There can be little argument that COVID-19, at least in the short-term, has resulted in a seismic shift in the way many businesses serve their customers.
When the pandemic hit and lockdowns occurred across the economy — shuttering retail and business establishments of all sizes — businesses and the fleets that served them had to pivot quickly to meet the surge in demand from homebound consumers. Even as lockdowns have eased in the most hard-hit cities and regions, only about 50% of consumers feel safe going to a retail store and 35% feel safe eating in a restaurant, according to a recent report by Deloitte.
It is likely safe to say that the surge in demand — with eCommerce taking center stage — is here to stay. As one major last-mile company described it, we’re in a “never-ending peak season” with no end in sight, which makes planning and strong partnerships even more important. And while you need to meet your customers’ demands for your goods or services, you also have to do so in a way that is cost effective.
To survive in the so-called today’s “new normal,” traditional fleets need to learn and keep the following three lessons that last-mile operations have perfected to make them productive and profitable.
#1. Optimize Your Lease Terms to Fit Your Business Needs
As last-mile fleets have learned, flexibility is crucial in meeting customer demands, particularly as surges wane and wax throughout the year:
- Have the right number of vehicles to meet demand. For last-mile fleets, the number of vehicles you need is a moving target. Having flexible terms that allow you to easily right size your fleet—either by scaling up or de-fleeting—ensures you do not pay for long-term assets you only need during peak seasons.
- Flexible terms. Does your provider allow you to easily extend terms or return vehicles early? If you keep vehicles on the road for an extended period, are they able to accommodate a conversion to longer-term leases that can give you a better rate?
While owning or leasing are traditionally the way fleets handle vehicle acquisitions, as the surge in demands continues, you may need to add flexibility into your acquisition strategy. Using rentals to supplement your base fleet is a way to maximize flexibility — allowing you to scale up and/or de-fleet quickly to meet demand. And you may find that a combination of rental, leasing, and purchasing is a better mix than leasing or owning alone — at least for the short term.
#2. Take a Holistic Look at Your Operations to Find Ways to Drive Down Costs
To meet customer expectations of efficient deliveries at an affordable cost, last-mile fleets have had to find ways to control costs. As the authors of the Deloitte report, “Last mile delivery after COVID-19: A world of things to solve,” observed “…the longstanding concern about how delivery costs put pressure on margins will remain. Customers aren’t willing to pay too much for delivery of relatively inexpensive products…”
It's a point well taken, and certainly one that traditional fleets are likely grappling with.
However, there are a number of ways fleets can cut or control costs while still meeting customer demands, for example:
- Take advantage of remarketing. Selling vehicles to a remarketing group for a guaranteed, up-front price can get you cash quickly.
- Consider sale and lease back. For companies that own their vehicles, selling vehicles and leasing them back immediately can improve cash flow.
- Optimize driver routes. Leverage GPS tracking to find the most efficient routes so drivers achieve more with fewer miles.
- Reinforce positive driving behaviors. Modify behaviors like hard braking and speeding by using driver scorecards. It can cut maintenance costs, save fuel, and avoid crashes.
- Streamline fleet administration. Utilizing fleet management software with features like exception reporting and alerts can make it easier to monitor key performance indicators (KPIs).
As these examples illustrate, there are many ways to control costs while maximizing efficiency. It requires scrutinizing every aspect of the operation and having a willingness to engage in out-of-the-box thinking in some cases.
#3. Embrace a Proactive & Innovative Mindset
Because last-mile delivery is experiencing explosive growth and more fleets are, by necessity, adopting this model—you need a partner who is thinking ahead and can think and act differently to address and solve your business challenges now and for the future.
These aren’t cookie cutter times, so you don’t need cookie cutter solutions. Perhaps the biggest lesson that can be learned from last-mile delivery fleets is that every operation is different and needs an individualized approach to meet the specific challenges of the market it serves.
Originally posted on Automotive Fleet