10 Ways to reduce your Fleet Running Costs
Keeping fleet running costs down is best done with applying knowledge and utilising the experience of a good fleet manager.
Across every element of the fleet, it is wise to implement some KPI’s (key performance indicators). Usually you will see KPI’s applied to employees in order to monitor their performance but applying them to aspects of your fleet allows you to identify patterns and improve performance.
Here we provide 10 points to observe and grade them 1 – 10 on their money saving effect.
Reduce the size of the Fleet
This may seem unrealistic to many BUT the reality of it is, could you take the workload from one vehicle and spread it across the rest of the vehicles? Do you have vehicles that are only used part time if at all?
If the answer is yes, you can probably start reducing your fleet costs quite quickly. Removing vehicles reduces maintenance costs and your fleet insurance costs.
You can easily rent vehicles of all sizes which means if you do strip back and then need an additional vehicle for a short spell, then hire one. This is still likely to be cheaper then keeping low use vehicles on the fleet.
Money saving potential: 9
Reduce Miles Travelled
It is a given that your fleet is going to clock up a lot of miles and it is an area where fleet managers have very little control.
You can however look to implement some or all the below.
Implement Fixed Routes
If you have a vehicles that is in a similar area frequently but with an erratic schedule, look to fix its schedule and route so that it does the same cycle every trip with eliminates un-required miles.
Remove Personal Use Privileges
By implementing ‘non-personal use’ you will reduce miles travelled which clocks up wear and tear, fuel costs. A lot of accidents happen out of working hours so by removing personal use, you also drop the cost of insuring your fleet.
Money Saving Potential: 3 – 6
Get More MPG
The government are always trying to reduce carbon emissions from vehicles on the road. They typically do this by imposing taxes and fares to travel in certain areas or for less economical vehicles.
There are a few ways of increasing miles per gallon, we recently wrote about using better hgv oil in a bid to run a more efficient engine, but there are some other tips to utilise.
Use Smaller Vehicles
Smaller vehicles naturally require less fuel to run as they are also lighter. This is also in favour of the Governments plans to reduce non-efficient vehicles.
Purchase New Vehicles with Aluminium Bodies
Traditionally lorries are made with steel, BUT you can purchase aluminium made HGV’s, this drastically reduces the standard weight of the vehicle. Take time to understand the functional purpose of the vehicle as well, does it need a tail lift? If not, don’t add one etc.
Use Innovative Automotive Technologies
Diesels have come a long way in recent years for being cleaner and their efficiency far outweighs any other. However, there is heavy focus on dual energy engines that utilise an electric engine. If you manage a fleet of cars, potentially investing in electronic vehicles with both petrol and electric engines could save a lot of running costs.
Many fleet managers forget to look at their drivers driving style. Heavy acceleration, braking and harsh cornering have a huge impact on a vehicle wear and tear. Vehicles on the road are not rally cross vehicles and should be bought up to speed at a sensible level and slowed at a sensible level. Bad driving can impact a vehicles efficiency by up to 33%. That’s wasting £33 in every £100 you put in the tank! That is without taking into consideration the damage to the types and brake pads.
Sensible drivers are also safer drivers. Again reducing the likely hood of accident.
Driver driving style can be monitored through a good tracking system.
By using faster roads with no to little stop start is a great way to reduce fuel costs. Heavy loads cost a lot to stop and get going again, if your drivers can use motorways where once going they can just keep going. You may be in for some savings.
Money Saving Potential: 5 – 6
Reduce Fuel Costs
Fuel is often by far one of the biggest variables a fleet manager faces. Fuel use though is controllable to a certain degree.
Make use of fuel card discounts
Shop around for fuel cards and ensure that if you fuel use is increasing, your fuel rate is decreasing.
A point we have visited a couple of times but a lighter vehicle with efficient technologies that is maintained will save you substantially in the long run.
Trial Higher Grade Fuel
This may not be as effective as other methods but if you have a very sensible driver using a higher grade fuel, his extended miles per gallon and reduced engine wear costs may outweigh the additional cost of the fuel. It will require the test of time though to see the actual benefit to this.
