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.
Determination of the precise total cost of ownership (TCO) related to operating fleets has always been difficult. According to Johan van Niekerk, Fleet Solutions Consultant at FleetDomain – an Argility Technology Group company, this is due to various issues including lack of information due to not capturing a holistic view of all vehicle expenses from a central source.
“As South Africa moved out of the full impact of the pandemic, significant cost increases were experienced with regards to vehicle ownership – regardless of whether they related to individual citizens or businesses managing fleets. Inflation of vehicle purchase prices, maintenance, tyres and fuel over the past three years have combined to contribute to a staggering 20% to 30% cost increase for an average passenger and light commercial vehicle,” says Van Niekerk.
According to Van Niekerk, the only way to tackle this spiralling TCO escalation is to implement a fleet management information system (FMIS) as supplied and supported by FleetDomain. “To improve the costs and risks associated with fleet operations, businesses must take an all-inclusive management approach and ensure they have the information necessary regarding accidents, fines, management and personnel.”
Van Niekerk reveals some cost comparison models in the attached table:
Comparing a selection of vehicles purchased in 2019 and 2022
“Examination of the numbers in the attached table shows that expenses must be managed, controlled and reduced in line with, or below, inflation. Unmanaged vehicle expenses can end up incurring 10% to 23% greater costs than necessary. This can be explained when one considers that fixed costs are managed by accounts, and variable costs are managed, in most instances, by fleet operations. The latter can either capture all expenses, or they can implement the use of a maintenance or fuel card. In some instances, maintenance, tyres and fuel are all managed on one card,” he explains.
Van Niekerk says companies often add a GPS/tracking device to enable them to locate assets and monitor driver behaviour. By scrutinising GPS/tracking kilometre usage and comparing it with card kilometre usage, the actual usage per month can be determined.
“It is important to understand that a GPS/tracking device is not a fleet management system. Change in driver behaviour and meaningful savings will not be achieved without relevant information regarding speeding, harsh braking, acceleration, excessive idling and all the other actions performed by drivers that cause increased maintenance, tyre and excessive fuel usage. All of the foregoing can only be achieved with an FMIS.”
Van Niekerk says in post-COVID South Africa, vehicle price increases of between 27% and 32% – dependent on models and country of origin – have contributed significantly to TCO. “However, resale values of some models improved due to the shortage of new vehicles. Maintenance and tyre replacement come in at 17% to 21% of TCO, with the actual percentage increase being manufacturer/supplier dependent. Fuel has been identified as the most changed value, having been measured as a percentage of the overall at 96% to 145% (depending on mileage and application) in the TCO stakes.”
FleetDomain’s FMIS can integrate with finance institutions, maintenance, tyre, fuel and GPS/tracking service providers placing all costs on one platform. “The FleetDomain online FMIS can assist companies to receive and analyse all vehicle-related expenses and in turn aid informed decision-making regarding model selection, driver behaviour, safety and risk management,” he concludes.
Source: IT Web
A series of blogs by Johan van Niekerk, Fleet Consultant, Fleet Domain, part of the Argility Technology Group (ATG) group.
In my previous blog, I outlined the merits of an FMIS system and the significant benefits you can expect if you deploy it – in fact in highlighting the merits of the system, I have essentially explained why you need it but just in case you remain in any doubt as to the merits of such a move, let me outline exactly why you need a Fleet Management Information System (FMIS) solution in place.
Let’s start with a brief recap.
The goal of FMIS is to reduce the total cost of ownership (TCO) and deliver an improved cents per kilometre (CPK) outcome. Basically, FMIS provides control over the entire fleet with real-time data, improved operational efficiencies and inevitably better ROI.
It is a particularly attractive proposition for fleet managers/supervisors as they leverage their drivers as assets (rather than liabilities). Software vendors like Fleet Domain, are incorporating more out-of-the-box features for driver management/behaviour monitoring – this latter is crucial, without the ability to change driver behaviour, there is no ROI. It enables businesses to manage, monitor and control their fleet with real-time data; Improved operational efficiency, and better insights that support quicker and informed decision making.
So, if you are still asking why you need a fleet management system – please read on.
Your drivers and your vehicles are amongst the core components of your business, and the management of both is vital, not only to limit costs, but to keep your company operating as efficiently as possible.
Vehicles are expensive to buy, equip and maintain, and no matter how many vehicles you have, your fleet costs probably form a large percentage of your budget. It is common knowledge in the industry that the operating cost of most unmanaged fleets are 10% to 15% higher than it should be. Aside from the depreciation on the vehicles themselves, fleet costs include items such as maintenance, tyres, fuel, accidents, licences, permits, tolls and fines. Based on the average running cost of a vehicle, it is probable that your vehicles are each costing you between R 6 000 and R 12 000 per year more than is actually necessary.
