Easy steps for reducing fleet costs
Managing a fleet is expensive. You don’t want to cut corners with safety, your drivers, or customer satisfaction – so how do you reduce costs?
In this article, we take a look at some simple steps you can take to reduce fleet expenses.
Fleet management expenses.
No matter what kind of business you run, if you manage a fleet of company vehicles, chances are it’s one of your most significant expenses. Beyond the purchasing price of the vehicle, you have fuel costs, regular maintenance, insurance, and any ELD or GPS services you utilize.
The biggest costs to consider are the vehicles’ total cost of ownership – or TCO. TCO includes:
? Capital – Every time you spend money on your fleet, there is a risk to your return on investment.
? Repairs – As your vehicle ages and incurs inevitable wear and tear, repair costs increase.
? Depreciation – All vehicles depreciate as they age.
? Administration and licensing – although these vary between types of fleets and vehicles, administration and licensing can be expensive.
Depending on the type of vehicle your fleet employs, one study found that TCOs range from USD$15.90 to $49.62 per mile. While this study was performed on larger trucks and trailers – not smaller fleet vehicles like cars and vans – it is still quite a staggering number.
Regularly calculate your TCO.
It’s hard to know where you can save if you don’t know exactly what you’re spending. Calculating your TCO for each vehicle in your fleet will give you the insight you need to become more cost efficient.
Once you know your TCO, you can begin looking at savings strategies.
Use fewer vehicles.
You may be able to downsize your fleet without overloading or letting go any of your drivers. Eliminating even one vehicle from your fleet can result in significant savings.
If you are considering making the switch to electric vehicles – especially for urban fleets – the replacement ratio is often better than 1:1. The investment in electric will likely reduce expenses long term.
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Optimize your routes.
GPS routing is an incredibly helpful fleet management technology that calculates the fastest route to a driver’s destination based on real-time traffic data. It will save your drivers time, fuel, and money. On top of those immediate savings, optimizing your routes with GPS routing will also reduce your depreciation and repair costs over time.
Replace old parts & vehicles.
It’s not uncommon to swap vehicle parts to increase efficiency and reduce overall costs. The newer and more technologically advanced a vehicle is, the less the maintenance should cost, and the longer the durations will be in between parts needing to be replaced.
Likewise, replacing an old vehicle might have an up-front cost, but could potentially save you a lot on the TCO. Older vehicles often require more frequent repairs, have less efficient gas tanks, and in many cases, cost more than obtaining new vehicles.
Optimize fuel costs.
You can’t get rid of your fuel expenses, but you can reduce them. Some strategies to consider:
? Improving driver training to make use of fuel saving methods like cruise control and proper breaking and cut out bad habits such as idling.
? Investigate fleet cards – fleet cards can help you manage and reduce your fuel expenses.
? Plan for a larger average value of miles per gallon among your fleet.
? Make sure your vehicles are as fuel efficient as possible.
Reduce your off-the-road costs.
Part of the cost associated with fleet management is outside the physical vehicle. Your warehouse, depot, and office space are all a part of your expenses. You can do an internal or third-party external audit of these expenses to make sure you’re not paying more than you should be on utilities, telecommunications, and other operational costs.
In conclusion…
Fleet management goes hand in hand with a lot of different expense areas. Luckily, there are a lot of strategies for optimizing your expenses and reducing costs. As the age of electrification takes off, hopefully we will see more and more savings opportunities.