An interview Brett Hay and Tom Debney from Expense Reduction Analysts.
With superior consulting and strategic skills, Brett has a solid understanding of the marketing and operational needs and constraints of the entrepreneurial environment of SMEs. With over 20 years’ practical experience in management, retailing and marketing, Brett has consolidated his industry expertise in fleet management and is recognised nationally as a category specialist in this area. His other key cost categories include telecommunications, employment services, and banking and finance.
Tom has extensive experience in managing organisations in Australia and Asia and has spent more than 2 years as a Managing Director in the UK. With strong operational skills and extensive experience in developing and managing the process, Tom has a good understanding of the operational and administrative needs in identifying and successfully implementing cost reduction initiatives that drive to the bottom line. Tom has been successful for clients in utilities, fleet, logistics and communications projects.
Is there a competitive market for fleet management companies in Australia?
There is a highly competitive market with suppliers in both national and international markets. Recent changes have seen some local companies list on the ASX, and others being bought out resulting in some consolidation in the market. However, it is still a competitive market, particularly now with new car-share programs entering the market which further increases the level of competition.
Where are consumers being caught in the pricing of fleet management?
- Residual value (RV) – this is the value of the vehicle at the end of its operating cycle. The catch is that it can be over-or under-stated relative to its real value. This affects the consumer by not reflecting the true value of the vehicle at the time of disposal.
- Interest rates paid which affect how much is paid during a lease or hire purchase.
- Upfront list price – consumers may not be taking advantage of discounts available.
- Lack of knowledge of best vehicle being fit for purpose, e.g. buying an SUV when a small sedan would do an equally good job.
- No transparency of underlying cost – companies could be paying $1,000 per month on a lease which covers tyres, servicing etc., but the true cost may be significantly less.
- Adjustments for kilometres – at the end of a 2-year lease, there may be provision for an adjustment for the number of kilometres over and above the specified allowance, for example, 100,000 km. If the lease was being rolled over for a further 24 months, this adjustment cost could penalise the consumer.
Has the fleet management market changed in recent years?
- New players are entering the market with rideshares such as Maven, Flexicar and GoGet which brings a new cost-effective alternative to pool cars.
- Change of ownership of companies such as Custom Fleet, and the acquisition of Fleetwest by Smartfleet.
- There has been a push by organisations to get the fleet off the company balance sheet. We are seeing more novated leases and car allowances – vehicles owned by the employee but paid for by the employer.
- Grey fleet – this introduces a new set of problems under workplace health & safety rules. Vehicles owned by employees, but used on company business, may expose employers in the case of an accident. Is the vehicle insured by the owner, the employee, for business use? Is it properly maintained by them? Do employers monitor loss of licence or demerit points by the employee?
- There are changes regarding FBT rules which are being tightened. Company-owned vehicles doing over 200 km in a trip for personal use will become FBT liable. This is aimed at the 1-metre crew cab SUV market which was previously exempt. Companies should be consulting with their accountants or our consultants to get advice on the tightened FBT rules.
Where are the opportunities for savings or optimising costs of fleet management?
- A better understanding of fleet routing is essential for managing fleet costs. Drivers should follow a planned route with mapping for a logical flow, to avoid traffic jams and excess kilometres from unplanned routes.
- Management of maintenance schedules could lead to cost savings, extend the life of a vehicle and reduce the cost of fuel. Heavy-footed drivers are likely to cause vehicles to require more maintenance as well as using more fuel.
- Companies should be looking at the total cost of ownership (TCO) of vehicles. This includes the cost of licences and any fines which drivers may incur and is measured in cents/km for vehicle or driver comparison.
- An interesting development here is the use of companies like GoGet or Flexicar, and other car-share networks, which could replace pool cars.
What are the latest innovations or developments which would enable companies to reduce costs?
- Telematics – this monitors driver efficiency, running costs, route optimisation, over- or under-utilisation of vehicles.
- Onboard fleet monitoring with the setting of routes advising traffic jams and time to next stop. This can provide a dashboard report showing poor driver behaviour and possible cost blowouts. Bottom line is a measure of the vehicle cost per km to aid in budgeting and better business management.
Why do organisations need Expense Reduction Analysts to help to manage and reduce costs?
Expense Reduction Analysts’ Fleet Cost Management Team provides a solution across all elements of fleet management:
- Acquisition – advising on the best procurement method appropriate for your business needs.
- Purchase management – competitive tendering on each and every vehicle.
- Strategies to ensure favourable outcomes upon the end-of-life disposal.
- On-line management of all vehicles.
- Reduction of management fees.
- Reducing costs of servicing, tyres, parts and maintenance.
- Policy – ensuring appropriate vehicle choice and allocation, optimum term/mileage configuration.
- Assessment of the environmental impact.
- TCO reporting to provide vehicle management tools to assist with decision making and cost management.
There is a great deal of complexity in benchmarking costs and comparing like-for-like in fleet management. Our specialists can help your organisation ensure the best return on your business investments with our extensive knowledge and expertise, and we can achieve significant savings on your fleet management costs.