Money Saving Potential: 2 – 3
Reduce Lifecycle Costs of your vehicles
Many fleet owners either replace vehicles to quickly or run an incredibly aged fleet. You want to try and gauge this to run on an economical based cycle, only replacing a vehicle once it’s become un-economical to run.
For this to work, you really need to start looking at your drivers, distance the vehicles travel and what sort of work they carry out.
Replacing vehicles to quickly will see you constantly suffering high one off expenses and depreciation costs whilst an aged fleet will be racking up high fuel costs and maintenance costs.
When you purchase a vehicle, look to have a plan for it and anticipate its end of life cycle.
Money Saving Potential: 7 – 8
Lower Purchase Costs
When purchasing anything, you will always suffer depreciation. This is felt more so on vehicles.
Reduce Vehicle Cost
Achieving the very lowest purchase cost rate of a vehicle is paramount to reducing your fleet costs. If you have a 10 vehicle fleet and you are able to knock £1000 off each vehicle, that is a £10 saving and could even be the value of another vehicle. No fleet is going to complain at buy 10 get one free!
Lease the Fleet
Not always practical, but worth a look. Lease companies are often able to purchase vehicles at a far lower cost then you or I can. As such, it is very much worth looking at how much the lease would cost over a period of time. This also removes depreciation costs, keeps the fleet new as most vehicles have a 3 year lease plan and keeps your fleet fuel efficient reducing running costs.
Money Saving Potential: 7 – 8
Look for Higher Resale Value
Allow Employees to Purchase
Believe it or not, employees account for around 16% of vehicle sales from a fleet.
Potentially seen more in courier fleets or company fleets, if the drivers know they can purchase the vehicle, 2 things are likely to happen.
1, The employee will look after the vehicle reducing your fuel and wear and tear costs.
2, The vehicle is likely to sell for more as you avoid bartering down or auction costs.
Grow Vehicles to build a greater return
Choose Neutral Colours
When purchasing a vehicle, choose a more neutral colour such as white, steering clear of ‘choice’ colours.
Provide Maintenance Schedule
People purchasing second hand vehicles are much more likely to be willing to pay great levels if the vehicle has a maintenance schedule.
Money Saving Potential: 2 – 3
Lower Maintenance Costs
It is the belief of many fleet managers that they should put their vehicles through preventative maintenance (PM for short) every 3000 miles. This is a very out-dated view and on the modern vehicle and is only really required on vehicles under ‘severe use’.
These services can be costly when it is quite reasonable of the average fleet on standard use to only have a service every 6000 – 7000 miles. This halves your service costs!
Increasing your use of synthetic oils will also extend service intervals, when offset against the cost of further spread PM Services, saves money and justifies the additional cost of the oil.
Using vehicles that have larger wheels also reduces running costs. Larger wheels do cost more to purchase yes, but their savings are in better Miles Per Gallon, Vehicle Performance and don’t wear down as quick through having a larger tread area.
Money Saving Potential: 2 – 3
Lower Crash Costs
Vehicles don’t crash themselves; it is down to the driver at the wheel. An effective safety management program provides monitoring and education of drivers that allows for greater profitability.
Such program will allow you to:
– Reduce the risk and therefore cost of accidents and injury
– Significantly reduce the cost of your fleet insurance
– Increase driver productivity
– Enhancing driver morale
– Increase driver retention
Take the time to translate crash costs into lost profits through fully loaded expenses in association with fleet crashes. Divide the number by your operating profit margin and this will give you the total additional sales revenue the company must produce to replace lost profits du to crashes.
For example, in an organization with an operating profit margin of 10% and annual accident-related expenses of £500,000, an additional £5 million in sales revenue is needed to replace the £500,000 in lost profits due to accidents.
The starting point is to implement the management system and better recruit safer and more understanding drivers.
Money Saving Potential: 7 – 9
This may be an obvious one and is something every company should look to do. Overheads, or indirect costs, include admin staff, buildings, facilities, fuel sites, computer systems, utilities, tools, taxes and many other factors that cannot be linked directly to a vehicle.
Money Saving Potential: 3 – 4