Six Questions a Fleet Manager Needs to Ask About Outsourcing
In this blog post we consider and answer six questions, aimed at helping fleet managers decide whether to outsource, what and who to. They are:
1.Which processes are you thinking of outsourcing and why?
Outsourcing is the ‘contracting out’ of a business function, such as the management of the vehicle fleet, to a third party specialist without your business losing the overall control. The appointed third-party organisation takes control of the function and becomes responsible for its success.
Outsourcing allows you to concentrate on your core business activities and, at the same time, save money, be more flexible and manage growth effectively. It also allows your business to gain access to outside management expertise and technologies.
The benefits of outsourcing can be substantial. For example, outsourcing can free up the business to focus on its core strengths, allowing staff to concentrate on their main tasks and on future strategy.
Outsourcing, if implemented correctly, should also reduce the overall cost to the business of operating the fleet and may involve re-pricing, re-negotiation and cost re-structuring.
Outsourcing can provide access to the wider fleet experience and greater specialist knowledge of the outsource partner based on the years’ experience they have had in managing clients’ fleets and the best practice they have built up or acquired over time.
All fleet services will then be delivered to pre-determined levels with SLAs and KPIs firmly in place to ensure successful service delivery.
2.What are the costs of doing it in-house?
When outsourcing a business function, it is important to remember that, however experienced an inhouse department is, managing that particular function is a departure from the organisation’s core business.
However, a specialist fleet management provider will not only be up to date with the latest legal requirements and industry practices but will be able to bring a range of technical skills and expertise that may be lacking in the client company.
This means that any changes in the market place, new developments or innovative ideas they may have can be used to gain an advantage and increase the benefits to the business.
3.What is the return on investment?
All fleet spend should be benchmarked and monitored – from the biggest costs, such as vehicle leasing and fuel – the two largest costs – to the smallest.
Only by accurately measuring the existing spend will it be possible to quantify any costs savings that outsourcing can generate. The old adage of ‘if you can’t measure it, you can’t manage it’ certainly applies here.
ROI can be based on the levels of savings generated or on other pre-determined parameters based on service delivery. ROI can vary from as little as 2:1 to as much as 8:1 or even 10:1 on a three or four year contract, depending on the client fleet and the circumstances involved
To ensure service delivery targets are being met and delivered, service level agreements (SLAs) and KP!s should be built into the agreement to cover a whole host of operational features and processes.
These can include checking accuracy and delivery of data and reporting, managing external suppliers, key compliance areas, timeframes for key processes such as vehicle ordering and the management of vehicle downtime.
The use of the latest technology systems by the outsource partner makes this process easier to manage and to quantify, as well as providing the conduit for handling all data from external suppliers.
4.What is the cost of not outsourcing? (eg, will a business suffer because it cannot afford to invest in the expertise an outsourcing partner might provide?)
For most businesses, the only reason they have a fleet in the first place is to mobilise their workforce or reward their employees.
So, it so it should be the job of the fleet management specialist to ensure that staff are happy and comfortable, taken care of when they need help, and given the right tools to do their jobs.
Somebody within the organisation will still be needed to work with the chosen fleet management provider at a strategic level.
This will ensure that there is a match in terms of the personalities involved, that systems are employed which are easy to use and interrogate, and that meaningful, easily accessible management information is readily provided to help the business’s ability to make good decisions.
5.Have you checked that any potential supplier is capable of limiting your cost and not interested solely in gaining your business and then massaging up your costs over time?
The new provider needs to demonstrate transparency in everything they do to provide complete peace of mind to the client. If you’re going to outsource the whole, or even part, of your vehicle fleet, it is important to know that you can completely trust that partner and work with them on a daily basis.
6.What are the risks of outsourcing against those of keeping the processes in-house?
One of the key risks of keeping fleet management processes inhouse is the fast moving pace of change within the UK fleet market and the risk of becoming outdated very quickly.
By retaining the fleet management function inhouse, this increases the chance of missing out on the latest changes in the marketplace in terms of new vehicles, the latest legislation, new technologies, and new working practices.
For the fleet outsource partner, however for whom this is their daily occupation, these things will be a matter of course and the client can benefit from this constant updating in knowledge.
CLM provides a comprehensive range of fleet services on either a fully or partially outsourced basis to help support internal resource. To discuss any aspect of running your fleet, please contact us and one of the team will be in touch very soon.