One consideration at many nationally or regionally dispersed fleets is the pros and cons of centralization versus decentralization of fleet management. While not a new concept, decentralization emerged as an industry trend in the 1980s designed to delegate various corporate functions to field locations allowing for the implementation of reduction in force (RIF) initiatives to streamline corporate staffs and to expand the authority of line management.
As companies expanded and grew, it made sense for local managers to handle local fleet requirements. In this context, some companies decided to decentralize fleet management and delegate fleet responsibilities to either different departments or to separate regional locations with local managers handling local fleet requirements. These managers and staff were given the control to utilize their assigned fleet assets in ways they felt best suited their immediate needs and long-term goals to fulfill their fleet applications.
Decentralization has worked beautifully for cable providers, distribution companies, delivery fleets, and many other organization; however, for some companies segmenting fleet responsibilities was not the most effective strategy. While it looked good on paper, for these companies decentralization sometimes led to mismanagement and poor asset utilization, primarily due to lack of oversight and leadership. Some companies soon discovered that while decentralization worked for sales and manufacturing, their fleet operations weren’t optimized because, in many cases, they were being managed by inadequately trained regional fleet administrators who were juggling fleet management functions on top of their other job responsibilities. While decentralization made evolu-tionary sense as companies grew, in some cases, it ultimately led to a pendulum swing back to a more centralized fleet management structure for some companies.
P&L Centers are Important Partners
Despite this shift back to centralization, managers of individual P&L (profit & losses) centers within an organization continue to have a tremendous influence over the way fleet policy is executed within their area of control. Fleet managers must partner with these stakeholders and give them latitude to influence fleet decisions to maximize the opportunity to achieve P&L objectives.
Decentralization is not for everyone and for most companies, fleet management is most effective when responsibilities are centralized within the corporate hierarchy and when the reporting relationship extends directly to the chief executive officer or the chief financial officer. In this way, the fleet manager becomes an extension of the most influential members of the organization. This perceived authority promotes compliance with fleet-related policies and processes without departmental bias to delay or thwart implementation. Centralizing or unifying control of the fleet management function at the corporate level brings consistency to the organization.
On the other hand, decentralization creates the potential of inconsistent management of policies, which can put an organization in a precarious situation. In addition, aggregating fleet responsibility centrally frees other departments and functional managers, whose core purpose is not in fleet, to concentrate their efforts in areas where they are truly the experts and to allow the fleet experts to manage the fleet.
Another disadvantage with decentralized fleet management is the diminished leverage when dealing with suppliers. Decentralized fleets do not fully take advantage of their significant market clout that a large fleet would command when suppliers are dealing with individual operations or business units.
Allowing input, and more importantly gaining fleet consensus, with field operations provides managers with the influence to properly manage their P&L objectives. If, for example, a branch manager, or a divisional manager, is responsible for their unit’s profitability, it is not out-of-line for them to have some level of influence over how dollars are expended. Many of the day-to-day activities required to run a vocational or complex fleet are best handled at the field level, such as vehicle maintenance and asset utilization. The corporate fleet function is better suited to manage interactions with vendors, the establishment of policy/procedures, driver communication, or management of fleet metrics. Many companies recognize that a combination of centralization and field participation is the best mix of fleet responsibilities.
There are certain issues best handled at the corporate level, while others are best handled at the regional or local level. For instance, vehicle selection, lease vs. buy, replacement criteria, and supplier selection, should be a central fleet function with input from all fleet stakeholders. These are functions that field operations are generally not equipped to handle, either from a personnel or resources standpoint. However, end-user feedback and participation in these important acquisition decisions is critical and should be solicited.
Centralized Management Requires Collaboration
Centralization doesn’t mean just issuing mandates to field operations. You can’t sit in a corporate office and simply hand down orders. Fleet managers need to view themselves as part of a team with field operations to solicit input from all parties, so the corporate procurement/fleet department can negotiate on everyone’s behalf, as well as carry out fleet policy and seek to achieve fleet metrics.
A corporate fleet manager has to be receptive and flexible to the needs of field operations. However, open-minded doesn’t mean being open-headed. You must listen and entertain new ideas, but you are the fleet subject-matter expert when dealing with fleet. If the users and other field managers feel empowered, it’s a win-win situation. Ultimately, you need to make certain that all stakeholders, including field management and end-users, are involved in the fleet management process so you can help them achieve their P&L objectives.
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Originally posted on Automotive Fleet