Fleet management: should you outsource?
Rob Gray, August 19, 2013
How do you measure the performance of outsourced fleet management services?
Read More Katekaine Solomon
November 15, 2015 06:39
Dedicated in-house fleet managers are apparently becoming an endangered species in the private sector as companies increasingly outsource the function.
Last year was a tough one for many in business, but perhaps even more so for fleet managers. Although company cars remain a key benefit for many organisations, often enhancing the remuneration package in lieu of a pay rise, 2012 was the year many fleet managers were shown the door and forced back on the road.
According to the Alphabet Fleet Management Report 2012, the number of dedicated in-house fleet managers in the private sector has shrunk rapidly. With responsibility for fleet management increasingly migrating to the procurement, finance and operations departments, companies appear to be outsourcing fleet operations in ever greater numbers. According to the research, more than twice as many companies as in the previous year outsourced their fleet management in 2012, and the proportion with an in-house fleet manager fell from 63% to 27%.
There's certainly a sense of momentum behind fleet outsourcing at present. One fleet management specialist, CLM, says it added seven new clients and more than 1,000 new vehicles to its portfolio in the first six months of the year as companies focused on cutting costs, improving transparency and reducing fleet administration. It was CLM's busiest start to a year since the economic downturn began to bite in 2009.
"The experience, insight, skills and processes that an outsourcing partner can bring into the organisation can accelerate growth plans when companies face tight budgets," says CLM head of sales and marketing Rob Wentworth-James. "What is needed is a partnership approach, working with clients to understand the reasons for growth, the aims of their business and how we can help achieve them."
Pub and restaurant operator Mitchells & Butler (M&B) outsourced management of its national fleet of 500 vehicles to CLM last year. As well as handling the complete procurement process, CLM provides end-of-term vehicle checks, daily rental vehicles and fines management, plus storage and reallocation of vehicles. In pursuing the outsourcing route, M&B placed particular emphasis on reducing its acquisition costs through competitive tendering.
"We have made significant five-figure savings already through the use of CLM's contract management solution," says M&B's director of corporate procurement, Darrell Wilson. "CLM's flexibility throughout the implementation and its detailed process maps, covering all of our fleet requirements, have been greatly appreciated."
Drivers now order new vehicles online through CLM's FleetActive website. This, explains Wilson, is of real benefit because it has increased the efficiency of M&B's ordering process. He adds that employees do not find it as cumbersome as the previous system.
Housing and care provider Longhurst Group combines in-house expertise with the advantages of using a fleet specialist, in its case Lex Autolease. Car fleet manager Paula Maxwell argues that an in-house perspective on fleet issues should not be underestimated.
"When I began managing the Longhurst Group fleet on a part-time basis, there were fewer than 50 vehicles in the fleet," she says. "We now have 158 company cars and 12 company vans, as well as 350 grey fleet drivers (employees who use their own cars for business travel). Fleet management is now a full-time job. One of the best changes in recent years has been the introduction of a web reporting system that allows me to see whether a vehicle is late for a service or due an MOT."
As a trained driver assessor, Maxwell saves her company costs by delivering training and assessments herself, rather than relying on third parties. "As I work within the company, all our drivers know whom to talk to about any queries they have," she says. "I've held the position for eight years so I've established strong relationships with our insurers, local dealerships and our account managers at Lex Autolease."
There's certainly a compelling argument to be made that by either fully outsourcing vehicle management or absorbing it into another function such as HR or finance, valuable insight may be lost.
A case in point might be 'utilisation', with fleet specialists drawing on their experience and cross-business knowledge to predict spikes in vehicle demand. They can then take advantage of close supplier relationships to fulfil that demand with short-term rental solutions.
"Since the financial crisis, the cost of running fleets has come under intense scrutiny at board level," says Peter Wright, sales and marketing director at Staffordshire-based vehicle solutions business Motiva Group. "Our impression is that a lot of fleet manager positions have been cut, with responsibilities often shared across other departments.
Companies have to be careful not to throw the baby out with the bathwater, though. Good fleet managers have specific skills and knowledge that deliver savings and increase efficiency. They also often have a good nuts-and-bolts understanding of how the whole business works and are often among the first to hear about developments within the business."
Despite Alphabet's report, some in the industry believe the trend of sacrificing in-house fleet managers in favour of outsourcing is not as widespread as the findings appear. Ashley Sowerby, managing director at fleet management software specialist Chevin Fleet Solutions, says it is not a trend that Chevin has noticed.
That said, for companies considering such action, quality is paramount. "Pitfalls include a drop in visibility of data, as fleet management companies typically limit performance reporting to the bare essentials," says Sowerby. "There's also the risk of losing corporate accountability, as out of sight can often translate into out of mind."
Whether or not companies outsource, they need to be mindful that it is their directors who are ultimately responsible for drivers. Outsourcing might offer some defence if providers are seen to be proactively managing risk, but there need to be procedures in-house to monitor performance, analyse risk and work with providers to achieve a safe and compliant operation. Handing over the reins and hoping for the best would be a reckless option. Moreover, outsourcing everything to a single provider carries potential risk. Less risky practice would be to retain someone in-house for policy and oversight, and to outsource only the interactive elements, such as those dealing with accident reporting, purchasing and tax.
Alongside the move to outsourcing, there has been a diminution of HR involvement in fleet matters. "Responsibility for fleet tenders has been moving into finance and procurement, which is perhaps linked to companies seeking greater control over costs," says LeasePlan HR director Steve Moss. "While this departure from HR makes sense in some cases, it is important to remember that most fleet vehicles are provided as a staff benefit, so there will always be HR engagement."
Clearly, getting fleet management right requires something of a balancing act. How compelling a proposition outsourcing is will depend on many factors, not least organisational culture, the standard of in-house expertise available and cost imperatives. Whatever the solution, HR should never wash its hands of this responsibility.