Spiralling post-COVID fleet management costs

Issue 8 2022 Logistics (Industry)

Determination of the precise total cost of ownership (TCO) related to operating fleets has always been difficult. According to Johan van Niekerk, Fleet Solutions Consultant at FleetDomain, an Argility Technology Group company, this is due to various issues including lack of information due to not capturing a holistic view of all vehicle expenses from a central source.

“As South Africa moved out of the full impact of the pandemic, significant cost increases were experienced with regards to vehicle ownership – regardless of whether they related to individual citizens or businesses managing fleets. Inflation of vehicle purchase prices, maintenance, tyres, and fuel over the past three years have combined to contribute to a 20 to 30 percent cost increase for an average passenger and light commercial vehicle,” says Van Niekerk.

He says the only way to tackle this spiralling TCO escalation is to implement a Fleet Management Information System (FMIS) as supplied and supported by FleetDomain. “To improve the costs and risks associated with fleet operations, businesses must take an all-inclusive management approach and ensure they have the information necessary regarding: accidents; fines management and personnel.”

Van Niekerk reveals some cost comparison models highlighting the TCO increases following COVID; comparing a selection of Vehicles purchased in 2019 and 2022 (see table 1.).

“Examination of the numbers in the table shows that expenses must be managed, controlled, and reduced in line with, or below inflation. Unmanaged vehicle expenses can end up incurring 10 to 23 percent greater costs than necessary. This can be explained when one considers that fixed costs are managed by accounts and variable costs are managed, in most instances, by fleet operations. The latter can either capture all expenses or they can implement the use of a maintenance or fuel card. In some instances, maintenance, tyres and fuel are all managed on one card,” he explains.

Van Niekerk says that companies often add a GPS/tracking device to enable them to locate assets and monitor driver behaviour. By scrutinising GPS/tracking kilometre usage and comparing it with card kilometre usage the actual usage per month can be determined.

“It is important to understand that a GPS/tracking device is not a fleet management system. Change in driver behaviour and meaningful savings will not be achieved without relevant information regarding speeding, harsh braking, acceleration, excessive idling and all the other actions performed by drivers that cause increased maintenance, tyre and excessive fuel usage. All of the foregoing can only be achieved with an FMIS.”

In post-COVID South Africa, vehicle price increases of between 27 and 32 percent – dependant on models and country of origin – have contributed significantly to TCO. “However, resale values of some models improved due to the shortage of new vehicles. Maintenance and tyre replacement come in at 17 to 21 percent of TCO, with the actual percentage increase being manufacturer/supplier dependent. Fuel has been identified as the most changed value, having been measured as a percentage of the overall at 96 to 145 percent (depending on mileage and application) in the TCO stakes.”

FleetDomain’s FMIS can integrate with finance institutions, maintenance, tyre, fuel and GPS/tracking service providers; placing all costs on one platform.

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