External vs internal fleet management

Posted by Sudesh Pillay on 2018/11/07 10:00 AM

External vs Intern Fleet Management

Fleet management is more than simply buying and selling company cars. The many factors that need to be considered can tip the scales between an organisation deciding to run their fleet internally or use an external fleet management expert  that could save the company money in the long run.

Company vehicles, while a necessity, are not viewed as essential to the core business of the company - and this is a common scenario in which the true costs of fleet management are often overlooked.

Fleet management is the sum of many things, all of which need to examined both individually and together to form a proper picture of the cost of fleet. The cost of your fleet includes the cost of managing your fleet - and to properly judge in order to decide whether it is better value for money to manage that internally or to call in a specialist fleet management company.

Sudesh Pillay, Head of Consulting and Data Analytics at EQSTRA Fleet Management, explains: “Where the vehicles are not essential to the core business of the company, the job of managing the fleet is often given to someone as an add-on to their primary role – this could be the HR manager, procurement manager or financial manager.

“This means the management of the fleet is not always top of mind and we have attended consultations with companies where they do not have an updated or accurate vehicle asset register. Some companies with multiple branches allow each entity to manage its own vehicles so it becomes very difficult to assess an actual cost to company for its vehicles.”

A good question companies need to ask themselves is: Are fleet management tasks consistently keeping my employees from contributing to my core business? If the answer is yes, then it might be time to outsource.

To evaluate whether to go the internal or external route, it is vital for companies to have a comprehensive register of its fleet because only then will they be able to start tracking the ‘hidden’ costs that include licencing, traffic fines (and redirecting those to the driver at the time of the offence), service schedules, certificates of compliance where necessary, fuel use and insurance.

“Other factors come into play when evaluating the fleet management process,” says Pillay. “For example, there is considerable office politics involved in coming down hard and heavy on the top salesperson for getting too many speeding fines whereas an external fleet company does not get involved in those internal affairs and can simply redirect the fine.”

“Another element to consider is an external company can provide cost benefits through its relationship with the manufacturers and the discounts it has negotiated for labour and spare parts.

“Where a growing company finds its fleet expanding, it may well have to hire additional staff to assist with the management process and this expense also has to be weighed against the cost of a Full Maintenance Lease situation where all these different items are packaged into one single monthly rate.”

Because they are experts in the field, fleet management companies tend to be more aware of best practices in the industry. They can bring this knowledge to bear for the benefit of your company.

Because they manage many fleets at once, they are better able to benchmark your fleet’s performance against others in the industry and this allows them to identify and address potential problems and inefficiencies sooner, or avoid them altogether.

They are also able to advise their client companies as to the most proven cost-effective and value-producing policies and procedures, bypassing the trial-and-error approach that isolated companies often take.

In a recent analysis for a major national company with headquarters in Johannesburg, EQSTRA Fleet Management showed by converting to a fully managed lease scenario it could affect monthly savings for the company of around R99 500 on its fleet of 195 vehicles.

Of this, by converting a number of cars to diesel, a fuel saving of R13 000 a month could be achieved.

And that, with fuel now R17 a litre, is conservative.

In a nutshell, leasing makes it easier to get more car for less money. This is because you only pay for the value of the car that you drive, instead of buying and owning the entire worth of the vehicle. When a lease expires, consumers do not have to be concerned with selling or trading in a vehicle they no longer want, nor will they have to worry about settling any outstanding fees or shortfall amounts.

However, buying frees you from the oversight that is involved in leasing. The car is yours to do with as you wish. Ultimately, it is up to smart car buyers and fleet experts to weigh the pros and cons, determine their needs and decide what choice best suits their business.

There are many things to consider when choosing a fleet management company. While cost is an important consideration, it should not be the only factor. Leasing and fleet management companies can vary significantly. While some of the larger leasing and fleet management companies may have more resources, they often lack the flexibility of small to midsize companies.

Many fleet management companies do more than just lease cars. Whether your fleet is big or small, you need a company that offers a full array of fleet management services, from insurance and nationwide delivery and maintenance, to roadside assistance and fuel management.

The ideal leasing company will make customer service a top priority and will treat you like a partner. Every business is different, so you will want an expert who will listen to your needs and be ready to offer flexible solutions tailored to your organisation.

 

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Topics: Management

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