The cost of operating fleets is ever on the rise. Fuel costs are volatile, maintenance is getting costlier, and gaining holistic visibility over the entire fleet is difficult without proper tools. Fleet managers and business owners have tighter budgets than ever. So, it’s crucial to relieve pressure on the bottom line as much as possible.
So what can business managers do to reduce fleet costs and maintain profitability in the current situation?
Fleet managers must strategically rethink fleet components and find ways to cut costs without affecting the quality of work or delaying shipments. In the following post, we take a look at some of the top ways to reduce fleet costs while maintaining optimum (or even improving) fleet efficiency.
Ways to reduce fleet efficiency
- Conduct a thorough cost analysis
If you want to reduce fleet costs, you will need an accurate grasp of the overall fleet expenditure. As a fleet owner, you can measure the entire cost of running and maintaining your fleet by calculating the total cost of ownership (TCO).
A thorough total cost of ownership analysis allows you to find cost burdens and strategize methods to reduce expenditure. You can calculate TCO by isolating fixed costs (e.g., permits, licenses, loans, etc.) and tracking variables like fuel, maintenance costs, travel allowances, etc. Continue tracking TCO over time, and you will find the necessary changes you need to make to lower this cost.
- Invest in centralized fleet software
As mentioned above, gaining a holistic overview of fleet operations can be difficult, especially for larger fleets. There will be multiple points of disconnect, and sending updated data to the entire team on time will become hectic. A centralized fleet management software consolidates data from multiple touchpoints and presents them in an easily-digestible manner.
Nowadays, advanced AI-powered fleet management software provides additional insights that individual departments cannot realize. Consolidating information in such software suites increases efficiency while reducing redundancies, providing fleet managers with a more holistic perspective of the fleet.
- Manage warranties and insurance
Warranty management is very often an overlooked part of fleet management. When operating a fleet of commercial vehicles, you need to look for ways to avoid paying for repairs and replacements as much as possible. Keep up with the warranties and insurance to avoid paying for parts covered under these contracts.
If you find maintaining records of multiple simultaneous contracts difficult, you can look for spreadsheet cost-management templates or feed all the information to fleet management software. Centralizing the data makes it easy for multiple departments to access and utilize it.
- Replace and dispose of older vehicles
Older and unused vehicles cost more. For older vehicles, you might want to replace them periodically to reduce the overall cost of maintenance, downtime, repairs, and safety risks. When you remove vehicles from your fleet, the TCO of other vehicles goes up as they might take on more mileage. However, the overall TCO will be lower than if you still had old and unused vehicles in the fleet.
Fleet resizing is another thing you need to consider in your vehicle replacement strategy. If you have extra vehicles in your fleet, find ways to improve fleet usability by renting or reselling a few vehicles. Determine vehicle criticality by factoring in the average number of trips, the number of people transported, typical use, etc. Once you know what vehicles you absolutely need, dispose of the non-critical vehicles.
- Streamline outsourced maintenance
Time and again, fleet managers have outsourced vehicle maintenance to reduce the burden on internal teams and maintain fleet uptime. However, maintenance costs can quickly go out of hand if you do not manage these service providers appropriately.
Develop performance standards for maintenance service providers and rank your vendors if you are working with multiple teams. Streamline outsourced maintenance and establish preventive maintenance schedules to ensure maximum fleet uptime and prevent unnecessary breakdowns and safety risks.
- Renegotiate contracts
During the early stages of any business, it is highly likely that you will be paying more for goods and services. However, once you are settled in, it is crucial for you to look for ways to optimize purchasing processes and renegotiate contracts if you want to cut fleet costs.
Establish fresh multi-year deals with vendors that offer better deals. A trick you can use here is to set up purchasing agreements under cooperative contracts, as they often offer better deals with minimal administrative effort.
A cost-efficient fleet requires fleet managers to pay extra attention to fuel consumption. With these above-mentioned steps, you can reduce fleet costs and improve profitability. If you have difficulty maintaining records, upload and store everything on commercial fleet management software. Modern-day FMS solutions come with advanced features like route optimization and vehicle telematics, which help in reducing costs even further.