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How to reduce fleet management costs

How to reduce fleet management costs


Try These Cost-Saving Tips


Driving costs down can be a real challenge, but it’s a necessary and worthy pursuit. As you think about ways to lower fleet costs and management expenses, here are some helpful suggestions worth considering:


1. Get Clear on the Numbers


It’s difficult to get serious about cutting costs if you don’t have a concrete idea of your baseline costs. Get serious about tracking fleet costs so you know precisely how much it costs to own and operate each vehicle. This metric is called total cost of ownership (TCO).


Determining TCO is a matter of itemizing all fixed costs (like licenses, permits, financing, taxes, depreciation, etc.) and variable costs (such as fuel, parts, maintenance, tolls, etc.). If this is your first time calculating TCO, go back at least six months. This will give you an idea of the average monthly TCO.


Once you’ve determined each vehicle’s TCO, keep tracking indefinitely. Each month, hold a meeting with your team to analyze any outliers and find creative ways to drive down variable costs.


2. Optimize Purchase Processes


When purchasing vehicles for your fleet, it’s important that you do everything possible to lower your costs. You might already be doing some of these things, but it’s worth mentioning the following:


  • Always shop around and consult with multiple vendors (and make sure each vendor you interact with knows that you’re vetting their competitors as well).


  • When you find good rates and reliable vendors, negotiate multi-year contracts to bring the process down even more.


  • Use strategic purchase agreements to reduce costs. If you own a small fleet, consider forming a group purchasing organization (GPO) to help you secure better deals.


At the end of the day, it’s all about being creative and proactive. The more you pay attention to purchase details, the more room you give yourself to generate a positive ROI.


3. Get a Grip on Fleet Maintenance


Maintenance isn’t something most fleet managers get excited about, but it’s the one thing that either makes or breaks a fleet’s profitability.


To take control over this aspect of your fleet and adopt a proactive approach that sets you up for intelligent preventive maintenance, you need fleet maintenance software. At first glance, this might seem like just another expense; but if you know how to calculate the ROI of fleet maintenance software, you’ll quickly see just how much of a difference it makes.


4. Develop a Fleet Replacement Plan


Few things put a drain on your fleet’s bottom line quite like holding on to aging vehicles that are past their prime. The value of a vehicle can depreciate by as much as $6 per day. So if you want to maximize your investment, it makes sense to sell before this rapid depreciation occurs.


Knowing when to replace and dispose of vehicles comes down to tracking your TOC and creating clear and objective benchmarks. There should be no debate about whether or not to dispose of a vehicle – just follow the data.


5. Invest in Better Driver Training


You can have the best strategies for purchasing, maintaining, and replacing vehicles – but if you don’t have well-trained drivers sitting behind the wheel day in and day out, you’re going to have significant difficulty keeping costs in check.


Outside of hiring experienced fleet drivers (which can be very difficult to do in the current job marketplace), driver training is the best tool you have at your disposal. More specifically, you should focus on training drivers in fuel-efficient driving methods.


According to researchers at the Department of Energy, rapid braking, fast acceleration, and speeding reduce a vehicle’s fuel efficiency by 15 to 30 percent at interstate speeds and by 10 to 40 percent in city traffic. That amounts to an effective loss of $0.25 to $1 per gallon of fuel. (In other words, inefficient driving habits might be costing your fleet hundreds of dollars per day.)


While you can’t get behind the wheel with every driver and personally control how they brake and accelerate, you can provide more thorough training around these concepts. You can also track driving metrics and introduce incentive programs to encourage drivers to make smarter choices.


Regain Control Over Your Fleet


Overall, successful fleet management is all about dollars and cents. If your costs are out of control, it suppresses your ROI and delivers a damaging blow to the company’s bottom line. But if your costs are low and you’re able to stick within a specific budget, it gives the organization something reliable to depend on.


ROI is everything in fleet management. You’re either delivering a positive or negative return for the company. But regardless of which end of the spectrum you currently land, you can improve or strengthen that ROI by implementing the aforementioned tips and suggestions. Start with just one suggestion and try it this week. Action-takers get rewarded!


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