Reducing the cost of fleet
The costs of operating a commercial vehicle fleet are rising but organisations have a wide range of cost management approaches available to them which can significantly reduce the total cost of ownership.
With diesel prices remaining relatively low and stable through 2016 and historically low rates of commercial finance, fleet costs have not had a high cost reduction focus. However, costs are rising. Driven by the Brexit-induced currency shift as well as increasing inflation vehicle acquisition costs are increasing. Vehicle technology costs, maintenance costs and softening residual values are all contributing to a significant impact on total cost and, worryingly, diesel pump prices are on the up.
Our experience shows that fleet costs are rarely subject to a deep and robust commercial review. Cost complacency sets in with a focus on business-as-usual and operational efficiency and an assumption that costs are historically fixed once a vehicle is purchased and key decisions are made on vehicle specification and whether to buy or lease. However, taking a total cost of ownership (TCO) approach combined with a robust procurement approach to each and every cost component can yield significant cost savings.
Taking cost out requires a detailed, structured value analysis approach which focuses predominantly on cost (working with suppliers to collaboratively reduce the costs of each tier 2 and tier 3 cost element) as well as price (challenging tier-one suppliers to ensure optimum overall price):
- Lease vs. Buy
- Disaggregation of finance and vehicle costs – taking advantage of finance-only providers to separate out and optimise total lease costs
- Vehicle specification – ensuring appropriate specification of vehicle to suit usage/mileage profile
- Vehicle acquisition – procurement of the base vehicle is the most significant cost
- Vehicle cost breakdown – breaking out and defining the cost of each core component of the vehicle
- Component cost sourcing – professionally sourcing each of the individual cost component s such as bodybuild, chiller units, axel load devices
- Contract hire/spot rental costs
- Contract review and benchmarking
- Operational cost management – tyres, windscreens, oil, adBlue, call-out, maintenance & repair
- Fuel and fuel card programmes
- Telematics cost and functionality
- “Double-lifeing” of core components
- End of life and residual cost
We are seeing an interesting trend towards “double-lifeing” - re-using key cost components such as bodies and chiller units on new base vehicles - with clients realising significant step-change reduction in total cost of ownership.
- Separating finance costs and vehicle costs can reduce the total overall cost plus allow for deep cost analysis and reduction work on each element of vehicle total cost of ownership
- Taking a rigorous TCO – Total Cost of Ownership - approach will yield savings. Sourcing each of the cost elements professionally and then building back up the total cost can yield significant savings
- Consider your usage profile. Are vehicles over-specified for mileage or could double-lifeing of key components give a step-change cost impact?
If you would like to discuss reducing the cost of your commercial fleet, please call: +44 (0)203 488 2262 or click here to email us
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