Reducing running costs, and using the cash that then becomes available for business growth is a constant struggle for most small and medium enterprises (SME). When it comes to reducing fleet costs, however, many business owners come face to face with a contradiction of sorts.
This is because major methods of reducing the cost of running a fleet of vehicles – not all, but most – requires cash itself. Owners of small and medium enterprises often stand before the difficult choice of investing scarce cash in making their fleet more efficient, or spending it on business expansion.
“It is essentially a short-term versus long-term decision. Investing in a more efficient fleet now will mean there will be more cash available for expansion later. But the urgent needs of an expanding business now makes it tempting to postpone efficiency investment, and to keep on limping forward with a costly fleet,” says Dr David Molapo, Head of Standard Bank Fleet Management.
These difficult decisions become easier to make if entrepreneurs know what it takes to raise to the super-efficiency levels that are being attained nowadays by the best – and not always the biggest – fleets.
The most important investment in fleet efficiency that an SME can make is by giving the responsibility of managing the fleet to a senior executive. In many small and medium enterprises, the task of fleet manager is taken on by a junior office administrator. For the junior office administrator, managing the fleet is usually one of numerous responsibilities and often they lack strategic insight and authority.
The kind of senior expertise and focus you need to make a dynamic and complex system like a fleet of vehicles efficient is expensive, and only bigger fleets can afford professional, full-time fleet managers. But the sooner the responsibility for fleet management is given to a senior executive, even on a part-time basis, the more and the sooner the fleet costs will come down.
“It is important that clear efficiency targets are given so as to make sure that the senior manager’s time spent on fleet management is actually paid for by the productivity gains. Systems need to be in place to allow managers to reduce fleet costs by pin-pointing bad driving and unnecessary trips and nowadays even providing early warning of certain types of machine failure,” says Dr Molapo.
Another crucial requirement of keeping fleet costs in check is keeping to timely maintenance and vehicle replacement schedules. The temptation to postpone the replacement of an old workhorse before it becomes too expensive, or even a much-needed major service on a vehicle, can be very strong in a SME when cash is in short supply. These are not savings; they are tantamount to pawning your vehicles for very expensive short-term cash.
Dr Molapo points to another small investment that SMEs can make to keep fleet costs low – management maintenance. For a small monthly fee per vehicle, the management of the maintenance of the vehicle is outsourced to a specialist call centre which makes sure that mechanical workshops don’t overcharge and don’t carry out unnecessary work.
Not all of the efficiency measures that a small business can implement cost money, such as the free value-added services that go with Standard Bank’s Fleet Card. Through transaction authorisation, for example, the fleet manager has information about every fuel transaction as it happens in real time. Suspect transactions are automatically blocked, and head office is alerted.
“The most important factor in all of the methods of reducing fleet costs however,” says Dr Molapo, “remains senior management focus.” It is only through dedicated attention and involvement that SMEs are able to develop crucial tools such as a working fleet policy and monitoring fuel-consumption. These businesses are able to turn their fleet from a cost absorbing headache to a competitive advantage.