5 Steps A Fleet Manager Can Bring In To Reduce Operational Costs


With the introduction of telematics, it has become progressively easier to manage your fleet in real-time. However, fleet managers still have a lot of work to put into managing their finances.

If left unchecked, the cost of maintaining and operating a fleet can blow over! Typically, it is the perishable items such as fuel and oil, along with recurring expenses in the form of technology and spare parts that drive a hole in your budget. So how can one optimize those without hurting the fleet operations or efficiency? Read to know more.

Tips for Fleet Managers on How to Cut Operational Costs

As per the Truck Operating Costs Report of 2018, the operational costs in the trucking industry have increased by 3 to 4.6%. Interestingly, a significant chunk of these expenses is variable. Thus, modifying certain controllable factors can help you achieve optimum performance without going over your budget.

Here are the best practices to reduce operational costs:

1. Modify Your Fleet

Naturally, cutting down the number of vehicles in a fleet is one of the easiest ways to decrease the overall costs. Typically, the total cost of ownership for a light-duty vehicle is anything between $5,000-$8,000. Hence, if you were to eliminate about 100 vehicle specifications, you could save up on at least $500,000 for the year!

However, do bear in mind that reducing your fleet size may affect other vehicles of the said fleet. This extra workload will have to be equally distributed and managed.

If reducing the fleet size is not an option, you could try out alternatives such as reducing the total number of miles covered or the size and weight of the vehicles. However, such modifications may not come under your control as it may hamper with the route or require further procurement.

2. Invest in Technology

With the advancements in technology, no company would like to miss out on the opportunity to tap into the true potential offered by digitization. Fleet management software and tools are instrumental in aiding fleet management without any operational overheads.

5 Steps A Fleet Manager Can Bring In To Reduce Operational Costs
5 Steps A Fleet Manager Can Bring In To Reduce Operational Costs

From GPS fleet monitoring to scheduling maintenance and upkeep of your vehicles – useful fleet maintenance and management software can achieve it all. Additionally, they come with robust reporting features that allow fleet managers to measure and monitor the expenses and performance. Collectively, these tools establish a unified platform for all stakeholders to communicate with each other to maintain efficiency and to convey any delays or setbacks.

Driver behavioral change is one of the greatest contributions of fleet management systems. It helps address issues like idling, excessive usage of the air condition, hard acceleration/braking, and so on. Addressing these grassroots-level problems will significantly contribute to cutting down operational costs.

3. Reduce the Vehicular Lifecycle Costs

Quite often, you may think that retaining your existing vehicles in the fleet could be the best way to avoid any further expenditures. However, this decision could be one of the primary reasons why your operational costs are skyrocketing!

Studies indicate that companies that resort to sticking with their older fleet vehicles even after they cross their optimum economic life could attract higher maintenance costs, reduced utilization, and increased fuel costs. Thus, timely fleet replacement forms a crucial part of optimizing your operational costs.

Thus, there is a need for balancing out the vehicle lifecycle with replacement cycles to ensure that you are no longer using vehicles that are beyond their prime. A fleet manager should draft an economic-based fleet replacement formula to determine the lifecycle of the vehicles and a suitable replacement cycle. While doing so, they will also have to factor in related considerations such as resale value estimation, new vehicle initial cost, etc.

Furthermore, companies must also invest heavily in the repair and maintenance of the existing fleet to ensure that it at their peak performances. The combined cycles will ensure short and long-term vehicle maintenance and replacement cycles.

Also, Read: 4 Best Ways for Running a Small Business Online

4. Lower Crash Costs

In the world of logistics, safety is of primary importance. Companies must impress upon their drivers the importance of safety and safe practices while on the road. In addition to inculcating a work culture of employee welfare, it also ensures that your employees and vehicles are safe. Further, it also reduces the liabilities involved in crashes and collisions. Through proactive measures to ensure safety, fleet managers can:

  • Reduce the cost and risks of accidents or injuries
  • Cut down on the insurance costs
  • Boost driver productivity
  • Enhance driver retention rates

Thus, implementing a safety program in consultation with the top executives of the company will help you reduce the costs involved in settlements and insurance. Apart from this, also bear in mind the costs incurred through fines and violations. Non-compliance with laws and regulations could result in massive financial drains.

5. Decrease Acquisition Cost and Increase Resale Value

As stated previously, to ensure that your fleet is operating at the best possible at its peak performance, fleet managers will have to formulate a lifecycle and replacement cycle. In this aspect, fleet managers will be involved in the acquisition of new vehicles and the disposal of the older ones.

Thus, it is crucial to factor in the acquisition cost and resale value of the vehicles that are entering or exiting the fleet. At the same time, it needs to be balanced out with the estimated depreciation.

The lowest acquisition cost may not necessarily correspond to acquiring the optimal vehicle. Thus, the acquisition should be based on cost-reduction strategies that take a holistic look at the vehicle, its specifications,  and its role in the fleet against the costs involved.

Similarly, companies must also consider the resale value of the vehicles quitting the fleet. Typically, companies prefer to sell a percentage of their defunct fleet to their drivers or employees. However, the practice of conducting auctions is not uncommon, either.

Final Thoughts

These highly effective money-saving tips can help you lower the operational overheads involved in fleet management. These tips address the controllable aspect of fleet management.

Cutting down on the operational overhead can greatly increase the profitability of your business. So go ahead and streamline your business operations now!