The advantages of fleet outsourcing

Fleet outsourcing a popular global practice

South African businesses have been very slow in adopting fleet outsourcing, despite the benefits, says Dr David Molapo, Head of Standard Bank Fleet Management.

While Molapo believes the reasons for this are complex, he says many people simply believe it to be more expensive.

Any number of services, be it procurement, maintenance, finance, fuel management, tolls and traffic fine management, vehicle inspections, insurance, accident management, vehicle tracking and monitoring, vehicle usage optimisation, driver optimisation or route optimisation, should be done for any vehicle deployed for business purposes.

Companies routinely pay for these directly and indirectly, through the salaries of staff employed to spend their time on these functions. But the true picture emerges when fleet managers or CEO’s tally up the separate costs of vehicles managed in-house.

Molapo says each of these services, when outsourced to a reputable fleet management specialist, is likely to be done better, more efficiently and with greater bulk-buying power.

While fleet outsourcing is potentially a more efficient option to manage a fleet, a company has to compare the outsourcing cost with the full cost of vehicle ownership.

Also read: Outsourcing transport the way to go

Often it’s only the companies with sophisticated financial and operational systems that can analyse and produce these figures. Smaller companies, where the role of a fleet manager is often given as a side-line function to a general staff or office manager, very seldom have the inclination to make a proper comparison.

Per Molapo, another factor is over-optimism, which pushes away thoughts of breakdowns, accidents and even predictable wear-and-tear on a vehicle. It makes it difficult for the users of a brand-new company car to imagine what it might look like in five years’ time.

In contrast, the fee that a company pays to an outsourcing partner can be a brutally realistic expression of all the costs of a vehicle, including future maintenance costs, which is smoothed into monthly payments to make it a predictable expense item.

Outsourcing is not a clear, one-size-fits-all package.

Furthermore, South Africans gravitate towards ownership, while the basic principle of fleet outsourcing is that the ownership resides not with the company using the car, but with the outsourcing partner.

Rather, outsourcing is extremely flexible so that one company may choose to outsource only the ownership and maintenance in the form of Full Maintenance Rentals, while another might throw in roadside and breakdown assistance, vehicle inspections, driver monitoring or vehicle utilisation into the bundle.

Another might choose to outsource only its carpool vehicles, excluding those allocated to specific individuals in the company.

The choices and permutations of fleet #outsourcing can be bewildering.

Fortunately, the flexibility allows fleet-owning companies to outsource incrementally, increasing the outsourced functions as the company and fleet grow.

Molapo says outsourcing does not mean a company gives up control of its fleet, or that the fleet disappears altogether from the focus of company management.

On the contrary, he says, if a fleet is outsourced to a specialist company worth its salt, a huge amount of information can be unravelled about the fleet’s operations, which give the company even greater fleet control.

The focus of the fleet manager can then shift from the distractions of the day-to-day management of vehicles to the management of the contract with the outsourced partner, and to strategic thinking about how to build and maintain an ever more efficient fleet.

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