Imagine a service or a solution that would assist any company with a fleet of vehicles to lower fleet costs, ensure predictable expenses and overall better fleet management. You would expect business owners who may not possess fleet management expertise to sign up.
Such a solution does exist, says Dr David Molapo, Head of Standard Bank Fleet Management. It is called fleet outsourcing. Yet South African businesses have been very slow in adopting the model that has become dominant in large parts of the rest of the world.
Currently, many in the state sector in South Africa – government departments and municipalities – are aware of the advantages of fleet outsourcing, whereas some in the private sector seem to be lagging behind.
Why is this? Dr Molapo believes the reasons are complex, but one of the main aspects is the pervasive misconception that outsourcing fleet management is more expensive than doing it yourself.
A key reason is that pricing seems more expensive for any number of services: procurement, maintenance, finance, fuel management, tolls and traffic fine management, vehicle inspections, insurance, accident management, vehicle tracking and monitoring, vehicle usage optimisation, driver optimisation and even route optimisation.
Each of these services has to be done for any vehicle deployed for business purposes, and companies routinely pay for them, if not in direct costs then indirectly with the salaries of staff employed to spend their time on these functions. Were a fleet manager or CEO to tally all the separate costs of a vehicle managed in-house, the true picture emerges.
Each of these services, when outsourced to a reputable fleet management specialist, is likely to be done better, more efficiently, with greater bulk-buying power and with deeper specialist industry knowledge than companies without fleet specialist skills.
The point is that fleet outsourcing is potentially a more efficient option to manage a fleet, says Dr Molapo. But in order to see it clearly, a company has to compare the outsourcing cost with the full cost of ownership of a vehicle.
Often only companies with quite sophisticated financial and operational systems are able to analyse and produce such figures. Smaller companies, where the role of fleet manager is often given as a side-line function to a general staff or office manager, very seldom have the inclination to make a proper comparison.
But apart from the fact that the total cost of ownership of running a vehicle is not immediately apparent, there are other related mindset hurdles that prevent fleet managers from adopting outsourcing.
One is an over-optimism that pushes away thoughts of breakdowns, accidents and even predictable wear-and-tear on a vehicle. It makes it difficult for the users of a brand-new company car to imagine what it might look like in five years’ time. In contrast, the fee that a company pays to an outsourcing partner can be a brutally realistic expression of all the costs of a vehicle, including future maintenance costs, but smoothed into monthly payments so as to make it a predictable expense item.
Another mindset hurdle that stands in the way of the outsourcing option is the culture of ownership. Fleet outsourcing can take make forms, but one of its basic principles is that the ownership resides not with the company using the car, but with the outsourcing partner.
Perhaps another reason for the slow uptake of fleet-management outsourcing is the fact that it is not a clear one-size-fits-all package. Rather, fleet outsourcing is extremely flexible so that one company may choose to outsource only the ownership and maintenance in the form of Full Maintenance Rentals. Another company might throw in roadside and breakdown assistance, vehicle inspections, driver monitoring or vehicle utilisation into the bundle. Yet another might choose to outsource only its carpool vehicles, but not those allocated to specific individuals in the company.
The choices and permutations of fleet outsourcing can be bewildering, says Dr Molapo. Fortunately, the flexibility also allows fleet-owning companies to outsource incrementally, and to increase the outsourced functions as the company and the fleet grows.
Dr Molapo says outsourcing does not mean a company gives up control of its fleet, or that the fleet disappears altogether from the focus of the company management. On the contrary, if a fleet is outsourced to a specialist company worth its salt, a huge amount of information can be unravelled about the fleet’s operations which give the company even greater control over its fleet.
The focus of the fleet manager inside the company can shift from the distractions of the day-to-day management of vehicles to the management of the contract with the outsourced partner, and to strategic thinking about how to build and maintain an ever more efficient fleet.