Operating costs: Avoid putting eggs in one basket with a multi-bid approach

White vans lined up in car park

Sole-supply or panel bidding? Unbundling services or putting all your eggs with one supplier? These are key decisions facing van fleets which can have significant implications for operating costs.

Technology offers a way to unlock potential cost savings through multi-bid leasing contracts. In addition, many fleets are considering ‘unbundling’ services from the leasing deal, such as maintenance, insurance and glass repair.

Tony Greenidge, sales and marketing director of consulting and management company Fleet Operations, says there is a growing trend towards multi-bid, especially with vans.

“The vehicles themselves represent the biggest overhead and prices can vary within £20 to £40 a month for basically the same van in the same spec, so it makes sense to look at a choice of providers rather than one,” he says.

“There’s an attitude of maintaining the status quo with sole-supply, particularly if fleet operators have had a bad experience in the past of choosing a supplier who have failed to deliver. So they reason ‘if it ain’t broke...’ and question whether to risk the hassle.

“But over the past 12 months there’s been a significant shift towards multi-bid, with technology making it so much easier to obtain the most competitive deal from a provider of funding, maintenance, accident management, and so on.”

Maurice Elford, fleet manager at L&Q housing association, is preparing for a new telematics provider that will pave the way for a “keener quote” on fleet-dedicated insurance, rather than having it wrapped within L&Q’s overall cover.

L&Q manages 70,000 properties in and around London with a van fleet that comprises Transit, Custom, Connect, Trafic and Movano vans, plus 17 cars. The company already unbundles maintenance from its leasing contract after taking a decision to bring it in-house.

Vehicle maintenance is now carried out at the company’s head office in Sidcup, Kent, with accident damage handled by a local repairer.

“Typically, three vans are in and out of the workshop by 10am to minimise downtime,” says Elford. “Turnaround for accident repairs is around seven-to-10 working days, mainly due to parts sourcing, but there are replacement vehicles on standby, already wrapped with our livery.”

Elford is looking for additional operating savings from implementing telematics via a reduction in fuel use – anticipated to be around 7%.

Fuel is L&Q’s “biggest pinchpoint”, accounting for around 25% of operating costs. The savings will come from the new data that will show “more information than speed and position to include other factors like acceleration and braking”.

Integral has also started moving towards an unbundled solution, at least for vehicles that fall out of warranty.

Over the past 12 months, and in conjunction with its leasing provider, Integral has moved to a ‘hybrid solution’ for service, maintenance and repair. This enables the company to take advantage of reduced labour rates without adversely affecting vehicle warranties, or downtime.

Vehicles under warranty are still booked through the franchised dealer route, but routine servicing is now being trialled through Halfords Autocentres.

Integral also works with its leasing provider and Vauxhall to track any events that may cause unnecessary downtime and, under a ‘report all incidents’ policy, each accident is reviewed with follow-up interviews, liaising with insurers and the driver intervention team to identify areas of support.

The organisation is responsible for properties in 40,000 locations, owned by 1,600 commercial and public sector clients. It has an engineer in every postcode and its 2,000-strong fleet, mostly vans, is part of a sole-supply deal with GE Capital, now part of Arval.

Fleet manager Keith Abell says it is difficult to identify the highest cost areas common throughout the fleet sector because “each operation will have its own issues and constraints that need to be addressed”.

“With the Integral fleet supporting a reactive business, we always have a challenging position,” says Abell. “The nature of the contracts we win can determine the efficiency of the business in relation to fuel consumed.

“The easiest way to illustrate this would be if we were servicing planned maintenance contracts, rather than a mixture of reactive and planned contracts, the fuel consumed would be easier to control. Hence our ‘buy it right – use it right’ policy.”

Integral recently changed the provision of the telematics installed into its operational vehicles to bring the benefits of data streamed from the vehicle ECU. This will help to reduce operating costs by giving it sight of driver behaviour. 

“We are now developing a suite of relevant exception reporting which will provide additional tools for increased efficiencies,” adds Abell. “Driver behaviour is a key element in all areas of cost avoidance.”

While multi-bid leasing contracts and unbundling services can both reduce fleet costs, they also add complexity and require in-house fleet expertise to manage the range of supplier relationships. It is not unusual to have three to four changes of provider within eight years.

Sole-supply, bundled agreements work best for organisations that do not have – or want – a dedicated fleet manager.

Ashley Sowerby, managing director of software provider Chevin Fleet Solutions, says that the small- to medium-sized companies tend to favour the sole-supplier option because of its convenience.

However, he argues that of greater significance to operating costs is the volume of data now being generated by telematics, and the need to use it selectively.

“That means looking at exceptions, patterns and anomalies,” says Sowerby. “Some of those exceptions can be relatively simple to identify and resolve. Are they caused by vehicle or driver? Try swapping drivers with other vehicles.

“On a broader front, telematics offers the opportunity to change the culture of driver behaviour, to the point where it’s no longer acceptable to take unauthorised breaks, overspeed and so on.”

Ultimately, Sowerby said operators should be examining fleet utilisation because the biggest cost saving is achieved by maintaining a service with fewer vehicles.

Richard Perham, business development director of data management provider Airmax claims telematics is as indispensible to fleet as Sage is for finance.

“Driver profiling based on input from organisations ranging from the police to Cranfield University has been shown to improve performance by 34% across 10,000 vehicles,” he says.

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