Is better asset utilisation the real key to reducing fleet costs?

Fleet operators of all sizes are under constant pressure to reduce the overall cost of business mobility. Understandably, this often leads to a close scrutiny of the funding, management, and maintenance costs for each vehicle.

The trouble is that headline costs can only be cut so far before they start to have an undesirable impact on operational risk and efficiency. Moreover, headline savings in one area can often increase hidden costs elsewhere.

In reality, reducing fleet costs is about more than just monthly finance payments and cost-effective support services; it's about maximising the value of every asset.

Cost, utilisation and value

To better understand and thereby control the cost of running an entire fleet, it’s important to get a clear and accurate picture of the true whole life cost (WLC) of each vehicle. While there is no set way to do this, most models factor in key components such as taxation, insurance, finance, fuel, servicing, and depreciation to produce accurate, and sometimes surprising, results.

Knowing the true cost of operating individual cars and commercial vehicles is crucial because it leads to better decisions about how vehicles are sourced, which funding options are used, and the level of support services required.

That said, even when you have made sound decisions designed to minimise expenditure in each of the above areas, any savings realised can be quickly wiped out by operating more vehicles than you really need. Knowing whether this is true for your fleet requires a clear understanding of the current and potential value that can be derived from each vehicle.

We need to remember that simply utilising each vehicle for more hours each day may well increase its value to the business, but it could also adversely affect the cost and frequency of servicing. It’s also only one part of the overall picture, with how and when a vehicle is used playing as equal, if not a greater part, in optimising its value to the business and thereby decreasing the true cost of mobility.

Key things to measure

To understand the current and potential value of each fleet asset, there are some key metrics to consider. Measuring them accurately is almost impossible without the right telematics system in place but it should be noted that whatever technical solution you use, the best results come combining asset utilisation data with insights from across the business.

Typical elements to measure at an individual vehicle level include:

Particularly for businesses where each journey directly corresponds to income earned, you will also want to examine the revenue (or revenue generating action, such as a package delivery) per vehicle and per mile and then compare this with a pro rata assessment of the whole life cost incurred.

In doing so, you could use calculations such as:

This can then be compared with:

It’s also important to factor in any seasonal variations, or out of the ordinary events, to these calculations to get a fully rounded picture.

The above will give you some interesting facts and figures to analyse, but don’t forget that this means little without context.

The importance of context

An analysis of the data may show that a vehicle was inactive for 40% of the time. This would seem to indicate that you are getting far from the maximum value from the asset whereas, in reality, this may or may not be true. It all depends on whether you could reasonably put the vehicle to an alternative use during downtime periods or whether any operational or behavioural changes could influence the value derived from the vehicle during this time.

For example, could leaving at a different time enable more deliveries or appointments to take place in any given day? Could a change of route be more efficient, or could better planning mean that separate journeys can be combined into a single multi-stop trip?

Of course, the answer will depend upon a range of circumstances, some of which will be unique to your business, but the key is to understand current utilisation rates and then use comparative models to explore potential changes that could influence the value generated.

In reality, you will never reach 100%, as all vehicles have some level of downtime. This means that whilst the utilisation rate of a specific vehicle might be 75%, the value derived from the asset could be 100% of its realistic potential.

How many vehicles do you really need?

It’s an easy question to ask but not quite so easy to answer, partly because it’s something that changes and evolves over time in line with business needs, available fleet assets, and operational requirements. We also need to bear in mind that some vehicles are only needed for short periods of time, such as a one-off project, or while waiting for a new company car to be delivered.

Most people would agree that it makes little sense to have vehicles sitting around ready to be used for just a few days or weeks and then left in the car park, unused but still costing money to finance, insure and remain legal to drive.

One solution is to rely on short-term hire vehicles rented for a few days, weeks, or even longer. However, this can work out expensive, and it can also be quite challenging to control when and for how long vehicles are used and the total costs incurred.

An alternative to short-term hire that’s worth considering is a pool fleet solution that provides optimum mobility at a lower-than-hire cost. It won’t work for everyone, but it’s worth exploring.

Measurement is just the start

Once you have all the key facts together and the data has been given some real-world operational context, it’s time to start taking action. The key point to remember here is that making too many adjustments at the same time can often obscure the financial and operational impact of each individual change.

What should you do first? It depends on what is most important to your business and which changes are the easiest and quickest to implement. For example, commercial vehicle operators often find that it can be difficult to find a garage with the right skills, equipment, and capacity to carry out servicing and repairs at a time that minimises disruption to their business-critical activities. 

It might be tempting to think that you can only work with the garage locations and time slots available, which makes this far from a ‘quick win’. In fairness, this might be true in some cases, but it’s worth remembering that specialist repairers in the Novuna Approved Network offer a priority service that has been shown to cut repair times by as much as 50%.

Vehicles aren't the only asset that needs optimising

As businesses in every sector switch from ICE to battery electric vehicles, optimised charger access and usage plays an increasingly important role in multi-asset utilisation. With the right Charge Point Management Network and System in place, drivers can book a charging slot in advance through an app, ensuring they get a spot when and where it’s needed. Vehicles can also be charged based on priority factors such as battery percentage, required level of charge, or departure time, while still balancing the load so that the system distributes power efficiently across multiple chargers, avoid excessive strain on local power supplies, and reduce peak demand costs.

Learning from others

Accurately measuring utilisation rates brings a much-needed focus to the true cost of business mobility. It also kick-starts the process of identifying any adjustments that are likely to increase the value of each asset to the business. 

One final piece of the jigsaw is to put the results you achieve into context by comparing your own data with that of comparable fleets and, as a result, learn valuable lessons from steps taken to increase utilisation and value. This might not be easy, especially considering commercial sensitivities, but talking to someone with extensive experience of fleets operating in your own sector can make a real difference.

How can we help?

Having spent more than 40 years managing some of the largest and most complex fleets in the UK, our fleet management experts use real world operational experience to create bespoke fleet optimisation plans that deliver tangible value and measurable cost savings. To find out more, just get in touch.