by Johan van Niekerk, Fleet Solutions Consultant, Fleet Domain, a member of the Argility Technology Group.
Fleet operating costs remain one of the top three expense items on any company’s balance sheet. This is not expected to change in the future. Over the past three years fleet expenses increased by 12%+ per annum. To manage or even reduce fleet expenses, companies must implement policies covering all aspects of fleet management.
Finance: Financing vehicle assets can be done in several ways e.g., cash, hire purchase, financial lease - with or without a balloon payment - or an operating rental. Each of these methods have distinct advantages and disadvantages.
Where a third party takes risk for the final settlement or payment applicable - as in the case of a lease with a balloon payment or operating a rental with a residual value - excess kilometres and make reasonable costs (this is what we refer to in the fleet industry for penalty charges at the end of a contract for excess kilometres and vehicle damages).
These are influenced, by selecting a market related value on future terminations, at inception.
Maintenance and Tyres: Various options are available in the market all with benefits and risk attached.
Companies can elect to pay for maintenance/tyres as and when needed - allowing for future inflation trends and price increases on maintenance items.
Alternatively, one can elect to make use of a third-party service provider which has the requisite products as follows:
As noted above, companies and fleet managers find it very difficult to manage and control these expenses, as they receive multiple reports from different service providers.
The FleetDomain Fleet Management Information System (FMIS) enables businesses to receive all necessary reports and measurement tools on one consolidated platform. This system produces reports that flag bad driving behaviour, which in turn negatively influences maintenance, tyre, fuel, fines, and insurance costs, with great savings to the company.
Fleet expenses are currently 9% to 15% out of line due to companies not using available fleet management tools.
Organisations managing and operating fleets should have an FMIS tool that can manage driver behaviour and control expenses under thumb at all times.
It is a known fact in the fleet industry – “Without managing driver behaviour savings in fleet expenses will not be achieved”.
This brings us to the last point of a cost-saving influencer: driver training. On average, driver training costs 0.340% to 0.95% of a vehicle's total cost of ownership (TCO). This is calculated on averages for small passenger/light commercial vehicles to heavy commercial vehicles.
Significant savings can be achieved by using a Fleet Management Information System (FMIS) and Driver training. These savings will far exceed the cost of having these valuable tools and services on hand.
Want more information as to how FleetDomain can help you – Contact our Business Consultants on 011 712 1300, email info@fleetdomain.net or visit our website, www.fleetdomain.co.za
A conservative estimate of the increase in Fleet Management operating costs for the past two years is between 6% and 12% per annum. This estimate factors in new vehicle prices, maintenance, and tyre costs.
It is becoming increasingly important for companies to put policies and procedures in place to manage all areas of their fleet operations and driver behaviour to ensure best practices are applied to minimise the impact of inevitably increasing costs.
There are many areas to which such policies can be applied, and these include:
Each of the above will require a specifically designed and implemented practice to obtain the best results.
* Below is an example of a passenger vehicle's lifetime cost in a fleet.
| Costs | Per Month | Lifetime | CPK | Retail% |
|---|---|---|---|---|
| Finance | 7 163 | 343 824 | 88% | |
| Maintenance | 1 345 | 64 560 | 17% | |
| Tyres | 1 809 | 86 832 | 22% | |
| Fuel | 6 118 | 293 664 | 75% | |
| Insurance | 1 462 | 70 176 | 18% | |
| Total | 17 900 | |||
| TCO | 859 056 | 573 | 220% |
You also need to factor in the following:
One area that should be carefully examined and understood is the implementation of the nearly 20-year-old Administrative Adjudication of Road Traffic Offenses (AARTO) Act.
The act is being signed off by SA’s President, which can be a lengthy process. Once signed off, all the provinces and municipalities will become part of the legislative processes of AARTO, which is replacing the current Criminal Procedures Act (CPA). This change will benefit corporate fleet owners with drivers as well as private vehicle drivers.
The main objective behind this move is to simplify the management of road offences, which driver actions or vehicle conditions can cause. Both can attract fines.
Moreover, these changes should encourage drivers to become more responsible with driving habits and hopefully generate respect for traffic road rules and regulations.
