Four Strategies to Reduce Total Cost of Ownership

Reducing total cost of ownership (TCO) is one of a fleet manager’s most pressing challenges and determining a TCO reduction strategy that both fits an organization culturally and delivers results is a significant task. When determining which areas of focus will yield the most effective change, fleet managers must weigh a variety of data points from across the lifecycle and engage multiple stakeholders to find the best way forward.

The following are four successful strategies that have resulted in significant cost reductions for fleets across various industries. Each fleet realized the most benefit from these strategies when they approached these as processes that involved stakeholder buy-in, continuous review, and a data-driven approach. It’s vital to note that in order to glean actionable data for any of these strategies, fleets must leverage a platform that will automatically aggregate and standardize their data. A data platform turns data into value and helps drive effective execution of the selected strategy.

Optimize Vehicle Configurations to their Applications - For fleets that utilize upfitting and service bodies, making sure the configuration of the vehicles appropriately matches the application can significantly reduce costs and lead times. For example, a service fleet reduced lead time by approximately a month by determining that its service bodies could be replaced with different upfitting. Taking a deep dive into vehicle application can reveal that some service bodies may be able to be replaced with more streamlined upfitting choices. In addition to shorter lead times, the right upfit can result in a lighter vehicle, which ultimately impacts fuel consumption.

Improve Safety by Modifying Driver Behavior - Creating a meaningful program that impacts driver behavior can improve safety and your bottom line. For example, it has been shown that driver behavior management can reduce speeding by up to 43%. Reducing speeding, hard acceleration, harsh braking, and other risky behaviors translates to reduced accident rates and costs, increased miles per gallon, and increased driver safety. In the case of a pharmaceutical fleet, a focus on modifying driver behavior yielded a 10% decrease in preventable incidents, at a savings of over $3,000 per incident.

Optimize Fleet Size to Utilization - Idle or underutilized assets mean your fleet is leaving money on the table. Telematics allows for the capture of real-time odometers and report summaries, which gives fleet managers the ability to determine which assets are being used appropriately, which assets could benefit from being moved to a different location or use case, and which assets should be sold. In one use case, a fleet of service trucks discovered over $7 million in cost savings over three years when the organization categorized vehicles according to their idle range and made efforts to improve cost per mile.

Utilize a Company Car Program to Minimize Cost - Companies that utilize reimbursement for their fleet can often benefit from taking the time to evaluate their existing program. Fleets are often faced with increasing reimbursement expenses, especially in times of business expansion. By analyzing the breakeven for its program and determining which use cases were better served by company vehicles, a fleet for a home care company realized a reduction in per mile operating costs and reduced monthly cash flow by almost $31,000 per month.

Regardless of the strategies a fleet utilizes to reduce its TCO, fleet managers will realize the best results when they view fleet strategy as a continual process. As opportunities for continuous improvement are identified, fleet managers must continue to have discussions with key stakeholders, adjust goals, and actively manage tactical execution. Ongoing measurement and data-driven management are how fleets will continue to realize not just short-term gains but long-term cultural changes and savings.

Brad Jacobs is the Director of Fleet Consulting at Merchants Fleet and has been with the company since 2012. Brad partners with clients to identify long and short-term cost savings and policy opportunities through customized lifecycle management, analysis, technology and benchmarking. He is also responsible for project management efforts for many of the company’s strategic initiatives.