Stretch Your Budget Dollars by Minimizing Waste

Reducing fleet costs is a constant, never-ending struggle for all fleet managers, especially since every aspect of fleet management revolves around money. While there never seems to be enough money to go around, one of the less talked about aspects of fleet management is the amount of budget dollars that are wasted every year.

If we are honest with ourselves, most of us will grudgingly acknowledge that there are wasted dollars in our fleet budgets. The overwhelming majority of fleet managers are good stewards of corporate funds so budgetary waste is not blatant but often comprised of the cumulative impact of numerous hidden inefficiencies – the fiscal equivalent of a death by a thousand cuts. This situation is best resolved by a quote attributed to Henry Ford that says: “If you watch the pennies, the dollars will take care of themselves.”

Focus on Minimizing Waste

In lieu of requesting additional budget dollars, one course of action is to stop the waste of existing dollars. There are a number of fleet-related areas where waste occurs. For example, how many budget dollars are wasted in unnecessary over-spec’ing of vehicles, keeping under-utilized assets on the books, or non-compliance with scheduled preventive maintenance intervals that result in unproductive downtime?

Often, it is the people closest to day-to-day operations who are best at identifying waste. Therefore, seek suggestions from supporting departments and drivers on ways to reduce unnecessary expenditures, or ways to streamline fleet procedures. Examine the entire vehicle lifecycle for opportunities to eliminate waste.

Often, cost-reduction initiatives focus on operating expenses, but depreciation is a fleet’s largest annual expenditure. Are you maximizing the resale potential for all assets? Or are your remarketing practices wastefully leaving money on the table?

Likewise, what about overloading? This may be perceived as strictly a safety issue, but overloading is another way precious fleet dollars are wasted. Overloading shortens a truck’s service life and increases operating expenses. In fact, fleet maintenance surveys consistently show that overloading is the No. 1 cause of unscheduled maintenance for trucks.

This is an avoidable expense. In addition, there’s a direct correlation between vehicle weight and fuel consumption. Every pound of extra weight requires an engine to work harder, increasing fuel consumption. For instance, an extra 100 lbs. in vehicle weight can reduce mpg up to 2%. Conversely, every pound deleted from curb weight is converted into revenue-generating payload.

Driver-Inducted Waste

At its most fundamental level, waste involves consuming resources through inefficient or non-essential activities. This is not just waste, but wasteful. The greatest amount of waste occurs with the fuel budget. If up to 30% of a vehicle’s fuel efficiency is impacted by driver behavior, you need to minimize this inefficient use of corporate assets. In fact, many of these behaviors are in violation of fleet policy.

Let’s start with one of the most wasteful of all fleet activities – unnecessary idling. Until the advent of telematics devices, unnecessary idling was not perceived to be a major problem for fleets. But, once engine data was captured by fleets on a large-scale basis via telematics, it quickly became apparent that idling represented a significant “hidden” problem. The amount of unnecessary idling varies by fleet, but some fleets have recorded idling as much as 20% of the time.

Besides unnecessary idling, there are many other ways that fuel dollars are wasted, ranging from inefficient routing to drivers not being price conscious when refueling. But, what about having drivers ensure that tires are properly inflated as per fleet policy? Driving on under-inflated tires is not only dangerous but wastes fuel dollars as well. This is the easiest, most cost-effective (and most neglected) way to boost fuel economy and avoid wasteful fuel expenditures. Keeping tires properly inflated increases fuel efficiency by 3%.

Cost Control by Fleet Policy

Before implementing new fleet initiatives requiring new dollars, let’s make our No. 1 priority to stop the waste of existing dollars. The most effective way to reduce waste is to increase compliance with fleet policy. Fleet policy must be a powerful component of a company’s overall cost-control strategy.

The best time to control waste is before it occurs and the way to do this is by establishing policies and procedures that inhibit unnecessary spending and protect corporate assets from avoidable expenses. Fleet policy provides the mechanism to curb money-wasting behaviors, such as unauthorized rogue spending that often occurs in fleet field operations.

The overwhelming majority of drivers want to do what’s right for the company; however, just because your company implements a written fleet policy doesn’t mean drivers are following it or even aware of it. In a final analysis, the majority of fleet waste occurs because of non-compliance with fleet policy and, conversely, the lack of enforcement of it.

A common problem is a fleet manager communicates policy to the drivers’ managers, but the word doesn’t get down to the individual drivers. To increase driver compliance with fleet policy, it is crucial to engage in communication directly to the drivers whenever practical and appropriate.

It is proven that increased fleet policy compliance will reduce unnecessary costs. Policy compliance is a crucial part of a company’s over-all cost-control strategy. Based on my experience, the best-managed fleets are those whose drivers adhere to a written fleet policy.

A fleet policy should be a living document that is updated annually. As changes occur within your company, revise your procedures to reflect these changes. Likewise, eliminate those policies that have become outdated. What was right yesterday may not be right today. When developing or re-evaluating fleet policy, solicit the participation of all affected departments, such as sales, administration, purchasing, maintenance, and accounting, in addition to vehicle user group, such as operations and customer service.

Scofflaw Drivers

Vehicle violations, such as traffic tickets and parking violations, represent 1-3% of total fleet costs. However, the total cost will vary by fleet depending on the cities and states where vehicles operate. This is an area ripe with waste. Some drivers are egregious in their violations. In my mind, vehicle violations are not the cost of doing business; it is a needless waste of dollars.

Let’s target flagrant scofflaws and stop the waste. Speeding is a common moving violation. Reducing driving speed not only reduces violations, but it also conserves fuel. For every 10 mph of speed reduced, fuel economy improves by an average 4% depending on the vehicle.

By involving drivers and field management in the fleet policy decision-making process, it increases the likelihood of buy-in and support of policies. Similarly, consider creating a driver focus group, with rotating members, and hold periodic meetings to solicit feedback on the fleet program and solicit their recommendations on how to eliminate waste. As part of your annual fleet policy review, you should survey your drivers to give them an opportunity to express their opinions or dissatisfaction about fleet policies that govern them.

Let’s make our No. 1 priority to stop the waste of existing dollars. Again, the most effective way to reduce waste is to increase compliance with fleet policy, which a powerful component of a company’s overall cost-control strategy.

Lastly, if a fleet manager wants to minimize waste, you need to pay attention to the details of fleet management and put into practice the saying: “If you watch the pennies, the dollars will take care of themselves.”

Originally posted on Automotive Fleet