How can you measure the ROI of your telematics investment?

1 The ROI formula

The basic formula for calculating the ROI of any investment is:

ROI = (Benefit - Cost) / Cost x 100%

This means that you need to subtract the total cost of your telematics system from the total benefit it generates, and then divide that by the cost and multiply by 100% to get the percentage return. The higher the percentage, the better the ROI.

2 The cost of telematics

The cost of your telematics system includes the upfront and ongoing expenses associated with installing, maintaining, and using the technology. This includes hardware such as GPS trackers, sensors, cameras, and dashboards; software like fleet management software, driver behavior software, and reporting software; subscription fees to access the software and data services from your telematics provider; installation labor and materials; and training for your staff on how to use the system effectively and safely.

3 The benefit of telematics

The benefit of your telematics system is the value that it adds to your fleet operations in terms of improved efficiency, productivity, safety, and compliance. For instance, it can result in fuel savings from optimized routes, reduced idling, and improved driving habits; maintenance savings from preventive maintenance, fault detection, and remote diagnostics; insurance savings from lower risk, better driver behavior, and enhanced security; operational savings from improved dispatching, scheduling, and asset utilization; and revenue growth from faster delivery, higher quality, and more transparency.

4 The ROI calculation

To calculate the ROI of your telematics investment, you need to estimate the cost and benefit of your system over a given period, such as a year. For example, let's say that you have a fleet of 50 vehicles and you invest in a telematics system that costs $500 per vehicle for hardware, $50 per vehicle per month for software and subscription, $100 per vehicle for installation, and $5,000 for training. This adds up to a total cost of $55,000 for one year. Additionally, you estimate that your telematics system will generate fuel savings of $10,000, maintenance savings of $15,000, insurance savings of $5,000, operational savings of $20,000, and revenue growth of $25,000. This means that the total benefit of your system for one year is $75,000. Using the ROI formula, you can then calculate the ROI of your telematics investment as 36.36%. This indicates that for every dollar you spend on your telematics system, you get back $1.36 in return - a positive and profitable ROI.

5 The ROI evaluation

Evaluating the return on investment (ROI) of your telematics investment is essential for understanding its effectiveness. Ask yourself: is the ROI positive or negative, high or low, meeting or exceeding your targets, and consistent or variable? Tracking the ROI over time can help you identify changes due to seasonality, market conditions, and customer demand. By assessing the ROI of your telematics system, you can gain insight into how it is impacting your fleet operations and how you can optimize it for maximum value.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?