Going forward, corporate concerns with company vehicles and drivers must be capable of redirecting fines received to the responsible driver who created the offence. Even more importantly, company drivers must be aware of the validity of their licences and negative penalty point status. Procedures must be implemented to create licence status awareness, possible training programmes, and human resource management intervention.
Drivers who continuously disregard road rules receive more fines and have more accidents, causing damage to vehicles and possible deaths. All the foregoing gives rise to increased fleet operating and human resource costs.
The FleetDomain Fleet Management Information System (FMIS) can consolidate these expenses on one platform. Various report options are available to best manage all areas of fleet expenses, which are expressed as a total cost of ownership or as a cents per kilometre value.
In the future, all fleet operating costs, plus driver behaviour costs and well-designed and implemented company policies, will combine to ensure a reduction in TCO with an improved return on investment.
We'd love to hear from you if you want to learn more or have any questions! Feel free to contact us at info@fleetdomain.co.za or connect with us via our Website. We're always here to help and look forward to starting a conversation.
Johan Van Niekerk – Fleet Consultant - FleetDomain, part of the Argility Technology Group.
Managing a fleet of passenger or commercial vehicles is no easy task in today’s economy, with issues including inflation, interest rate hikes, and more playing a significant role. Key factors contributing to rising costs are best explained by looking at the Total Cost of Ownership (TCO) of a vehicle over its useful life in the fleet operation.
Cost per category as a TCO is measured as a percentage of retail price for pass/LCV and Funded (Net Present Value) for commercial vehicles.
Looking at primary expenses over the life of a vehicle, there are areas in which savings can be achieved. The second major contributor to cost reduction is to ensure you purchase the correct vehicle for the required application.
A fleet management principle states, “Unless the behaviour of a driver can be changed, no savings will be achieved.” This is a sobering thought for fleet owners and managers.
The biggest contributors to vehicle costs are depreciation and fuel. The table below shows some driver actions that influence fleet costs:
Managing driver actions will require deploying a reputable GPS/Tracking device. The information obtained from these devices assists in managing fleet costs and drivers.
A Fleet Management Information System (FMIS) will help effectively manage fleet operating costs. Driver training will add to the overall savings, enhance safer driving, and minimise risk for the company.
The FMIS can record all vehicle and driver details flagging - service intervals, license renewals, COF tests, PRdPs, GPS/Tracing, accident history, and driver and vehicle fines incurred with excellent and detailed reports.
By using the information and effectively managing the reports produced by these two systems, fleet costs can be reduced by a healthy 3% to 12%.
On a passenger vehicle with an operating cost of R 726 240, a 5% saving represents
R 36 315. FMIS/GPS/tracking/driver training cost for the period is R 17 760 (2.5% of TCO)
On a commercial vehicle with an operating cost of R 4 802 460, a 3% saving represents a saving of R 144 073. FMIS/GPS/Tracking/Driver training cost for the period is R 50 400 (1.05% of TCO)
Focusing on fleet management costs supported by technology that gathers information, produces good reports, and assists in changing driver behaviour will yield savings due to the improvement of safety and risk.
In 2023, FleetDomain took our Corporate Social Investments (CSI) to the next level. Our aim is to give back to the communities we serve, not only those in which we live but also those who are not as fortunate as us.
At FleetDomain, it is all about making a positive impact.
We extended our support, love and heart to the following initiatives:
Our corporate social investments reflect our transformative impact on people and communities. We’ve established a strong foundation for responsible corporate citizenship and sustainable change by aligning our CSI efforts with our company values. As we look ahead, we're continuing to innovate and collaborate with stakeholders to address evolving societal challenges and create a better, more equitable future.
"We may make a living by what we get, but we make a life with what we give." - Winston Churchill
By Wanda Kriel - ATG People Lead and Special Projects
by Johan van Niekerk, Fleet Solutions Consultant, Fleet Domain (Pty) Ltd, a member of the Argility Technology Group (ATG).
Effective fleet management and cost savings can be achieved when the vehicle life cycle is well planned from start/selection to end/remarketing. The lifecycle of a fleet follows a logical process that encapsulates all the events that have a bearing on costs. It covers: vehicle selection; purchasing; financing; operations; replacement, and re-marketing. All of the foregoing form part of a total business programme that involves vehicles and drivers. The lowest and most efficient fleet costs are achieved when all these elements are synchronised to work in harmony.