Fleet administration is time consuming and laborious. You know just how many forms need to be completed and how much time it can take at the traffic departments whenever you need to do anything that is vehicle or driver related, and if you are not aware of additional requirements, such as the number of copies, ID photos, ID book, copies of ID books, driving licences, medical certificates etc. then this could necessitate multiple trips. This in turn is chewing up valuable time that could be better spent in focusing on growing your business.
The full implementation of the AARTO system will introduce a whole new set of problems. Besides the increase in complexity and administration, it is vitally important that any fines accrued by your vehicles and drivers are managed correctly, as mistakes or misunderstandings can result in your driver’s licences being suspended or cancelled, or even the loss of your operator’s licence.
It is crucial to limit downtime of both vehicles and drivers. If they are not out on the road, they are not earning money for your business. Vehicles parked in a workshop or panel beater, or waiting for permits or licences, are not productive, and a driver waiting for a licence or PrDP cannot go out and earn money for your company. More importantly, you cannot afford to send out unlicenced vehicles or drivers, as both the financial risk and potential liability, could cripple your business.
And last, but not least, you need a fleet management system so that you can make informed decisions about the running of your fleet.
You need to ask some questions such as:
The one question you should not be asking as this point is “why do I need a fleet management system”? By now it should be obvious that an FMIS solution is not a nice to have in your business but is imperative to survival, and growth.
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
Brief Biography: Johan van Niekerk Johan van Niekerk, Consultant, Fleet Domain – a member of the Argility Group.
Johan van Niekerk boasts 34 years’ experience in fleet management, sales training, and consulting. His skills include fleet data analysis, reporting and financial expertise. He has a profound understanding of the fleet 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.
Johan 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.
A series of blogs by Johan van Niekerk, Fleet Consultant, Fleet Domain, part of the Argility Technology Group (ATG) group.
Research figures are said to indicate that the global fleet management market size is expected to grow from US $19.9 billion in 2020 to US $34.0 billion by 2025* at a compound annual growth rate (CAGR) of 11.3% during the forecast period.
These statistics reflect some Fleet Management services but predominately the GPS/tracking and card methodologies – which is not a holistic representation of the full market rather only components of it.
But let’s unpack what is meant by ‘the global fleet management market’. Often statistics like this refer to GPS tracking systems – which are not ‘Fleet Management Information Systems’ (FMIS). The latter is an entirely different matter, and without a return on investment (ROI), is nothing more than a distant dream that will never be achieved and certainly not through deploying GPS tracking only.
FMIS can be defined as a “Set of theories and applications that are combined to produce an end result of a reduction in fleet Total Cost of Ownership (TCO) and an improvement in ROI”.
Moreover, FMIS is the process through which all costs relating to a fleet of vehicles are controlled by applying a specific management discipline with recognised theories and techniques. It covers system setup from procurement through to disposal. Moreover, it encapsulates all data for full fleet management inclusive of; depreciation, maintenance, tyres, fuel, insurance, GPS/tracking, accident management, licence registrations and fines management.
In a nutshell the ‘right’ FMIS solution will provide control over:
Reporting is an essential part of any system you deploy. For example, standard reports, as well as exception reports, will immediately shine a spotlight on problem areas. These reports can be scheduled to run automatically at pre-set times. Reports can be emailed to selected recipients irrespective of being logged on!
Dashboard Indicators allow you to see the state of your fleet at a glance. Exception s are Flagged which can be drilled down to with immediate report analysis.
FMIS Is:
The deployment of FMIS leads to:
FMIS also reduces:
The goal of FMIS is to reduce TCO and deliver an improved cents per kilometre (CPK) outcome.
Basically, FMIS provides control over the entire fleet with real-time data, improved operational efficiencies and inevitably better ROI.
It enables businesses to manage, monitor and control their fleet with real-time data; Improved operational efficiency, and better insights that support quicker and informed decision making.
Moreover, to help fleet supervisors leverage their drivers as assets (rather than liabilities), software vendors like Fleet Domain, are incorporating more out-of-the-box features for driver management – this latter is crucial, without the ability to change driver behaviour, there is no ROI.
The foregoing highlights just some of the positive outcomes, however, despite this some fleet managers continue to question the need for FMIS. Even where executives accept it is essential in a digital age to get the right technology to improve performance and ROI the next step can seem daunting and that is determining which software best meets their fleet management needs.
In my next article I will explain why you need a FMIS.
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
Johan van Niekerk boasts 34 years’ experience in fleet management, sales training, and consulting. His skills include fleet data analytics, reporting, and financial expertise. He has a profound understanding of the fleet 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.
Johan 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.
