4 “Non-Sourcing” Initiatives to Optimise Your EU Car Fleet

We’re delighted to feature a post from Franck Capron, Manager, Consulting GEP, on four steps you can take to facilitate your car fleet sourcing.

In some EU countries, like Germany or France, people have a stronger relationship with their cars than people in non-EU countries: they value it as a benefit, not just a tool. When it comes to car fleet leasing in Europe, Procurement faces numerous challenges in order to drive the change that management requires and achieve the level of excellence in both cost and end-user satisfaction.

Beside the standard sourcing activities, below are four initiatives that could positively impact your car fleet environment when supported by a strong car policy.

1.  Define a car selection list

Move away from a “budget” approach. This is something that procurement needs to fight against in order to define a restricted car selection list for each level. Some stakeholders would argue that the implementation of a car selection list means lesser quality vehicles. This is not correct as you are only reducing the number of choices, not the quality of the choices. A car selection list should be structured using the TCO calculation (in general 50% financial lease, 25% fuel, 15% maintenance and 10% for insurance and claims) and needs to take into account the local culture (in some countries the national car brand could be naturally preferred by the employees). Having a selection list will also help you to reduce the number of OEMs, better negotiate maintenance costs and get visibility of your volumes/forecasts. Benchmark and industry case studies should convince reluctant stakeholders that market leaders are already following this path.CO2 reduction programme – the “green” money

2.  CO2 reduction programme – the “green” money

19 EU countries currently apply some CO2 taxes to the registration of passenger cars. Setting up the right level of CO2 emission (in connection with your selection list) saves a lot of money on top of the obvious classic fuel consumption reduction. In a recent example for France, CO2 emission reduction from an average of 130 g/km to 110 g/km triggered 900,000 Euros cost savings over the replacement cycle of the 1,200+ vehicles of the fleet. Don’t hesitate to “brand” it under a sustainable programme, because while your stakeholders can always push back on some savings numbers, who would push back on a green initiative? On top of that, the programme can be locally reinforced by rewarding users opting for the lowest CO2 vehicles with various forms of incentives (win – win strategy for users and the company).

3.  Ongoing mileage review

A direct comparison is a mobile phone agreement: even if you signed the best deal ever for four hours/month, don’t you think you are wasting money when you only use two of them? For open-end lease agreements – mostly used in Europe – it is not always a given that the “real” mileages are aligned with the contracted ones. If the contracted mileage is not used sufficiently you will pay higher leasing costs than necessary (in both directions). A common reason is that there is a lack of ownership on this measurement activity: is it Procurement, the fleet manager or the fleet management provider?

4.  Reduce accidents and increase awareness

“Responsibility” - damaged cars, carelessness or fines cost a lot of money. Instead of penalising the bad drivers (whenever the local regulation makes it possible!) it has been proven in Europe that rewarding the good ones appears to be the more successful approach. This can be a monetary reward or a gift that the company would make to people taking care of company assets. Recently, a company reduced its salesforce’s accidents by 24% after rewarding drivers with no fines or accidents over a 24-month period with a tablet computer. Training programmes can also be an efficient alternative and may also support the fuel reduction consumption programme as speed and CO2 emissions are directly connected.

Procurement professionals should remember that for a car fleet, major changes need always to be supported by a harmonised car policy sponsored by top management and/or the HR community. It is also critical to keep in mind that the “sourcing” exercise is often the final piece of the puzzle and should never be the first one.

 

 

 

 

First Voice

  1. Tony Elliott:

    Most of what you write makes sense. My own frustration is that not enough is internally to manage the person who can assist in making the biggest savings: the driver. You are correct when you query just who has the power within a company infrastructure when it comes to steering change. Too often it is Human Resources, and this often means that internal cost savings by managing driving behaviour does not happen. Contract variations driven by the actual mileage driven varying to the contracted mileage is a dangerous escalation area for the customer. Tight Master Hire Agreements are a rare occurrence , with the obvious risks associated with loose Legal Agreements. Procurement specialists are good at negotiation, but, in my experience poor at tying up the loose ends: Lease Agreements for example.

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