Today’s private fleet operators are under pressure like never before to control costs. The shortage of drivers across the country has made it difficult to find experienced personnel. While at the same time, economic growth has increased the need. As a result, companies are often short of staff. This combination of factors means that managers are forced to pay more for qualified drivers. Add in rising fuel prices and it’s easy to see why costs are rising.
Executives understand that something must be done to rein in transportation spending, but most have already forcefully seized the reins. Now they are looking for new ways to tackle the problem. For businesses that operate in high-volume, local pickup and delivery environments, fleet management might be the answer. More specifically, these companies should consider investing in an integrated fleet management system. [http://www.geocomtms.com/solutions/index.asp].
Good investments always pay for themselves, and with fleet management software, payback can come quickly. Consider a typical scenario for a dealer with 30 trucks. Most days all the vehicles are in use, each making about 18 stops per day and traveling 100 miles. Average fuel consumption is seven miles per gallon. Drivers are paid $15 per hour, plus time and a half for overtime. On any given day, about a third of the trips last more than eight hours.
With diesel at $2.90 a gallon, this dealer spends more than $6,200 a week on fuel. An easily achievable reduction in mileage of just ten percent results in savings of $610 per week. This equates to over $30,000 per year. Eliminating an hour and a half of overtime for ten drivers results in a savings of nearly $1,690 per week. That’s another $87,500 per year.
A savings of $117,000 is substantial and should be enough to warrant investigation into fleet management software. But the most advanced fleet management systems go one step further, taking vehicles off the road. In most cases, a fully optimized plan requires fewer trucks, if not every day, then at least some. Simply reducing fleet requirements on one vehicle twice a week yields a savings of $322 (not to mention reduced risk). That’s another $16,700 a year, for a total of more than $133,500. These are conservative numbers. Savings for a fleet of 30 vehicles could exceed $150,000.
The above scenario focuses on a single component of a fleet management system: route planning. There are other apps, however, that, when combined with dispatching and planning software, amplify the savings. GPS fleet tracking [http://www.geocomtms.com/solutions/fleet-tracking.asp] it’s an example. It is certainly valuable to know the location of each vehicle in the fleet. However, the real value comes from knowing where each vehicle needs to be and how it is operated.
If drivers idle their engines for comfort in the summer and winter months, the fleet operator is footing the bill. Diesel engines burn approximately one gallon of fuel per hour while idling. Once they start monitoring, companies find that drivers allow engines to effortlessly idle for up to two hours per day. In our distributor scenario, this behavior would cost the company almost $175, another $41,750 per year. Additional benefits of GPS fleet monitoring solutions can include reports showing incidents of speeding or harsh braking. This information can help fleet operators reduce risk and reduce insurance rates.
The opportunity to reduce costs by $175,000 is attractive to any fleet operator. With these savings, payback can occur in as little as six months. However, the startup capital required to implement fleet management software often makes it cost prohibitive. Innovative fleet management providers are responding to this challenge by offering flexible payment options. Plans can include subscription-based pricing, where customers are billed a set amount each month, or app hosting. Hosting further reduces costs because it does not require customers to maintain additional hardware to run the application.
However, for some organizations, software delivered as a service is the best option. In this scenario, providers manage business processes such as scheduling and routing vehicles for the customer. This allows companies to eliminate the need for hardware and potentially reduce staff costs. For example, staff previously responsible for these tasks may be reassigned to other roles or removed.
The main benefit of these pricing options is that they allow customers to increase savings at a faster rate than costs have increased. In the example above, the fleet operator would see savings starting in the first month the system is up and running. Compare this to a typical wait of twelve months or more for recovery with other business applications. This means that investing in a fleet management app would generate positive cash flow almost immediately.
Given the pressure they are under, for many fleet operators, implementing an integrated fleet management system just makes financial sense. These applications open up opportunities to significantly reduce transportation and personnel costs. They also have the potential to improve an organization’s risk profile. Recovery often occurs within six months. And with the right payment options, fleet management software can help organizations improve cash flow from day one.