Are fleet management operations better off managed in-house or outsourced to a specialist organisation?
We look at the benefits and disadvantages of each to help determine which is the best option for your business.
Outsourcing fleet operations appears to steadily be on the increase in terms of the preferred management style. But is outsourcing fleet management really a better option than having a dedicated division when managing your fleet?
This very much depends on what you want to outsource – the entire fleet management operation or just certain areas of it. This decision depends on the size and type of business and the number of vehicles and assets within the fleet. An example of this is the availability of a skilled workforce willing to travel to fill jobs that can influence the decision on individual areas of management or the entire department being outsourced.
When we think in terms of the activities that need to be carried out by a fleet manager, the level of responsibility can be overwhelming.
Such duties can include:
Vehicle sourcing and purchasing
Driver requirements such as licence checking
Purchasing and disposal
Parking and fines administration
Driver support and training
Health and safety and duty of care compliance
Vehicle tracking and communications
Vehicle breakdown and recovery
Although managing this workload doesn’t tend to be a problem for larger fleets with tasks carried out across a team, for smaller fleets, this could mean some, if not all, of these tasks may need to be outsourced to ensure that they are completed correctly.
We look at some of the advantages and disadvantages of in-house vs. outsourced fleet management styles to help you make that decision.
Benefits of In-house fleet management
Managing and monitoring costs
An in-house fleet management team will always know your business better than any external agency. Familiarity of the vehicles, drivers and resources can help identify areas of concern before they manifest into bigger problems.
Individual relationships can be built with suppliers and other specialists to deliver on service level agreements and negotiated rates to save on both fleet costs and additional, unplanned vehicle downtime costs.
Fully understanding the ‘bigger picture’ in terms of the business, plans and goals if very beneficial in keeping departments in-house. Any external service provider will never have full access to business sensitive information such as investment and growth plans. A fleet manager is prepared to negotiate for additional budget to improve processes or update machinery by demonstrating the longer term cost benefit analysis. An agency, on the other hand, will tend to favor achieving only those targets and objectives as pre-agreed during the length of the contract.
Benefits of outsourcing fleet management
Access to industry-wide specialists
External fleet management organisations can introduce best practice and ideas for new ways of working through their own specialists that have experienced working alongside business of varying fleet sizes. Such information can prove invaluable in improving and streamlining your fleet processes.
Ability to realign company focus
Outsourcing fleet management can allow a business the opportunity to focus on an area considered a priority or where their expertise lies. A business may require a fleet simply for the purpose of enabling employees to carry out their tasks, or even as part of a benefits package, but having to create a dedicated fleet department to manage this doesn’t fit into their business model in terms of costs and resources.
It is far easier in these circumstances to outsource the management of vehicles to a specialist organisation to remove management processes and manage associated fleet risk.
Meeting compliance regulations and required industry standards can be a minefield for fleets due to external influence such as ever-changing legislation.
This may be less of a problem for larger fleet departments but for smaller operations, the risks can be just too great. Outsourcing can help alleviate some of this worry – processes and procedures will already be in place to minimize failure to comply with tools such as fleet management systems creating auditable trails to manage this.
It’s worth noting, however, that despite outsourcing, if things go wrong the overall accountability will still rest with you.
Access to a wealth of resource and knowledge
Outsourcing often means access to a plethora of systems, tools and knowledge that had previously been unavailable such as specialist fleet management software and other tools and procedures to keep things running efficiently.
Such organisations often have access to market intelligence, allowing the ability to benchmark your performance against those of other fleets to determine any shortfalls and areas of improvement that need to be made against industry standard.
Disadvantages of in-house fleet management
Spending money on providing the suitable facilities and equipment to run a fully compliant fleet comes as a cost which can be a challenge for smaller fleets. As an example, maintenance tasks carried out in- house will require a suitable premises and equipment to carry out the work correctly which can be expensive. These costs need to be compared to those associated with outsourcing the work to determine best fit for the business.
Skilled staff recruitment difficulties
Sourcing high caliber, trained staff to carry out specific tasks can prove troublesome in running an efficient operation.
An example of this is the industry-wide recognized shortage of vehicle technicians. A difficulty in fully staffing could mean that having your own, in-house workshop is a decision that is taken out of your hands.
Access to specialist technology
Having the tools and systems in place to manage the department efficiently, particularly with smaller fleets. There are fleets out there that rely on dated practices such as managing and reporting through spreadsheets and systems with limited integrations due to budget constraints.
Disadvantages of outsourcing fleet management
Once costs have been drawn up as per the contract, then the potential to find future spending savings become no more. These costs tend to be tied into the contract for the agreed period before they can be reviewed and amended. There are often penalty clauses in place for any such amends being made before the end of the contract.
During times of trading difficulty when businesses tend to see where they can make any cutbacks, a reduction to fleet operations may not be a possibility due to contractual obligations. There is nothing worse than needing to let go of workforce and their vehicles through redundancy but still paying for a contracted service that is no longer required or only in part.
Similarly, fleets lose the bargaining power in areas such as purchasing vehicle parts. Suppliers used are those set out int the contract and are bound to pre-agreed set prices which could prove costlier in the longer run.
Loss of communications
Discussions with your fleet management organisation will need to go through the proper channels which can reduce efficiency itself. The correct policies and procedures need to be taken to instigate any changes or areas of concern which can delay operations. Decisions may need to go through several channels before coming to fruition which can be inefficient itself.
How do you decide between in-house or outsourcing fleet management?
This will very much depend on several influencing factors such as budgets and resources available, the size of the fleet, priorities for the business and the talent pool available to support the operation to influence the choice.
Those with smaller fleets that do want to remain in- house there are options available to help efficiently manage the fleet such as fleet management software.
A fleet manager may decide to outsource part rather than all of an operation such as maintenance. This is where fleet management software can be a great help. Depending on the size of an operation, solutions such as FleetWave and FleetWave CORE can be utilized to efficiently manage a fleet and find those all-important cost savings.
Such software reduces much of the administrative burden associated with managing a fleet to improve efficiency and support with compliance. The return on investment created through such an implementation can prove a strong influential factor on the future of fleet management decisions.