Fleet Foundations – Are you organized to compete? By Mike Corbett, Publisher

Fleet Policy-Financial Policy-Management Organization-Maintenance and Support Services Organization-Customer Service Organization-Information Technology

One of the most basic yet important aspects of a competitive fleet management program is policy and organization. But whatever the reason—whether politics or lack of knowledge -- many fleets are neither organized properly nor provided the authority to be competitive.

Tom Peters, author of In Search of Excellence, answers, in response to the question: What share of business problems come from structure, human resource practices and from top management decision making? Structure (organization), 50%; systems, 35%; people, 15%; top management, 0. He adds: “I contend that top managers make lousy decisions and people fail to shine because burdensome structures and misaligned systems get in the way.”

For fleet managers, this means addressing what I call six key foundations that are integral to the development of a competitive fleet management program. The foundations include: fleet policy; financial policy; management organization; maintenance and support services organization; customer service organization and management information.
The following briefly addresses each.

Fleet Policy

What role should fleet policy play in your fleet organization? Fleet policy is the tool to structure management of the fleet -- its organization, services and financial viability. It is the directing force behind the goal of the fleet organization to achieve optimum fleet management -- lowest cost/mile and high quality service in support of the transportation goals of the organization.

Fleet policy should reflect the decisions of an organization concerning general, long range objectives or directions about the fleet management and transportation function and serve as a guideline to short-run action. Fleet policy should reflect the importance of the fleet in the organization: that fleets move employees who provide services essential to the conduct of corporations and governments.

A formal policy should define the standard for fleet management in terms of mission and function. An effective policy should clearly define authority and accountability throughout an organization and the roles and responsibilities of all involved: policy makers, department or agency heads, fleet management and drivers.

Fleet Management Authority

A key aspect of fleet policy is the delineation of authority to the fleet manager. Does it provide a guideline for a "strong fleet manager" concept and the authority to manage fleet assets worth millions in a competitive manner? Or, does it position the fleet manager as a staff person with little authority to meet the challenges required today?

Fleet management authority is critical to competitiveness. In order to be competitive, fleet managers need authority and flexible decision making to manage assets and save fleet dollars. But most fleet policy is fuzzy and even diminishes rather than expands the authority of the fleet manager. Thus, the fleet manager may influence policy but often is powerless when it comes to making important incremental and timely moves that add up to making a big impact on the bottom line over the course of a year.

In addition, there is often little linkage between the asset management function of fleet management and the operation and maintenance function. Proper management of the fleet requires an ongoing assessment of the interrelationship between capital and operating & maintenance costs. The dilution of authority often results in costlier fleet management.

As a result, fleet policy should detail the managers role. An all-inclusive or short form grant of authority might read: "The fleet manager shall have overall authority for management and operation of the fleet, including planning, directing, managing, coordinating and supervising programs for the acquisition, assignment, utilization, repair and replacement of the vehicle and equipment fleet."

More specific grants of authority can also be considered to augment this authority. Some policy grants detail authority for each area of responsibility and specify the practice desired by the organization. For example: "The fleet manager shall conduct a review of all vehicle assignments and annual utilization in recommending reassignments, rotations, or other actions relative to the size of the fleet."

Policy Growth

Finally, fleet policy should grow as fleet management is a fast growing field. Most grants of authority and responsibility focus on the fleet of vehicles, when increasingly broader mobility concerns are emerging for corporations and governments. In fact, fleet managers find themselves right smack in the middle of the issues of the day -- air quality, energy dependence, traffic congestion, employee commute programs, global warming and hazardous wastes, to name several.

As a result, some organizations are expanding the role of the fleet manager to mobility or transportation manager with these responsibilities. For the first time, some are assessing the total cost of transportation in their organization -- for the fleet, airline, taxi, bus, rental cars and use of personal cars. Consequently, fleet policy should be enhanced to reflect this emerging broader view.

Financial Policy

If fleets are to be competitive in the 90's, a new direction needs to be taken as budgets shrink and the recession continues, as new responsibilities emerge and taxpayers resist tax increases, and as state governments relinquish more responsibilities to local
governments.

Many managers report that capital replacement budgets are on hold and that alternative service delivery approaches, such as privatization, are being evaluated. Those that report the continuance of a stable funding base also live according to a fleet financial policy that provides a long term foundation for funding the fleet function.

