars and infrastructure become increasingly connected, this will result in greater levels of data which will empower businesses to make more informed and timely decisions, ultimately enabling them to control their costs, manage their risk, improve their carbon footprint and manage their fleet more efficiently.

“Whether that’s information relating to vehicle health that can help fleets take early steps to prevent breakdowns, or more accurate information relating to driver behaviour so preventative action such as training can be administered, fleets will have more data at their disposal to use and interpret as they see fit,” Dale says.

“With this comes a responsibility to handle data in a way that respects the privacy of the driver and adheres to the legislation. Businesses will need to be clued up on the rules and regulation surrounding data protection more than ever before.”

However, while outsourcing is a key part of the fleet management mix, Dale believes in-house fleet knowledge will remain crucial.

“Over time, companies will need to possess the skills to manage new services and systems that go beyond the traditional company car, whether that’s getting to grips with automation technology or administering an electric car-sharing scheme,” he says.

“These solutions will continually evolve and develop but, where there is a need for business mobility, fleet managers will continue to play a vital role.”

Consultancy relationships

In addition to outsourcing, leasing providers are also seeing greater demand for consultancy relationships, according to Inchcape Fleet Solutions.

“We are expected to provide much additional consultancy that would otherwise have been the domain of the fleet manager,” says Lee Hamlett, Inchcape commercial director. “The rationale seems to be that the client wishes to reduce cost and expects us to continually add value to their business.”

However, the growing complexity of running fleets might result in more control returning in-house, Hamlett adds.

“With an increasing burden from legislation, taxation, accounting, compliance, General Data Protection Regulation, corporate and social responsibility and environmental factors, along with the constant challenge to review and re-engineer fleet policies to deliver financial enhancements while retaining integrity of the operational performance, the specific fleet focus that a professional fleet manager has may once again return to favour,” he says.

Mixed picture

Others report a mixed picture, with some companies outsourcing fleet management as others in-source.

Simon Hill, chief executive officer at Total Motion Vehicle Management, says: “We are seeing a real mix and our guidance to clients is to find a hybrid of both that works as, for many, neither is really effective.”

Likewise, Keith Townsend, managing director at Agility Fleet is seeing “a mix of both”, although there has been a slight bias towards outsourcing as “operations want to reduce internal head count and improve efficiency”.

Steve Whitmarsh, Multifleet Vehicle Management managing director, stressed the importance of choice, especially for smaller fleets. “Small fleets still want to retain a degree of independence and high level of choice. As such, they are actively seeking flexible partners and platforms as a stepping stone to fully outsourcing their fleets,” he says.

Meanwhile, Paul Walters, managing director at JCT600, identified a trend away from the company car, particularly in the non-essential perk car category due to the increased taxation burden.

“PCH will continue to play a larger role but with the look and feel of a corporate contract hire arrangement, with maintenance, accident management etc.,” he says.