How to avoid hidden costs of fleet management?

Humans, as their nature is, always try to squeeze the best of everything. Among all of such things, this applies to companies – always on a run to be the first in their respective industry, which refers to healthy competition, when and if it is done in a proper way. While we seek to perceive things clearly, without introducing any lens of ambiguity to them, especially in the processes of management, expenses make an essential component in such a scenario. Keeping this reason as a major perspective along the way, it falls on the company’s CEO to make decisions, but that does not leave the manager without any responsibility, and it is largely up to the manager to negotiate the best price value, and to avoid spending extra. Accordingly, it’s useful from time to time to look after not only the main expenditures but also to be familiar with hidden costs in fleet management.

To begin with, let’s find out what the direct, also called obvious, costs are:

As you can guess right – it includes the price of each vehicle (prices can vary depending on whether you are buying it or getting it on rent). With the vehicle comes additional duties to maintain the truck (it may eat up to 20 % of all costs), so remember to include those expenses as well as vehicle insurance costs. Next, of course, vehicles need fuel to run, so add fuel costs, which were quite volatile in 2023, with diesel prices rising and falling throughout the year. Then, who will transport the cargo? Yes, the drivers. So, this includes staffing costs, to which we also add the wages for administration and, if needed, mechanics’ salaries. Continuing the domino effect, we face the need for an office and a place to keep trucks – including these buying or renting expenses. Also, don’t forget to add the costs of the fleet management software, which is crucial to managing all the operations fluently. Depending on your service needs and fleet size, it can vary from $14 to $499 for one vehicle in a month. And last but not least, when planning downtimes due to maintenance, deduct the amount of money lost, which can be from $448 to $760 a day for one vehicle, on average. Despite the fact that your fingers may sometimes get tired of pushing the calculator, we are ready to add more to our understanding of the hidden side of expenditures.

The shadow side of expenditures has a few more points to add to overall. Find and predict these aspects useful and try to include them in your daily, weekly, or how it better suits your scheduling process:

Depreciation. As this point can eat quite a significant portion of your fleet company costs, try to choose less value-losing vehicles and keep the proper maintenance of them. You can calculate the depreciation in two ways: The straight-line method (formula: (vehicle cost – salvage value) / lifespan) or the MACRS (Modified accelerated cost recovery system) method. And one thing to note here: the bigger the company, the lower the percentage of depreciation it will feel if vehicles are bought one after another and not at the same time.

Downtime. As mentioned earlier, you can count some lost revenue due to planned maintenance but don’t forget about the emergency downtime. A GPS tracking system comes in handy when you need the location here and now to get faster mobile maintenance done. To add to this point, you should balance the needed vehicle numbers to avoid unnecessary acquisition and operational costs.

Unauthorized use. Not every person you can trust 100%. People may misuse the company’s assets for their personal purposes. In this case, you really don’t want to give away extra money for fuel or maintenance because of someone’s irresponsibility, so make sure to track whether your vehicle is in the planned route.

Regulatory compliance. Safe and sound – this is how your fleet should be treated to not get hefty fines and penalties. It is important to note that not only drivers should be responsible for their safe driving habits, but the company should also meet environmental standards. Maybe it’s time to go EV? Take a look at the government’s future plans and get along with it. Early preparation may help you save some time for updating strategies for your fleet to be first in your industry, right?

What else can get you closer to being the first – it’s GPS tracking. Imagine lowering accident costs by 16-30%, fuel costs by 7-20%, and labor costs by 9-25%. Sounds right, yes? It’s not only monitoring real-time vehicle movements but, as we mentioned, tracking misuse, getting shorter downtimes, correcting drivers’ habits, and recovering vehicles from theft – and this is only the tip of the iceberg of how it can be useful to get those hidden costs to drop off. 

One of the best examples in the case study is UPS, which is known for its precise delivery service. They were using a GPS tracking system to optimize routes, but in a very smart way – monitoring the problem spots where vehicles had to stand in one place for a long time before being able to turn left. So what they did – eliminated as many left turns as possible. Consequently, they saved up fuel and maintenance expenditures and reduced delivery time. 

A similar example was found in the company case of PepsiCo, a global leader in convenient foods and beverages. Applying a new strategy, a program called “Resource Conservation,” they have monitored drivers’ behavior, vehicles’ vitals systems, and real-time fuel consumption, which led to reduced mileage and savings in maintenance. Cleverly combining GPS tracking with fleet management, they resulted in the reduction of nearly 75 million gallons of water, nearly 500,000 MMBTUs of energy, and more than 55,000 metric tons of greenhouse gases. 

The change is right around the corner – get inspiration, take these insights to complete your new strategy, make technology work for you, and enjoy great results that speak for themselves!

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