Such fleets have been able to link asset management and maintenance management activities by demonstrating that over-aged equipment is often more expensive to maintain than new equipment is to buy. These fleets not only have a cycle for replacing equipment but have realized that it has little or no value if a policy for
funding equipment replacement is absent.

These fleets are also more accountable: to using departments they serve; to upper management; and, in the case of public fleets, to the taxpaying public. These relationships are most often properly be accounted for within the concept of an enterprise or internal service fund (ISF).

ISF's permit governmental agencies like fleets to perform in a more business-like environment and focus on performance. While many fleets today operate within such a fund structure, most do so in name only.

Next, a proper charging system for operations and replacement of the fleet is necessary. The approach should be a traditional pricing concept in which there is a buyer of services (fleet users) and a seller of services (fleet management). The idea is to introduce a market pressure for negotiating prices between buyers and sellers. The pressure is exercised when those responsible for using equipment are aware of the cost of maintaining the equipment and must budget those costs. Properly constructed rental rates are the tool to implement this concept and influence users to make more economical decisions.

Fleet managers need to influence fleet costs by "stepping up" within their jurisdictions and companies and aggressively participating in ongoing organizational processes: budgetary, labor relations, safety management, and capital improvements, etc. The management process offers unlimited opportunity to influence decision making and impact fleet costs.

For example, some fleet managers use the budgetary process as a way to control fleet size; the labor relations process to weed out ineffective work practices; safety committees to control vehicle abuse; the capital planning process to keep abreast of facility development enabling them to better plan future needs. This approach plugs the fleet manager into areas where influence and coordination can be directed to impact the costs of fleet management.

Management Organization

Organizationally, where should fleet management be situated within a given jurisdiction or company? Do economies of scale warrant centralization? What level of cooperation should exist? Should there be private-public partnerships, or regional solutions to providing specific fleet services?

There is an emerging trend to centralize the fleet management function in general services organizations and to remove them from Public Works and Police Departments which are major operating (mission-oriented) departments. There are strong customer oriented reasons for doing so as these agencies are generally not tied to existing priorities and provide a jurisdiction-wide service focus.

In addition, there is a growing trend to centralize the fleet management function. The major benefit of this approach is a demonstrably decreased total cost of fleet management since the inherent benefits of centralization allow these agencies to practice
economies of scale.

Maintenance and Support Services Organization

Does your organization have centralized control over fleet maintenance, fuel sites, motor pools and other services? It is costly to duplicate personnel, equipment, fueling stations, and facilities in the conduct of the fleet management function. It is costlier when a 
coordinated approach to planning these activities is lacking.

Yet these situations abound. In many organizations, individual departments own and control fuel stations when the costs to meet new mandates have skyrocketed. There is duplication of maintenance organizations when centralization could result in improved specialization, uniform policies, more complete inventories and in cost-justified, specialized repair facilities and services. Finally, the question of whether fleets stay in these businesses or contract out is a question each fleet needs to answer in seeking competitiveness.

Customer Service Organization

Is your fleet organization customer driven? Fleet organizations which regularly communicate with their customers and develop programs that meet mutual goals produce cost effective fleets.

For most fleet organizations, however, customer relations is reactive. As monopoly providers in their organizations, fleets often ignore customer responsiveness. One way to combat this is to develop a formal customer service program.

Some techniques used by fleets include: a fleet policy that defines the authority and accountability relationships between fleet management and department or agency heads, upper management, and vehicle drivers; the assignment of vehicle coordinators as liaison to fleet management; and, the development of formal intra-agency service agreements (ISA) between fleet management and a customer department that detail the level and quality of fleet services, and charges for such services, particularly with users that have extensive fleets.

Others include: annual meetings that occur with department directors to discuss services and vehicle costs, fleet size, vehicle utilization, and the five year vehicle replacement plan; user committees of employees, often departmental coordinators, which meet several times a year to review policy issues, vehicle problems, etc. All of these set the framework for interacting with vehicle users.

Information Technology

Brainpower is essential to becoming competitive. As programmed brainpower, management information systems are an essential foundation for fleet management. Exciting new capabilities in information technology are changing the manner in which fleets can be managed and operated. Without a good fleet management system, fleets can have little financial impact on their operations. Today, quality systems are inseparable from management of the fleet.

The issues addressed above are fundamental to the organization of any successful fleet agency. How they are addressed determines the ability of the fleet agency to get and stay competitive.