Being able to manage a fleet effectively, taking all these matters into consideration, is not an easy task.
All the foregoing processes and requirements can be managed by well developed and tested fleet management information system which is available on the market.
FleetDomain Online Business Systems (Pty) Ltd have specifically designed and developed systems available that can cater for the different levels of fleet management.
Kindly contact us via email info@fleetdomain.net or our website so we can determine your specific requirements.
by Johan van Niekerk, Fleet Solutions Consultant, FleetDomain – part of the Argility Technology Group.
The internationally accepted format of managing a fleet effectively, is that of: Assets; Fleet Operations; Driver and Safety Management. These matters are in turn all inter-related when it comes to determining the total cost of ownership (TCO); cents per kilometre (CPK) or cents per hour attached to any one vehicle.
Assets incorporates:
Managing depreciation influencers during the life cycle of a vehicle can result in a significantly improved resale value at the end of the lifecycle of a vehicle in your fleet. Depreciation as a percentage of the retail price is normally estimated to be between 35% and 47%.
Fleet Operations incorporates:
With passenger and light commercial vehicles costs are measured as a percentage (%) of the original retail price. In the case of commercial vehicles same are measured as a % of the net funded value inclusive of accessories and body fitments. It should be noted that values can differ dependant on the operational, or conditions of usage of the vehicle. Controlling these costs and managing change processes to achieve savings will result in an improved TCO.
Having these costs reflected in a Fleet Management Information System (FMIS) and managing the exceptions against stated objectives, will allow the fleet manager to make objective decisions to reduce costs.
Driver, Safety and Risk Management encompasses vehicle plus driver, licence renewals. This also covers company policies managing all aspects of vehicle usage including: drivers; driver training; accident management; GPS/tracking and reporting.
Ensuring that vehicle and driver licences are renewed timeously, safeguards companies against insurance claims not being honoured and possible lawsuits.
Policies governing driver’s eligibility to get behind the wheel of company vehicles; rules around car allowance vehicles; the necessary training required to improve driver quality; vehicle safety procedures – inclusive of COVID dictates - all contribute to a better and improved fleet operation with a subsequent reduction in costs.
It is a fact that: unless the behaviour of a driver can be changed; no savings will be achieved.
Fitting a reputable GPS/tracking unit to fleet vehicles – one that can report on the aspects that cost a fleet owner money such as speeding, harsh braking, excess idling to name just some - will have a direct savings result in fleet operating costs.
Example: reducing speeding; harsh braking and excess idling; will cut maintenance, tyre, and fuel costs. Furthermore, fewer accidents and fines received by driver will have cost reduction benefits.
Accidents and increased vehicle costs have a direct effect on the resale value on termination of a fleet vehicle.
Although the AARTO demerit system and process surrounding same was found to be unconstitutional, the problem of fines received by drivers still exists.
Companies should be aware of the number of fines received by a driver and for what reason.
Example: Drivers receiving fines for speeding can result in more accidents which can become an HR problem with associated increased costs.
It is important to take a holistic view of Fleet Management. Companies operating a fleet need to invest in a proven, tested Fleet Management Information System (FMIS) and a reputable GPS/tracking system supplier. Moreover, driver training needs to be performed by a certified/recognised vendor.
By investing wisely in this way – the business will experience positive changes around safety and risk issues with a definite improvement in return on investment (ROI).
Should you require any additional information, guidance, or training to improve the above fleet management cost contributor’s contact us on:
011 712 1300, email info@fleetdomain.net or visit our website, www.fleetdomain.co.za
Brief Biography: Johan van Niekerk, Fleet Solutions Consultant - FleetDomain
He has 38 years’ experience in fleet management, fleet sales training and consulting. Van Niekerk has a profound understanding of the fleet management industry, including funding options, safety and risk assessment, plus the development of safety, driver and vehicle policies.
Over the years, he has gained experience conducting fleet evaluations and audits, plus providing fleet management training to executive and various levels of management personnel. He has also conducted fleet sales training courses for manufacturers, automotive groups and dealerships.
Van Niekerk places improvement of ROI in corporate enterprises and parastatal organisations through fleet optimisation as his main business objective. He also assists businesses with budget development, scenario analysis, forecasting and ultimately the entire management spectrum of corporate fleets from procurement through to disposal.
